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Why you might not want to incorporate in the USA

thenitai.com

221–230 of 358 posts

Re: Why you might not want to incorporate in the USA

#221

I am an international tax lawyer and this stuff is my day job. Consider this comment an AMA. For smaller companies, the bureaucratic cost of international tax systems is insane. For US citizens abroad ... I will just say that my biggest area of growth is helping people shed their US citizenship and tax paperwork/penalties is the number 1 reason. Anyway. If you are in a position like The One and Only Netai -- or don't…

"Federalism" was the founder's way of guaranteeing employment for lawyers.

Lawyers as politicians are the way that guaranteed employment is generated for lawyers. :-)

Re: Why you might not want to incorporate in the USA

#222
I had a similar experience.

I run a france-based company specialized in online advertising and I wanted to expand our activities to the US, who does not? Obviously France is way worst than Denmark and the US for business, tax and work laws, so I can't really relate for the tax part.

I relate mostly for the visa stuff. What I am getting from the OP post, Nitai was doing L1-A. I have been doing L1-A too. (I recognized the list of documents scanned the OP has posted! :) ) Same hassle, same huge amount of documents needed, we didn't give up though after the first request for evidences but the requirements are kind of high so we finally didn't get it.

US now sucks for immigration and it seems to worsen. BUT, Europe seems harder too than before for immigration. It seems a tendency that in the world with Internet, cheap transportation and desire for better file, people immigrate more and countries make stronger bureaucratic walls.

That's sad. :'(

Re: Why you might not want to incorporate in the USA

#223
post #196

Earlier quoted context omitted.

US Citizen here! Unfortunately, it won't end! First, you have to fill out personal taxes every year for foreign income, regardless of whether you live in the US or not. All income globally is treated in the eyes of the IRS as income. Second, you have to declare FBAR if you hold foreign accounts of over $10,000. Third, you have to "open your books" for any foreign corporations you are the director (or have ownership)…

Yes, mbesto is right. Acquiring a second citizenship will not relieve you from the full boat of U.S. tax laws. No matter where you live, no matter how many other passports you carry, if you have the magic blue passport with the eagle on it, you are a U.S. taxpayer.

Supposing one does not want a second citizenship and is willing to renounce their US citizenship entirely, which country would you recommend switching to? How difficult is it and what are the consequences?

Re: Why you might not want to incorporate in the USA

#224

I am an international tax lawyer and this stuff is my day job. Consider this comment an AMA. For smaller companies, the bureaucratic cost of international tax systems is insane. For US citizens abroad ... I will just say that my biggest area of growth is helping people shed their US citizenship and tax paperwork/penalties is the number 1 reason. Anyway. If you are in a position like The One and Only Netai -- or don't…

Thanks so much for doing this! Here's my situation: I've been working on a pretty successful project with a friend (selling eBooks), and we're thinking about incorporating (up to now we've been taking in income separately through our own personal companies). Given that I live in Japan, and he lives in Australia, does it make more sense to incorporate in the U.S., in one of those two countries, or somewhere else (Hong…

I think the question of where you incorporate depends on two factors. First is citizenship. Are you (or your friend) U.S. citizens? If so you have a bunch of tax hobbles that will slow you down.

Second is where your customers are. This is both a tax question (you want to pay less tax) and a business question (you want to collect more money more easily).

If you need Stripe or its equivalent, you dance to the tune they play. Organize in the USA and bend to their will.

If your customers are in the USA you have to look at whether you have "U.S. source income" -- a defined technical jargon-y concept. If so, it doesn't matter where or what you (or your company) happen to be. The U.S. wants tax.

You have to look at brain damage, complexity, and cost. Don't focus so much on financial cost when thinking about your business structure. Think about opportunity cost. An hour spent thinking about this is an hour you did not spend writing books or marketing them.

Until the stakes are high -- several million a year of revenue -- don't get too complicated. Yeah Apple 'n Google do fun stuff. But they have billions of dollars and you (and I) don't. :-)

Keep it simple. Don't optimize for tax too early. You'll make more in building your business fast than you will spending the same amount of time and thinking on tax strategies.

Re: Why you might not want to incorporate in the USA

#225
post #126

Earlier quoted context omitted.

> the latter is undisputably true unless you're over the age Medicaid and unemployment do not depend on age. ACA provides healthcare insurance subsidies based on income, not age. SNAP and other programs exist as well. The US safety net is perhaps inadequate, but not "undisputably" "nonexistent".

Did you see the thread about the 35yo dying of cancer currently ongoing.

My father died of a brain aneurism when I was 2 years old (he was 26). If not for the safety net of SS insurance and VA benefits, I would have had a much harder childhood.

I would love there to be more. I also think that discounting what we have makes it easier for those that would like to remove them.

Re: Why you might not want to incorporate in the USA

#226
post #137

I am an international tax lawyer and this stuff is my day job. Consider this comment an AMA. For smaller companies, the bureaucratic cost of international tax systems is insane. For US citizens abroad ... I will just say that my biggest area of growth is helping people shed their US citizenship and tax paperwork/penalties is the number 1 reason. Anyway. If you are in a position like The One and Only Netai -- or don't…

It's something I've considered. As a now resident of Hong Kong, I was surprised - and delighted - with how incredibly easy it was to handle my taxes. Front-to-back, I could do the whole thing, including payment, in less than an hour and understand the whole system. Unfortunately, it is nowhere near so simple in the US, and they have no regard for expats. The US treats its expats worse than any other country in the wo…

Unfortunately, it is nowhere near so simple in the US, and they have no regard for expats. The US treats its expats worse than any other country in the world. The forms are atrocious. And I could go on about being taxed heavily for services I don't use.

As a U.S. expat, I haven't noticed this. The forms aren't as easy as the Danish forms (which are fully automatic and done for you), but not too complex in my situation of just having a regular salaried job. I paid a CPA $200 or something to do it the first time, because I wasn't sure I would do it correctly myself. But the result was pretty readable and basically what I had thought I was supposed to do. Unnecessarily many pages, but simple enough ones.

And due to the foreign-tax credit there's no double taxation. I compute my U.S. tax obligation, subtract Danish taxes paid, and the result is always $0, since U.S. taxes are comparatively low.

Re: Why you might not want to incorporate in the USA

#227
So seeing all these problems, how are YC companies solving them or better yet how do they handle the whole process to avoid this? PG said they are incorporating in Delaware but their offices most probably are in CA. Shouldn't this be a problem being in different states? Or it applies only to foreign related companies? Thanks.

Re: Why you might not want to incorporate in the USA

#228
post #223

Earlier quoted context omitted.

Yes, mbesto is right. Acquiring a second citizenship will not relieve you from the full boat of U.S. tax laws. No matter where you live, no matter how many other passports you carry, if you have the magic blue passport with the eagle on it, you are a U.S. taxpayer.

Supposing one does not want a second citizenship and is willing to renounce their US citizenship entirely, which country would you recommend switching to? How difficult is it and what are the consequences?

For what it's worth - Derek Sivers chose Singapore:

https://news.ycombinator.com/item?id=3944339

http://www.guidemesingapore.com/incorporation/introduction/s...

AFAIK, you can always change to another country. However, I can't see the US taking it very lightly that you've denounced your citizenship. In other words, I would assume they would try to make your life a living hell if you wanted anything to do again in the US. (Have no idea, just assuming based on preconceptions about the way the US already treats it's citizens who live outside of it already) Derek seems pretty open, might be worth trying to reach out to him.

Re: Why you might not want to incorporate in the USA

#229
post #137

Earlier quoted context omitted.

It's something I've considered. As a now resident of Hong Kong, I was surprised - and delighted - with how incredibly easy it was to handle my taxes. Front-to-back, I could do the whole thing, including payment, in less than an hour and understand the whole system. Unfortunately, it is nowhere near so simple in the US, and they have no regard for expats. The US treats its expats worse than any other country in the wo…

Unfortunately, it is nowhere near so simple in the US, and they have no regard for expats. The US treats its expats worse than any other country in the world. The forms are atrocious. And I could go on about being taxed heavily for services I don't use. As a U.S. expat, I haven't noticed this. The forms aren't as easy as the Danish forms (which are fully automatic and done for you), but not too complex in my situatio…

You are one of the lucky few. :-)

Be sure not to invest your savings in mutual funds. Form 8621.

Be sure to avoid the local equivalent of an IRA if you want to do retirement savings. The IRS might not think it is a tax-free pension. And they might think that employer contributions are taxable income to you.

Don't own stock in a foreign corporation. Don't become an officer with signature power over the corporation's bank account.

Be sure to report all of your bank accounts and investment accounts on FinCen 114 (the new FBAR). Don't forget Form 8938 as well, if it applies to you.

I'm not saying you can't have a simple tax life as an American abroad. I'm just saying that you have to have a simple life in order to achieve it.

The problem is not with the U.S. tax liability. As you said, the foreign tax credit will take care of that. You won't pay U.S. income tax. The real problem is with the paperwork and the penalties for screwing things up.

Re: Why you might not want to incorporate in the USA

#230
post #148
post #139

Earlier quoted context omitted.

It is, effectively, the only country in the world that does this. It's shameful. http://hodgen.com/does-the-united-states-stand-alone/

Wow... I really like the US, but these draconian laws make it difficult to justify moving there. Of course, if you grow up like this and don't know better...

> Of course, if you grow up like this and don't know better...

Also, if you don't plan on moving out of the country, which the majority of Americans (and probably citizens of most countries) don't.

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