However, Stripe Atlas is not exactly the answer to all your questions regarding managing an offshore online business. Like the positive, there are many relatively poor aspects associated with using Stripe Atlas for a business. Technically speaking, there's nothing much that Stripe Atlas can do that you can do on yourself. There are many better alternatives for remotely setting up bank and merchant accounts for your business.
If you live in the US, you know that the timeline to set up a US business entity with a robust payment infrastructure can be reduced to days with Stripe Atlas. While managing all your merchant accounts is possible with other platforms like PayPal, they generally charge higher transaction fees. Additionally, there is a limit for making transactions with PayPal in some countries, as low as $1000 per month.
When Stripe Atlas came out, it made it easy for everyone to bring their entire banking system across different nations under one roof. Initially, they also offered many basic services such as tax advice from PwC, education materials, and legal guidance for their users from
Herrington, Orrick & Sutcliffe. It also offers some basic tools from Amazon Web Services.
Creating merchant accounts across different nations is something you can do physically by yourself if you are present in that country. The only difference that Stripe makes is that it allows you to manage all this process remotely without actually visiting the country by yourself. But as a smart businessman and investor, you will, in the end, find that doing it on yourself will save you more money in the long run.
What Is Stripe Atlas?
Stripe is a payment processing company with a generous free plan for e-commerce businesses. Because of the company's success, many people have tried to use Stripe to build an online business without paying fees and differentiating themselves with attractive features like subscriptions. A small number of these companies have grown large and well known, but most fail within a year or two. However, these companies encounter some major issues as they grow, which are often exacerbated by Stripe's free account.This includes worrying numbers of abandoned carts and customer complaints in addition to legacy code that doesn't scale well. But none of these issues are unique to Stripe. The same problems apply to any other payment processor like Braintree, PayPal, or Payoneer. Instead, the problems are caused by the nature of e-commerce businesses and competition online in particular.
The free Stripe account is only free for a limited time (12 months). After 12 months, you're forced to select one of their paid plans starting at $8 per month. This fee may not seem like much, but it's a large portion of the revenue of an average e-commerce business. You would think that after paying so much over a year, you would be able to customize your account and add features, but this is not the case. One-fifth of a payment processor's revenue is not enough to stand out from the competition.
Stripe for Businesses In Long Term
To understand why these businesses are not viable in the long term, it's important to see how they work. Some of the most successful companies on Stripe are newsletters with millions of users like Product Hunt, Indie Hackers, and Backlinko. These companies can spend a lot on marketing because they monetize their user base by selling access to their email lists.They can also afford to hire more employees because they have a successful subscription business. When looking at these successful online businesses, it's important to remember that they are not e-commerce businesses. They are newsletters. The goal of a newsletter is to collect email addresses and sell access to those emails, not make money from transactions.
This is an important distinction because it affects both how the company operates and how Stripe treats them. An e-commerce business's goal is to profit by selling products or services. The most common way for an e-commerce business to generate revenue is through transactions fees paid by consumers and sellers, so Stripe takes a fee of 2% plus $0.
Alternatives for Managing Offshore Merchant Accounts
There are many options available to manage merchant accounts remotely. However, Stripe is not an ideal solution for setting up a business in a tax-free country. Stripe is free only for 12 months, and then you have to pay some monthly charges for their services. These charges are way too much for a small-time business and do not have the flexibility to set your pricing plan. In addition, even their paid products do not have any attractive features that any other third-party provider does not already offer.
In the starting days, PayPal was the major leader in the market for maintaining offshore payments. However, managing your business with PayPal is quite complicated. On top of everything, it charges some heavy rates for making global transactions. For example, Hong Kong PayPal charges a great transaction fee for converting your money from Hong Kong Dollars to USD.
This means a major proportion of your earnings will be wasted in the name of transaction charges and conversion fees. Additionally, there's a limit on making a transaction with your PayPal account in countries like Costa Rica. This limit goes as low as only a thousand dollars for one month.
Countries Where Stripe Atlas Is Accepted
On the other hand, when Stripe Atlas was launched, it was expected to make things easier. Its working is quite simple. If Stripe is supported in your country, you can accept global payments from different countries. Currently, Stripe has supported in around 34 countries, and the number is still growing day by day. The list includes names like Singapore and Hong Kong, Japan, Malaysia, and many more. Stripe is available in New Zealand, Australia, Ireland, Canada, the United States, and the UK. Atlas also has its roots in some European nations like Austria, Denmark, Belgium, Estonia, France, Finland, Germany, Italy, Greece, Latvia, Luxembourg, Lithuania, Netherlands, Poland, Norway, Portugal, Slovenia, Slovakia, Spain, Switzerland, and Sweden.While this list of Stripe-supported countries is quite intimidating, the bad news is all of these countries have higher tax rates. The main motive behind taking your business offshore is to avoid paying heavy taxes. On the other, having an employee physically present in that country helps you cut down significantly on taxes. For example, if you are remotely operating in Ireland, you will be charged around 25% in taxes. But having an employee physically present in Ireland will allow you to cut the tax rates down to half at 12.5% only.
To sum up, Stripe Atlas is not offering anything extraordinary for your business. You can easily form a Delaware C Corporation if you are physically present in that country. While Stripe makes it easy to bring everything under one roof and manage things remotely, it still has downfalls. Stripe Atlas is beneficial only for business owners who are non-residents of the US.
Reasons Why You Should Avoid Using Stripe Atlas in First Place
The convenience of using Stripe with your payment system is always intimidating for every system. However, by signing up with Stripe, you are getting more than you asked for. Stripe will make managing your business across countries tough and complicated. Take a look at some of the most commonly seen problems associated with using Stripe Atlas for a US-based business entity:
You Must Pay US Corporate Taxes
You will need to pay US taxes, but you will also owe taxes in any other country where you do business. This can get very complicated since countries have different tax rates and rules that apply depending on the company's size and income level. For example, for a limited liability company (LLC) in the US to be taxed as a corporation, at least one LLC member must be a US citizen or resident. However, if this is not the case, your LLC will automatically be taxed as a partnership.
Using Stripe means you are turning yourself in with one of the most complicated taxation systems. Since the coming of the Tax Cuts and Jobs Act (TCJA) of 2017, which was passed under the Trump administration, corporate taxes were cut to 21% from the previous 35%. Even after this recession, 21% is still a huge tax amount. In comparison to that, the 32% tax rate for businesses in Delaware is quite reasonable.
The bottom line is you end up paying more in taxes. In addition, you will be limited on how much you can do with Stripe Atlas. You may think that it will save you from any complications with your business's tax code, but think again. Stripe Atlas limits are small, sometimes as low as 100 USD only per month. That's ridiculous compared to the amount of money you could make by doing business in countries with zero or very little taxes on your operations.
Those who live in countries that are not currently in any type of tax treaty with the US can face double taxation. You will also need to pay a whopping 30% withholding tax on every payment sent outside of the US. However, this tax rate reduces to a lower number when you send it to someone who is a resident of the US. As a result, many businesses forget about tax burdens and simply assume they make uninterrupted global transactions without paying any taxes.
The burden of Filing and Reporting
Running a business in the US requires a lot of paperwork, including individual and entity tax returns and local and federal state forms. You will also need to keep records of every transaction you make for five years. However, nowadays, most companies prefer to manage everything from the comfort of their computer using Stripe Atlas. This is because filing and reporting are quite troublesome from the viewpoint of businesses owners.
If your company earns more than USD100,000 a year, it will be required to file an individual tax return form with IRS. Unfortunately, in some countries like Ireland, Norway, Australia, and Singapore, you have more than that amount, which means paying double or even triple taxes on your earnings.
This is why many businesses prefer to manage their businesses remotely through Stripe. However, this comes at the cost of taxation. Since you don't need to pay taxes anywhere if you conduct your business through Stripe Atlas, you are still subject to filing tax returns and paying corporate tax everywhere. This is no way out for you and only really for those who have months or years to fill up paperwork in the US.
Since Stripe handles all the money coming in, customers have no way of contacting you if there is a problem with an order. So you are giving up control over your customer base and control of your reputation and brand. Also, even though it's possible to specify your local bank account while setting up your Stripe Atlas profile, it's not a great idea to use payments to pay yourself in foreign currency since they will need to be converted at the end of every month.
Your Business Needs to Be Stripe Friendly
Stripe Atlas only works with businesses that are Stripe friendly. This means that you should be processing your customers' payments through Stripe while you're sending money to your international bank account. If you do not have a Stripe account when using a normal bank account, it will affect how your customers pay internationally.
They may have to pay additional fees that you will have to reimburse them for later, which is quite annoying for everybody involved. In addition to that, you should also make sure that your bank account and Stripe account are linked to each other. The funds will be converted from one currency to another, so if you do not have that set up beforehand, then it will become difficult for your customers to pay you.
KYC Process For Silicon Valley Bank
Since Stripe scans your customer's bank account and KYC compliance, you will have to undergo this procedure before starting a new company through Stripe Atlas. This means that Stripe will look at your bank account and the associated information such as identification number, address, Social Security Number (SSN), driver's license, and more.
This is why Silicon Valley Bank is one of the best US companies to work with if you want to start a company in the US. Silicon Valley Bank is a partner of Stripe and will only work with companies that are HKD-friendly as well. This means that you won't need any passport for international payments through Silicon Valley Bank. You will be able to make payments in USD through Stripe Atlas.
There are no clear guidelines about whether or not Stripe follows all the US laws about the Know-Your-Customer process. This can be a spoiler for you if you are a huge fan of using Stripe for your business. But, you can always turn to other legal ways of managing global payment infrastructure for your company. For example, certain companies like Nomad Capitalist offer assistance for businesses to manage their payments across different countries.
Litigation Risk
The laws and regulations regarding managing money flow in the US are extremely strict. If you are a US-based business, you are destined to face litigation risks at some point in your life. You need to understand how litigious it can become to operate offshore payments for US residents as a business. The problem doesn't end here. Even if you are not a resident of the United States, you can still be sued in the US court system. This is true for all those who owe a legal entity that comes under the jurisdiction of the United States.Getting sued is the worst way to end up a successful or rising startup. If you are a new business in the market signing up on Stripe, you are taking huge risks. You are putting the future of your startup in line by optimizing Stripe in your banking system. This is because Stripe requires KYC and another form of identity verification data.
This is where Stripe could lead you to lose a part of the whole of your business if you don't follow all the necessary procedures from the start. Therefore, it would be best for you to understand payment gateway solutions for the business app on Stripe. Generally, Silicon
Valley Bank usually does not agree with Stripe on disputes with their contractors and partners.
There have been many cases of Silicon Valley Bank going after large corporations for the charges they are providing. This might be a source of worry for you, seeing as Stripe Atlas will provide you with a bank account and other necessary services like marketing and accounting.
Stripe’s Risky Advice
Who would want to put up with all these problems? Unfortunately, Stripe has no clear solution for payments in the US, and those who are trying it out are just learning the hard way. But, you can still deal with this by looking for other options like Nomad Capitalist. It is one of the best solutions for managing international payments with Stripe Atlas.No need to worry about your money getting frozen or your account getting shut down as you have total control over your money. As long as you do not change your banking information, then there is no way that Stripe or any other company can freeze your account or make any changes to it without your explicit consent.
Stripe has made its App compatible with Stripe Atlas, but you can still manage your international payment infrastructure with Nomad Capitalist. It is a secure, easy-to-use, and transparent app that will help you by providing personalized support and 24/7 assistance at the most competitive rates.
As a bonus, if you plan to start your own business in a foreign country, you can easily set up an offshore company for yourself if needed. So for all those who would love to try out international payments through Stripe Atlas, then Nomad Capitalist is a great option for you and do not have to worry about the risks involved with Stripe Atlas.
Transfer Pricing Rules
Transfer pricing has always been a complex piece of law, and mixing offshore banking systems makes it even worst. It involves every single transaction made between or within the control of your company. Therefore, when successfully set up with your Delaware C Corporation on Stripe, you must be extremely careful while sending money.You need a professional account with expertise in international business law and transfer pricing associated with different payment methods. Your accountant must know the set transfer protocols while trading with a heavy amount of money in cross-border transactions. If you are ignorant about it, you could have some serious troubles with both state and international authorities.
On occasion, Stripe will offer discounted international rates, which are strictly limited and may change from time to time. Once you start accepting payments from your customers, you will automatically start making payments in different currencies. You just need to update the amount of the currency you want to receive through Stripe Atlas in your payment settings when the first payment comes in. So there's no need to manually add the account or that amount into your account.
Stripe Atlas is easy to use, and it works with any integrated payment processor out there. However, with Stripe, you are working with your company's bank account and with Stripe in the background. This means there will be times when you will need to make changes to send some money from Stripe. This requires a lot of trial and error, which is quite annoying for everybody involved. This is especially true for the customers who are getting delayed delivery on shipments because of various errors.
