
How to incorporate a US Corporation from outside the USA? - andycroll
http://blog.freshdesk.com/how-to-incorporate-a-us-corporation-from-outs/
======
inopinatus
This is a lot of effort to go to just gain the ability to handling recurring
payments in USD[1].

I considered a similar path, since here in Australia we are very similarly
constrained[2]. However I was not willing to accept the risk and complexity of
incorporating in an unfamiliar legal/financial jurisdiction and I really don't
feel the OP has made me any more comfortable although they seem flush about
it.

Since I have an alternative billing model available that will be acceptable to
my customers, I've abandoned the whole subscription approach in favour of
annual prepayments.

Instead I have added "solve Australian online service billing" to my list of
possible future projects (not a pipedream, issuer/acquirer systems knowledge
is in my utility belt).

The guys at Pin (www.pin.net.au) will, hopefully, beat me to it, and I wish
them the best because it's a problem seriously needs solving for Australian
startups.

[1] Neither Paypal nor Worldpay's recurring options are palatable to me - both
are seriously underspecified, and are UX catastrophes to boot.

[2] There is one option available; there is one bank that offers USD-capable
merchant accounts, and the signup takes months of paperwork, and has huge up-
front and per-txn fees, at least huge from a startup POV.

~~~
skyhook_mockups
I'm also from Australia and have recently gone through the process of getting
a merchant account (from St.George bank).

From stories I heard in the past, I was expecting a horrible experience (banks
not being able to grok the concept of digital goods etc). Turns out that
either the stories were a furphy or banks have gotten a lot better.

Here's the process I went through.

1\. Application

2\. Set up a single page website to give a brief overview of product

3\. Include TOS and returns policy (adapted from wordpress.com)

4\. Wait 7 days for approval

Thats it. One week to get a merchant account with no prior business history.
The rates are fairly standard:

1.4%/trans, $33 monthly, $44 anual fee, $33 chargeback fee

I think off the top of my head those rates beat those provided by paypal,
stripe, etc. although I'm happy to be corrected if anyone has up-to-date info
about them

I'll also be paying $300/yr for gateway fees since I have no desire to handle
CC details directly.

~~~
inopinatus
Ok, but to the topic at hand - are you able to bill directly in USD with St
George without the buyer wearing the exchange risk and overseas transaction
fee?

I ask because merchant accounts denominated in AUD are widely available, but
for USD it still appears that only the NAB have multi-currency support.

~~~
skyhook_mockups
Sorry.. I'm not sure what you mean by 'exchange risk'.

To your question though.. no I cant bill directly in USD. I am very new (and
ignorant) to receiving online payments, so I'm really curious what the issues
for Americans are. The on-line currency converters are accurate to (I would
guess) +- 1hour currency fluctuations so would give a _very_ accurate estimate
(to within cents) of the cost of a transaction... Wouldn't this be good
enough?

Otherwise if this is an issue then paypal should do the job... 2 mins to set
up and gives an alternative option.

Would be good to hear your own personal experiences.

~~~
inopinatus
No, not good enough. Each bank chooses different exchange rates. Using a
converter gives you a spot price from one institution. There's no telling what
the customer will actually be billed. Indeed there's no certainty that the
transaction will even be journalled that day. Moreover, they'll be slugged for
an "overseas transaction fee". Finally, it means you're unable to use any kind
of collateral that quotes a price, because you can't guarantee it.

It's a marketing disaster, in fact, and would look completely amateurish.

Paypal is never Plan A.

~~~
skyhook_mockups
Thanks for your insight. I guess as an Aussie I'm used to seeing a slightly
different amount (usually within $1) of the quoted USD for a transaction...
however maybe US users are different. In any event, I think given that my own
business is only just launching I'll have to go the less than pro route of
offering paypal along with direct payment (in AUD) and hopefully that will
garner me enough business to start looking into direct USD transactions.

------
andycroll
I'm not super clear on the tax implications of this and they aren't
mentioned... any insights?

~~~
Negitivefrags
If you only have a US company, then it can pay salary to workers in other
countries and have those workers pay local tax. I think that your country has
to have a Double Tax Agreement for that to work. The US company pays US
corporate tax.

If you want the money to be funnelled to a company in your local country then
you need a set up a Transfer Pricing Agreement. This basically means that your
local company charges the US company for services rendered, and the US company
charges your customers. You pay local tax on whatever goes to your local
company and US tax on whatever remains. The hard part is determining a
percentage.

I believe that the rules for this are different per country, but in our case
(New Zealand), we needed to set up what is called an "Arms Length Agreement".
That is to say, you need to be able to prove that the relationship you have
could have formed between any two unrelated companies.

As we are a game company, we called our US company a publisher of our game and
we did a 70/30 split with it. This is justified by the fact that you can get a
70/30 split with a fair number of other methods for publishing independent
games (for example, the apple app store).

All up we paid several thousand for legal advice and incorporation costs.

~~~
bosch
Do you have Twitter/E-mail? I have a few questions you might be able to
answer.

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endgame12
This is useless. Incorporation is not really the problem. Being outside the US
is the problem. Compliance issues in both countries will cost a lot more than
the incorporation. They are either ignorant of the issues and not compliant or
paying a lot for an expert on international tax.

------
dfc
There might be some good info in a recent thread:

Ask HN: How to setup a company in U.S. without being there?

<http://news.ycombinator.com/item?id=4122794>

~~~
andycroll
Very nice, missed this.

Seems to me two reasons to set up in the US:

1\. For US-based investment 2\. For taking payments using excellent services
like Stripe, Braintree etc

#2 should be inspiring localized entrepreneurs all over the world. Fix the
payment problem and 'boom', instant business.

------
SeanLuke
It seems he doesn't really understand why one typically incorporates in
Delaware.

~~~
girishm
Hi Sean - When you are looking to incorporate from abroad, Delaware seemed the
most obvious and had a good ecosystem around it. You can pay the Franchise tax
online and pretty much get most of what you want from the State of Delaware
online. Once you are successful and have money we can always change things but
as a startup getting up and running quickly was essential and Delaware
incorporation was a breeze.

~~~
SeanLuke
What's missing from your article, and from your response here, is _why_
companies incorporate in Delaware as opposed to, say, Iowa. That reason is:
since the turn of the century, Delaware has adopted a variety of tax and
corporate laws which are highly, almost absurdly, corporation-friendly. As a
result, Delaware has a well-deserved reputation for being a corporate haven.

------
sbarlster
What a lovely story. Not specifically the credit card stuff but the hackernews
inspired startup story... [http://blog.freshdesk.com/the-freshdesk-story-how-
a-simple-c...](http://blog.freshdesk.com/the-freshdesk-story-how-a-simple-
comment-on-h-0)

I find the 'just make the core features work' part interesting. Make my core
business processes work with no glitches at a 'reasonable' cost.

I would be interested in a freshdesk tech stack blog entry?

------
stanislavb
If you found useful this article you may check this one too -
<http://news.ycombinator.com/item?id=4138253>

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raasdnil
Hey Andy, I used <http://www.incplan.net/> Jacques is the owner and very
helpful. Let him know I sent you along - Mikel.

~~~
andycroll
How does the tax work for you guys?

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yashchandra
One thing to note. The blog writer Girish already had lived in the US before
and had a social security number without which I do not think you can get a
federal EIN. So if you have never been to the USA, you cannot have a social
security number and which means you cannot incorporate? I will stand corrected
if someone has better information.

~~~
yashchandra
Ok thanks all. So you can possibly get an EIN using an agent. But I am sure
that you cannot incorporate certain entities such as S-corp (which I own btw).
But good learning otherwise.

~~~
rprasad
You cannot incorporate an S-Corporation if you are not a U.S. individual
taxpayer (i.e., a flesh-and-blood person who is a citizen or permanent
resident of the U.S.).

------
rprasad
Just a few thoughts on the tax consequences based on a cursory look at the
OP's post...

\- It appears that the OP will be subject to at least a 15% withholding rate
on dividends paid from the US Corp to the Indian parent in addition to the
U.S. corporate income taxes paid.

\- All IP and IP rights are owned by the U.S. corporation, which will make a
future IP migration offshore very expensive. As in, minimum six-figures
expensive (possibly even into 9 figures). This could be a serious deterrent to
foreign acquirers. IP should be held offshore to the extent possible. Note
that holding the IP in the U.S. also has implications for future expansion, as
it prevents the use of the most cost-favorable transfer pricing arrangements.

\- Worldwide income is subject to U.S. taxation. Their costs will not scale
with their income, which will make this very expensive. (U.S. income taxation
is preferrable to foreign jurisdictions only if costs scale with expenses,
because special deductions or credits in the U.S. tax code can lower the
effective tax rate below 10% or even 0%).

Incorporating in the U.S. is easy. The hard part is getting a tax-efficient
structure. The OP's structure is not tax-efficient. This will not matter as
long as they do not have profits, but it will haunt them once they start
having serious earnings or start receiving serious acquisition offers.

