Where should I register a company selling SaaS worldwide?

[tomwis]

SaaS is selling $15/month service. Yearly income $30.000 or more. Customers: 45% from US, 33% from EU, 10% from Australia.
I need to connect Stripe or Paypal or similar for credit cards, etc. At least 200 transactions a month (probably more).

I'm based in EU. Where do I register? Currently I'm leaning towards Delaware LLC, because of the anonymity and avoiding double taxation ($100 paid one-off in the US I consider a yearly cost, not a income=based tax). Registering it via Stripe Atlas to avoid registration hassle makes sense? I read in this forum Wyoming or New Mexico LLC are even cheaper, but Stripe Atlas doesn't offer registering there.

I'm assuming I'd have to do VAT MOSS for EU sales.

Last but not least - how do I do accounting? Ideally, I would love getting just one income document per month (including entire list of purchases that month), which I would forward to accountant in my home country.

So how do I do it? I cannot find a complete and detailed comparison of available options/countries/setups, with setup costs, running costs, tax calculations, accounting obligations and risks.

Thanks in advance!

 

[Martin Everson]

Sorry why not open a company in your own EU country and use Stripe and PP?

What are you trying to achieve by going offshore with a setup?

 

[tomwis]

Sorry why not open a company in your own EU country and use Stripe and PP?

Anonymity. If I register in Delaware, my name+address are not disclosed to public eyes.

 

[Martin Everson]

Anonymity. If I register in Delaware, my name+address are not disclosed to public eyes.

So basically you don't want public to know your behind this business but want them to deal with your business?

 

[tomwis]

Yes, exactly. They are already buying via BTC (so full anonymity), but I need to expand to credit cards.

 

[Sols]

You risk creating a huge mess for yourself for such a small business. If/when this structure falls apart, you're looking at tax payments plus penalties and possible jail time for tax evasion and potentially even money laundering, unless you do things correctly.

On the other hand, if you do things correctly and pay into EU VAT MOSS and comply with the company being tax resident where you live (meaning you pay local corporate income tax, or have the entity qualify as a local partnership), you're going eat up a big part of your revenue in accounting and administrative/legal fees to make sure everything is compliant.

Compliant advanced international tax planning for a business turning over 30,000 USD isn't worth it. Non-compliant is cheaper short-term but can get really ugly.

You would save a lot of money by just using a local company and have a local accounting firm do the books for you.

Carefully consider what your privacy is worth.

 

[tomwis]

You risk creating a huge mess for yourself for such a small business. If/when this structure falls apart, you're looking at tax payments plus penalties and possible jail time for tax evasion and potentially even money laundering, unless you do things correctly.

On the other hand, if you do things correctly and pay into EU VAT MOSS and comply with the company being tax resident where you live (meaning you pay local corporate income tax, or have the entity qualify as a local partnership), you're going eat up a big part of your revenue in accounting and administrative/legal fees to make sure everything is compliant.

Compliant advanced international tax planning for a business turning over 30,000 USD isn't worth it. Non-compliant is cheaper short-term but can get really ugly.

You would save a lot of money by just using a local company and have a local accounting firm do the books for you.

Carefully consider what your privacy is worth.

30.000 USD annual is a very safe bet. Aiming to make it significantly bigger.

I'd like to do it by the law, so not avoiding any taxes. Just do it - like you wrote - correctly, to avoid overpaying those taxes.

Can somebody answer with some hints?

 

[Sols]

Say you incorporate a Delaware LLC.

By being managed/controlled from the EU country you are in, the Delaware LLC is now a company tax resident in that EU country. This means it has to register for a tax ID and comply with your local tax laws.

Since there is no such thing as an LLC entity anywhere in the EU, the first thing you need to determine is whether the LLC is treated as a partnership or as a corporation. If it's a single-member LLC, it probably has more in common with a corporation than a partnership and is treated as such (maybe, who knows, go ask a local lawyer), so you need to pay full corporate income tax for the company's profits. Then if you want to pay yourself, you need to either withdraw funds from the company as dividends or salary as per local law and pay all relevant taxes and contributions.

If your Delaware LLC is treated as a partnership, you are subject to lighter taxation and paperwork requirements in most cases depending on local laws. You may effectively lose limitation of liability and be personally liable for the company's affairs and debts. This can be a problem if your company runs into problem, since those problems are then also your personal problems.

You may have to register the company with your local company registrar as a branch of a foreign company. This may in turn require you to disclose yourself as the UBO. Varies based on local law.

Since you're selling to EU residents, you need to be mindful of VAT. Your current revenue projections are so low you might be under the VAT thresholds but if your business picks up, you definitely need to start paying VAT. So now you find yourself in the interesting predicament of being a non-EU company operating from within the EU as an EU tax resident company. Hope you have good lawyers to help you navigate that quagmire.

You're looking at hiring a highly skilled accountant to handle the complexities involved here, and probably a legal adviser. I don't know where you live but services like that usually cost in the range of 5-10,000 EUR a year if you want the kind of peace of mind that comes with knowing you are in the hands of experts who have your best interests in mind; not just some cheap solution that won't hold if questioned.

TL;DR — Don't do it. But if you really want to do it, speak with a local tax adviser and lawyer, and prepare to pay up to a third of your annual revenue projections just to get the legal stuff in order. Potentially without achieving your anonymity goal.

 

[tomwis]

TL;DR — Don't do it. But if you really want to do it, speak with a local tax adviser and lawyer, and prepare to pay up to a third of your annual revenue projections just to get the legal stuff in order. Potentially without achieving your anonymity goal.

Ok, so you're strongly suggesting not to go this path. Can you suggest alternative? I need anonymity, but not really to hide from paying taxes. Just don't want to overpay them

Again - $30.000 yearly is an initial benchmark. I'm actually hoping for much more, otherwise why even start a company?

One thing I see I haven't mentioned before and it might be important: I'm single person, not partnership. So I will pay taxes in my home country as single person or sole prioprietorship.

 

[Sols]

Ok, so you're strongly suggesting not to go this path. Can you suggest alternative? I need anonymity, but not really to hide from paying taxes. Just don't want to overpay them

Depends on where you live and how much capital we're talking about, but a trust or foundation setup might work in your case. Or use a family member instead and then solve a transfer of wealth between yourselves.

Speak with a local lawyer/adviser who understands the intricacies of your local laws.

One thing I see I haven't mentioned before and it might be important: I'm single person, not partnership. So I will pay taxes in my home country as single person or sole prioprietorship.

That's not how it works, I'm afraid. If you form an offshore company, then that company is a taxable entity where you live. So you have to pay corporate income tax, plus all other taxes. No way around that.

 

[tomwis]

That's not how it works, I'm afraid. If you form an offshore company, then that company is a taxable entity where you live. So you have to pay corporate income tax, plus all other taxes. No way around that.

Then what does this "LLC pass-through taxation" mean (go ahead, google exact phrase)? I read a lot about it and is seems you only pay $100 or so per year to Delaware and then then entire taxation process is handled in your home country.

 

[user9823671]

Why do you need privacy?
Is there something illegal / grey area / dodgy about what you are doing? Maybe not in your eyes, but in the eyes of some countries?
Is it just that the business is embarrassing so you'd prefer family members not know you run a granny gay porn hookup site for young men? (or whatever)

Are you prepared to move?
Do you want everything to be legal and completely above board?

 

[tomwis]

Why do you need privacy?

Conflict of interest, that's all.

 

[Sols]

Then what does this "LLC pass-through taxation" mean (go ahead, google exact phrase)? I read a lot about it and is seems you only pay $100 or so per year to Delaware and then then entire taxation process is handled in your home country.

LLC pass-through taxation is a US legal concept. You don't know for sure yet how your home country is going to treat an LLC, since there is no such as LLC under any EU law.

As I mentioned earlier, the LLC will either be treated as a partnership (pass-through) or as a corporation (a taxable entity in and of itself).

What's your plan if your local tax authority knocks on your door and wants 20% corporate income tax for Tomwis LLC because under local law it's a corporation? You pay, or fight it in court. If you fight it in court, you need to prove that US law applies in your home country or that the company should be treated as a partnership (despite only having one member).

 

[tomwis]

LLC pass-through taxation is a US legal concept. You don't know for sure yet how your home country is going to treat an LLC, since there is no such as LLC under any EU law.

As I mentioned earlier, the LLC will either be treated as a partnership (pass-through) or as a corporation (a taxable entity in and of itself).

What's your plan if your local tax authority knocks on your door and wants 20% corporate income tax for Tomwis LLC because under local law it's a corporation? You pay, or fight it in court. If you fight it in court, you need to prove that US law applies in your home country or that the company should be treated as a partnership (despite only having one member).

I'm fine paying 20% (more-less) corp tax in my home country. The rest stays in my pocket. And if everything I have to pay on top of that is fixed $100/year in the US, than this is fine, too.

Unless there's a better way to do it... saving more. That's why I asked the question in the first place. Happy to learn about other options

 

[habib]

What about Hong Kong or Singapore?
I run a SAAS company and use a Hong Kong LLC. 0 tax on all income derived outside of Hong Kong.
For anonymity you'd need to use a nominee director and shareholder could be a foundation or something.
Stripe and PayPal works, but setting up a bank account will be hard with a nominee director and shareholder.. I had my international payments blocked by HSBC for using nominee director / shareholder and trouble with Transferwise and Neat also, in the end I just switched everything back to my name and no problems.
Setting up the company is super easy, plenty of services for this.
You'd need yearly audits by a Hong Kong CPA and submit a profit tax return once a year to the Hong Kong tax department, which you can do yourself online.

 

[Btraveler]

What about Hong Kong or Singapore?
I run a SAAS company and use a Hong Kong LLC. 0 tax on all income derived outside of Hong Kong.
For anonymity you'd need to use a nominee director and shareholder could be a foundation or something.
Stripe and PayPal works, but setting up a bank account will be hard with a nominee director and shareholder.. I had my international payments blocked by HSBC for using nominee director / shareholder and trouble with Transferwise and Neat also, in the end I just switched everything back to my name and no problems.
Setting up the company is super easy, plenty of services for this.
You'd need yearly audits by a Hong Kong CPA and submit a profit tax return once a year to the Hong Kong tax department, which you can do yourself online.

Interesting.. 0% Tax, but, if you are the owner and UBO, your EU home country will now and, again, treat the company as local + taxes fine. I'm right?

 

[Btraveler]

I'm fine paying 20% (more-less) corp tax in my home country. The rest stays in my pocket. And if everything I have to pay on top of that is fixed $100/year in the US, than this is fine, too.

Unless there's a better way to do it... saving more. That's why I asked the question in the first place. Happy to learn about other options

Wait. In Europe, your company will pay 20% or 30% in income benefits. But, when you try to withdrawal to your personal account, you'll have to make a Payroll land pay another 35% of taxes or paying the same in your annual personal income declaration if you withdrawal the money via dividends (instead of salary)

 

[habib]

Interesting.. 0% Tax, but, if you are the owner and UBO, your EU home country will now and, again, treat the company as local + taxes fine. I'm right?

I don't know about that, depends on the CFC rules of the country and your tax residency status.. I'm a perpetual traveller + make sure I'm not a tax resident of any country.
If you can't travel alot then consider making your tax residency in a country like Nicaragua that doesn't have CFC rules, then it's 100% legal 0 tax payable.

 

[Kilixos]

will either be treated as a partnership (pass-through)

Hi @Sols What happen if your country consider the US LLC as a partnership (pass-through) ? You pay taxes on profit as "personal income" ? Dividend ?

Thanks