Delaware company and then all team members get set up as contractors in their country of residence. If they are in the EU they can contract from where they are from but live within the EU - more flexibility. But putting people on payroll has a huge overhead - better compensate employees to pay a local book keeper to invoice and process their payroll. Encourage people who have not contracted to research what contractor fee covers their salary. It will be tricky to compare apples to oranges when it comes to salaries, not just because of different rates in different places, but because salaries are quoted differently and have different insurances. Where I'm from there's a compulsory payment from employer to the employees pension fund of choice. Salaries are quoted to include this payment. And on and on ... very different across countries. Contractor fee "normalizes" this and places some burden on employees to research what their USD contractor fee is. Ask people to invoice a week ahead of international transfer and transfer 1-2 business days before month's end. This will result in monthly salaries being paid out on time.
Ask HN: What is the best jurisdiction for internationally distributed teams?
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Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#32Earlier quoted context omitted.
These are all really good questions. I am not sure. I think that you could work around these issues by either "hiring" people as contractors or using something like https://remote.com/ or https://www.letsdeel.com/ . But I'd definitely be interested in hearing how other companies solved this problem (which is partially why I created the post).
We are US incorporated with staff in 14 countries. We use contracts for non-US staff and recently implemented letsdeel. So it looks good. You do not need a legal entity in most countries and in fact there can be significant disadvantages. The accounting management alone is a nightmare if you do it yourself. Ps most people set up their own company and we contract with that. Edit: add ps
Thanks for the feedback. Did you generally encounter any bigger issues with this setup or would you do it again for the next company?
Also, where in the US did you incorporate? Delaware?
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#33I’ve founded companies in the UK, US and EU. I’d recommend the UK. The cost of a limited company is £12. It’s formed in a day. Use https://www.ukpostbox.com if you need an address. The legal system is well known and entrepreneur friendly. Accountancy and company admin are simple and relaxed. HMRC is supportive. You can pay dividends on a flexible schedule. There’s a very large ecosystem of financial support, innovati…
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Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#34With a fully remote setup like you describe, what are the mechanics of hiring a foreign team member? Do you need a subsidiary or some legal entity in the foreign country in order to pay employment taxes? If they're direct employees of the US entity, what's their legal status in the US? Can you avoid all these questions by using foreign contractors rather than hiring foreign employees?
Just went through this. I ended up setting up as a contractor sending invoices quoted in the contract USD monthly number. I had to be careful to ensure I was covering all fees, including my coworking space rent and book keeper. They agreed to cover any future travel expenses though, which makes sense but better clarify it up front.
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#35There are plenty of good suggestions about jurisdictions, but I'd say that's not the only thing you should pay attention to
What you should check is what's the best way for each person to own their share in the company. Straight ownership might have some issues. Having each one have a company that then owns the parent company might be a way. Or having a company own your company then the founders own the parent company.
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#36One thing to note if, as a Dutch person (and possibly even if you're another European), you incorporate in the US: Many Dutch financial institutions hate people who have the "US person" status. If you own a US-incorporated company then I believe you will gain that status. Banks, lenders, stock brokers, etc will either refuse to do business with you, or will give you a lot of paperwork headache and/or charge you more…
I am indeed another European and I do know about the issues with being a "US person". Many banks and brokers will simply immediately close your existing account or not allow you to open one.
However, are you sure that simply by owning a US company you become a US person? Because according to my understanding if you don't live in the US (and don't spend more than 4 months / year there) you wouldn't actually be tax resident in the US and therefore also not be a "US person".
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#37Wherever the CEO/founder lives. You can always move the company, better to just get something formed and worry about optimizing for taxes later. Pay folks as contractors and you don't have to worry about having a presence in their country.
I am actually not trying to optimize for taxes but rather for low overhead and not spending too much time managing the company but rather building a great product.
In my experience, things aren't that simple. For example, if you start a company in Country A but you are the main decision maker and live in Country B, then Country B may try to claim primary taxation of the company based on the fact that they consider the company being 'effectively run' from inside their borders despite your incorporation. And you aren't going to read about this kind of stuff on forums because it is very situation specific.
Multi-country taxation is very complicated. You can get a general idea from asking online, but then you REALLY need to talk to an expert in those specific countries unless your business is just so small that the governments involved would never care.
If you don't want to do that, the best/simplest situation is almost certainly incorporating in the place where the founders actually live permanently.
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#38I recently had to consider this and was quite surprised to discover that the US was the best place. Compared to most countries the US has been a tax haven for a long time, but the 2017 tax change meant that in most cases the US would be a significantly cheaper place to recognize revenue.* Also the mechanics of getting the boring things done is significantly easier, as noted by the Germany post cited in your question.…
> Because of the US FATCA law you may have trouble opening a bank account in some countries (smaller entities simply can’t be bothered with the paperwork the US demands on accounts for “US Persons”, a term which has specific meaning). In practice this just means you have to deal with larger banks.
You mean opening a bank account personally or for the company? Because for the company I'd simply use Wise or Mercury and be done with it.
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#39Based on your description, your goals are predictability and low or outsource-able overhead. For those goals, the US is the clear choice. By far the largest pool of investors and employees are comfortable with US entities as counterparties. Plenty of companies will incorporate, prepare tax returns, and handle other compliance items (unemployment insurance) for relatively small fees. As far as states, if you don't car…
The Delaware tax is pretty low. Stick to Delaware as it’s corporate law is well known to everyone. The state of incorporation has nothing to do with where you might operate. Keep it simple. Note that I am part of an LLP that a group of us use for investing and consulting projects and it’s a Wyoming corporation with company office in Kentucky and no legal presence in California. These kinds of specialized entities are…
There’s nothing specialized about incorporating in Wyoming. And it takes minutes without a lawyer. The amount of paperwork is ridiculously low compared to Delaware. Last I recall Delaware has a minimum $500/year registration fee, more depending on outstanding shares. Not Wyoming.
Re: Ask HN: What is the best jurisdiction for internationally distributed teams?
#40I’ve founded companies in the UK, US and EU. I’d recommend the UK. The cost of a limited company is £12. It’s formed in a day. Use https://www.ukpostbox.com if you need an address. The legal system is well known and entrepreneur friendly. Accountancy and company admin are simple and relaxed. HMRC is supportive. You can pay dividends on a flexible schedule. There’s a very large ecosystem of financial support, innovati…
I've looked into the UK multiple times and it definitely sounds very attractive. It seems that OnlyFans and Hopin (https://hopin.com/) were both started as UK LTDs. Downsides (as you mention) are probably access to US investors and potentially issues with VAT because of Brexit.
Just out of curiosity - did you experience any issues selling to EU customers because of Brexit?