Is UK Ltd the right setup?

[cangarooo]

Good morning everyone.

So, looking for your advices/suggestions/pov. Here’s the story.

Together with other two friends, we have created a new solution for the HR world.

The solution is divided in two parts: one targeting end users and a second targeting HR, recruiters and talent managers.

There are some innovative components on both sides. At this stage, the solution is almost ready for the end users side (I would side we are at 95%) and work in progress for the business side (40%).

It’s time now to make it serious and decide to go to market as our first target is to achieve 10.000 registered users using our solution. The proposal is based on three types of user profiles: freemium, premium, platinum. Even if we would reach 10.000 freemium users, we will be happy.

As I wrote, it’s time to make it serious and we want to formalize our adventure by creating a company.

Forgot to mention that I will hold 40% of the company share (I’m EU citizen based in CH), one of the other two will hold 40% (also EU citizen based in CH) and the third guy will hold 20% (EU citizen based in Italy).

None of us can be visible as we all work as employees so we must use a representative.

Also, important thing, we want to keep incorporation and company cost very low as we will not generate income or revenue at least for 12 to 24 months.

For this scope, we are thinking about incorporating a UK Ltd and appointing a nominee director without any executive power. Attached to this, we are thinking about having an e wallet solution to pay suppliers and receive user fees (if any). I’m quite familiar with UK Ltd as it’s not the first time for me. I also know that banks are becoming more stringent when it comes to opening a bank account to Ltd without having the Ultimate Beneficial Owner (UBO) visible.

So far, this is the cheapest and the most flexible solution I’m aware of.

Looking around the web I’ve also heard about benefits of having an Estonian company incorporated but I’ve no clue about it. Is there anyone familiar with this?

Or overall, do you have suggestions or different ideas on how to have an effective setup?


Thanks for your feedback

Mr. P.

 

[JohnLocke]

None of us can be visible as we all work as employees so we must use a representative.

You could setup your business in Cyprus with company and banking , using nominees to avoid your name to appear anywhere.

 

[Luigi]

Good morning everyone.

None of us can be visible as we all work as employees so we must use a representative.

If you say that you can't be visible by the government I don't think it will work with nominee directors, but you can try.

If you would like to open in the UK I'd suggest using an LLP rather than a Limited.

Another Suggestion is opening in Delaware, where the document that indicates the company's owners is kept by you, not by the government.

 

[cangarooo]

Thanks for the reply Admin.
What about the costs associated to the incorporation and normal management of the company?
UK Ltd are cheap from both side.

Hi Luigi.
Thanks also to you for the feedback.
We just need to be hidden from our current employer not from the government.
Stupid question: what's the difference between an Ltd and LLP?

As mentioned in my post, we would prefer having the company incorporated in Europe rather than any other place, mainly for distance/reach reasons.

Mr. P

 

[diablo]

For privacy reasons Cyprus will protect you better but is more expensive compared to UK. However, if your goals are ONLY to hide from current employer you may be fine with a UK corp to protect your privacy.

 

[cangarooo]

Thanks for the feedback Diablo.
This was also my idea/understanding.
The only issue seems to be related to the bank account opening. Am I right? Any advice related to this?

 

[Martin Everson]

After reading your original post the first thought that came to mind is Estonia company also but opening account requires visit to Estonia. What you need to consider with UK company is that beneficial owners are publicly visible on the internet via companies house website. Anyone can click on a company and see the beneficial owners. UK companies since a few years have to publish beneficial owners.

An Estonia company has tax advantages in that you don't pay tax on profits but only pay tax when profits are distributed. Hence you can build up profit without paying taxes. Privacy is all but gone in EU but you can't have it all.

Tax info on Estonia company
See Taxation – e-Residency

 

[cangarooo]

Thanks Martin. Yes Estonia setup is definitely on my radar.
So true "Privacy is all but gone in EU but you can't have it all."
Anyway, do you know the banks behavior regarding bank account opening with a non-Estonian director?
Thanks
Mr. P.

 

[Martin Everson]

It seems both Swedbank and LHV bank require you to visit a branch in person as a non-estonian to open a business account. I would keep this in mind as it means if any issues with the account this attitude means you are going to be travelling to resolve issues.

 

[cangarooo]

Ouch!!! :-(

 

[Luigi]

Thanks for the reply Admin.
What about the costs associated to the incorporation and normal management of the company?
UK Ltd are cheap from both side.

Hi Luigi.
Thanks also to you for the feedback.
We just need to be hidden from our current employer not from the government.
Stupid question: what's the difference between an Ltd and LLP?

As mentioned in my post, we would prefer having the company incorporated in Europe rather than any other place, mainly for distance/reach reasons.

Mr. P

Hi Cangaroo,

I don't think that what you asked is stupid, actually sometimes it is confusing which one is the more appropriated one.
LLP allows members to protect their personal assets from any creditors, but for taxes purposes it is treated just like any other partnership.
If an LLP is used with mixture of UK and overseas partners, it would be only the UK partners that would be taxed in the UK, with the overseas partners being taxed in their country of residence.

Hope it helps.

 

[diablo]

Thanks Martin. Yes Estonia setup is definitely on my radar.
So true "Privacy is all but gone in EU but you can't have it all."
Anyway, do you know the banks behavior regarding bank account opening with a non-Estonian director?
Thanks
Mr. P.

You want to read here regarding Estonia about estonian e-residency
What business are you into? I can't figure it out from what I read, so as I understand it there is no issue to get an Cyprus bank account opened remote.

 

[cangarooo]

Hi Diablo.
The business I'm in is related to HR and Staffing.
As said before, costs associated to Cyprus are quite higher compared UK Ltd.
Mr. P.

 

[diablo]

Okay if it is a matter of setup costs you just stay with UK. It costs money to setup something that works. Sorry to sound rude, but too many people thing they can get everything for nothing and it most often end in an disaster for them, sooner or later - anyway I hope you find something cheap that will work for you.

 

[cangarooo]

No rude at all but simply true what you mentioned.
It's always difficult to find the most appropriate balance between "security" and cost and at certain point something needs to be left on the table.
Security in our case is something we need but not to the extreme point. Meaning that having a nominee director will be enough.
What is concerning me the most is the possibility to have a bank account associated to the UK Ltd.
I still need to find my way out. ;-)

 

[Martin Everson]

The below solution can be proposed.

1. Establish a UK company with nominee director
2. Establish a Dutch STAK as shareholder of the UK company
3. Give yourselves the depository receipts of the Dutch STAK

The advantages are a Dutch STAK is considered the ultimate beneficial owner (UBO) and has its own legal personality. UK companies house records would have to reflect this..a legal challenge is possible however. Your identity is 100% protected as no registry will contain your names in UK or Netherlands.

The UK company with nominee director won't cost much. The Dutch STAK around 500 euros if you shop around. The Dutch STAK is transparent for tax purposes so the tax liability lays with its depository receipt holders to declare their income.

It's probably overkill but its simple to setup, fairly affordable to run and completely private as to ownership. Only bank will have to know who STAK's depository receipt holders are for KYC purposes. The public will just see a Dutch Foundation (STAK) as ultimate owner of the UK company and the investigative trail stops there ;-)

For banking just use a EMI based in UK. Forget banks for UK companies its way too hard now.

 

[Martin Everson]

Another Solution

Just use Leapin.eu to open an manage an Estonia company and use it with a Transferwise Borderless payment account. Estonia e-passport is 100 euros, Estonia company 190 euro and leapin charge 79 euro a month to take care of everything for your company. I don't know anything about leapin but their offer seems reasonably priced and comprehensive for what you get. If your working full time you don't even want to think about VAT, tax returns etc and they seem to offer to take care of all of this.

Professional plan | LeapIN

Multi Currency Account | Borderless Account by TransferWise

It doesn't address privacy concerns but it does make sense to work with a company that specializes with tech entrepreneurs.

 

[cangarooo]

Hi Martin.
Thanks for both comments. They are very interesting.
I didn't know about the STAK so, this is something to really look into and the setup might really work.
Have been trying to "shop around" as you suggest but haven't been really able to find a STAK proposition at 500 €.
Any site you can suggest?

Also interesting and definitely easier the Leapin.eu solution.
Uhm! The privacy matter seems to be still there with Leapin but I'm going to contact their support to see if they accept a STAK as company owner. This might solve all problems, including bank account.

Thanks o much for the moment and for the great advices.
Mr. P.

 

[Dubsize]

Hi,
Delaware LLC is definitely the best setup for you.
You will get a cheap and fast solution (around 150$), it will take 48 hours for them to make the company.
No public registry, no one know who’s the UBO.
Then, you open an account in a EMI and you’re all good.

 

[cangarooo]

Thanks Dubsize for the suggestion but as mentioned before, we prefer European solutions.
Mr. P.