
Ask HN: Questions about running a company from a cheap country - gringomorcego
Recently I was thinking about this, and realized that a lot of the money issues I worry about for doing a startup would disappear if I incorporated in Singapore and ran my business (which would be a B2C/B2B hybrid, with possibly handling deposits into customer accounts) from a country which was very cheap to live in (India, Cambodia, Thailand or Vietnam).<p>What physical things do I have to worry about having to handle? What sort of stuff can I not easily handle with either a telephone call or an internet connection, assuming I'm working alone?<p>I'm particularly worried about how to read stuff that I'm going to have sent to a PO box and stuff like that. What stupid pitfalls am I optimistically avoiding to think about?
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brown
I ran a company in the Philippines for two years. It was a good experience --
good, not great.

Pros:

* Cheap -- You can make it as cheap as you want. You can get down to $100-$200 per month if you're aggressive. But understand that you won't have the western lifestyle that you're used to. If you want a nice western kitchen, bathroom, consistent electricity, consistent bandwidth, then you're going to pay more and more. I found a sweetspot of about $1k/month total expenses.

* Quality of living -- this is related to cost. You can have a full time maid, driver, etc. It's totally normal, totally acceptable, and improves mental health significantly.

* Tropical weather, access to many travel destinations

Cons:

* Far from family and friends

* Lots of business travel -- If you have customers in the U.S. or Europe, inevitably you're going to end up traveling there frequently. This bothers some people more than others. It really wore me down.

* Difficult hiring environment -- It can be really hard to find top tier talent. Either be patient, or be willing to pay above market rates.

* Weak legal system -- As you achieve success, you will unfortunately become target of occasional shady behavior. For example, an accountant who skims petty cash, or a server admin who locks you out of your own servers. In the U.S., those risks are mitigated by a good legal system (and background checks, credit agencies, reliable postal system, etc). In developing countries, you are largely on your own. That can lead to a feeling of helplessness. Toughen up. Hire lawyers.

Non-cons:

* Taxes -- Yes, international taxes are complicated; however, you can easily afford local legal services to handle everything.

* Foreign bank accounts -- Not as scary as FACTA sounds. Hire a good U.S. accountant to do your taxes.

We had a U.S. LLC and local entity in the Philippines. Doing business as a
U.S. entity is 1000x easier (think about payments, collections, legal
services, etc). Have a local entinty for all local staff and your office.

The Philippines, like many developing countries, has many special government
programs to encourage entrepreneurship. For example, we were in a program that
granted a 5-year tax holiday and special visas for "job creators".

~~~
tferris
Maybe a dumb question but I wonder always how the Internet connection in such
countries is in general and even if it's great: does the lag to the western
world annoys one after a while??

~~~
JohnGolt
20 mbit/sec in the provincial city in Ukraine, a bit more in the capital.
Also, around 20 mbit/sec in the Bratislava, Slovakia. Internet connection not
an issue in those countries.

~~~
piranha
Connection in Ukraine is _much_ better than in Malaysia, for example. Lag is
lower (Ukraine is in Europe, obviously), speed in higher in average, price is
lower. Speaking from personal experience.

~~~
igor_a
In fact connection in Ukraine is much better than even in US. I have 60 mbs at
home and pay 15$/month without any traffic limit (no throttling too). For $20
you can get 100mbs. In most major cities you have an access to several
providers so you can choose what works better for you. The ping to SF is
200ms. Upload download speed to SF is 4mbs/6mbs. Upload is faster.

In the city where I live (Donetsk) public areas are covered with free wifi
service.

------
philiphodgen
Pitfall if you are a U.S. citizen/green card holder: taxes. Scratch that. Not
taxes. Paperwork and the cost to keep it straight.

Your SG corporation will be a controlled foreign corporation.

Unless you are exceptionally well-organized and advised, the income generated
by your company would start to look a lot like Subpart F income. Translation:
all of the profit of the SG corporation is taxable to you as a human being,
every year, on your U.S. individual tax return.

Now. You might say "Meh, profit is profit and if I have to pay tax what does
it matter. I will have to pay tax anyway." Well, yes, to a point. But I will
gloss over that or what I talk about will look a lot (to you) as snippets of
code look to me. Unintelligible.

The real problem is that the U.S. tax paperwork burden is profound. And it is
beyond the power of mere mortals to do it properly. You are in the realm of
paperwork designed to capture transactions and operations of companies of
Google's ilk. Not ordinary small businesses.

And if you screw up the paperwork, the penalties will eat you alive. E.g.,
Form 5471. This is where you tell the IRS "Hi, I am an American and I own
shares of a foreign corporation." File late, and it is $10,000 please as a
penalty. Don't fill it in right, and they say it is an incomplete therefore
failed filing. $10,000 please.

Things start there and get worse.

The cost of running a SG corporation in SG annually is nontrivial. The cost of
people like me is nontrivial. (I'm de-f'ing a SG corporation right now for a
guy in precisely this position).

All of that money you save living in Cambodia will go to pay the overhead of
your corporation. I don't recommend living cheap just so you can give $10,000
to someone like me. :-)

If you are an American and you want to live in a cheap country, kind of under
the radar, and run your business from there, set up your company in the USA.
Run it from there.

The probability of making a mess of international tax filings approaches 1.0
in a very few years. The probability of making a mess with domestic corporate
or LLC filings is very low.

The cost of talent to keep your international corporate structure straight is
extremely high. (I'm $750/hour and I'm not taking on any new clients at the
moment). The cost of talent to run a generic domestic corporation -- you can
get that anywhere from any random accountant and corporate lawyer.

That's my suggestion. Running away is the best strategy. Said Brave Sir Robin.

~~~
gringomorcego
First off: thank you for taking the time to respond. Your answer was
incredibly insightful.

Usually I'm pretty good at googling stuff, but when it comes to this I feel
like too dumb to know what I don't know. If you know a link or two that answer
most of my questions below, it's cool if you just post those. I feel like I
can't even tell what info is right when it comes to this stuff.

\----

Okay, so I'm a US citizen. If I understand you right, most of my problems stem
from wanting to incorporate in Singapore. If I incorporate domestically but
run it while traveling, that'll cover most bases and make life much easier,
correct?

Secondly, I don't doubt your talk about the complexity added on by
incorporating in Singapore. But Singapore is really banking on people starting
to incorporate there, I mean there must be some sort of national effort to
automate/lessen the hurdles, right? I mean your random comment literally saved
me from thinking that incorporating in SG/HK would be a good option.

I don't know, just after reading sivers.org I just assumed that the complexity
was much more manageable. Maybe I'm just gullible/easily misled? Or does this
option only make sense when you have a certain number of people working with
you/certain profit? Could you guess as to what those numbers might be?

If I did want to incorporate, is there a big difference between incorporating
in HK/SG/better place I don't know of?

~~~
sivers
Singapore is a very easy place to incorporate (24 hours + $350), but there are
enough other downsides (credit card merchant account, banking, foreign
reporting) - that it's probably worth doing what the other people advise here,
and just set up your US LLC/corp and bank account in the U.S. first, then take
off and go hang in Phnom Penh, Nha Trang, Luang Prabang, Chiang Mai, Bali,
Kerala, etc. (I can introduce you to interesting techies in any of these
places & more. Feel free to email me at derek@sivers.org)

Singapore often wins the “ease of doing business” awards, but those are
grading things like imports/exports, foreign employees, and such.

When it comes to doing an internet-based business, U.S. wins hands-down. All
those lovely online things like Stripe, easy online banking, online
statements, PayPal integration and such are much harder to set up outside the
U.S. So set it all up first. Online-only statements for your bank, etc.

Oh and yes, EarthClassMail is awesome. Set it up first before you incorporate,
and make your EarthClassMail address the sole address for your LLC/corporation
from the start. It's a little expensive but so worth it.

Get a CPA you trust in the U.S. first, and give them some pre-signed blank
business checks before you go. There are some things that require paper
checks, and it's a drag when you're across the world and need to send one.
Usually they're tax-related so have your CPA send one of your pre-signed
checks. And when needed, have EarthClassMail forward tax things to your CPA.

On that note, it helps if a family member can sign your name for you, so if
some forms insist that they need the "signed original", you don't have to have
a f'ing FedEx jet flying a piece of f'ing paper to Asia and back just to get
your pen on it.

Hope that helps. I won't be monitoring this HN post for future comments, so
anyone please feel free to email me with any questions.

\- Derek

~~~
infinii
Singapore just surpassed Hong Kong as one of the most expensive places to live
in Asia.

I think it'd be more rational to discuss more developing countries such as
Vietnam, Thailand, South America, etc.

------
alain94040
You might as well keep a corporation in the US, but move to a cheap country
like Thailand. That gives you the best of both worlds: access to all the
deals, payment platforms, of a US company, with the low cost of living. As
long as it's just you to bootstrap, it's great.

You'll face scaling issues eventually: how do you hire 10 great engineers? But
hopefully, once you reach that point, your business generates enough revenue
or traffic that you can pay for it.

------
mbenjaminsmith
FYI, unless you're willing to live like a bum Thailand isn't a cheap place to
live. My rent is 75% of what I paid for a Nob Hill apartment and my car
payment is 100% more expensive (import duties). If you're willing to live like
a bum you've got tons of options, including moving out to Nowhere USA. My
parents spend part of their year in Tucson, AZ. I've seen ok homes for sale
there for under 100k. The used car market is incredible as is the case in most
of the US. You'd have to deal with chain restaurants and strip malls but at
the fraction of the cost of most urban centers.

I would recommend setting up your company offshore. It's not as complicated as
people make it out to be (unless they're selling their services) and I know
plenty of long-term expats who have done so without issue. Chances are if
you're asking this question here you're not going to be on anyone's radar with
your company.

The US does want you to: 1) File taxes regardless of residence. If you're
declaring personal income you're exempt up to 95k or so but even if you make
under that you're expected to file. Having said that I don't know anyone who
does or anyone who has ever had an issue. I talked to the IRS once about it (I
was young and wasn't making over the limit and hadn't filed taxes for years)
and they suggested to get up to speed to just file back reports and ask for
the exemption as normal. 2) I guess now you're supposed to declare any foreign
bank account with more than 10k in it. I've never heard of this being enforced
in any way.

As far as I know probably your easiest route it to move to HK. They seem to
have the most lax immigration policies and it's easy to set up a company
there. Rent is like central SF (same size/price ratio). If you're not selling
products in HK you're not liable for taxes (standard tax haven stuff).

Or just setup your company there and live somewhere else. If you do that
though you're going to have to deal with immigration somehow because you'll
permanently be a tourist. If you're a tourist in most of these destinations
you're looking at moving in and out of the country 3 - 4 times a year or more.
Between my first and second company I was living here and fell into a sort of
immigration limbo, having to live as a tourist for quite a while. I assure you
that going in and out of the country to keep your paperwork current gets old
really fast.

This was assuming you're a US citizen. If not ignore the US-specific info.

~~~
MortenK
"FYI, unless you're willing to live like a bum Thailand isn't a cheap place to
live."

This is only if you live in Bangkok or maybe Hua Hin. Most other places will
have you live exceedingly well for 1000 USD pr. Month all included. Cars
though are indeed extremely expensive, better to get a motor bike / scooter or
a motor cycle.

~~~
mbenjaminsmith
I can't agree with you there. Outside of Bangkok I don't think you could live
exceedingly well for any amount. I know people who have built homes in Chiang
Mai that are impressive, but they're still living in Chiang Mai. There's just
not a lot going on up there. Maybe if you had something nice on the water in
Phuket you could have a good life. But that's not something most non-wealthy
or non-retired people will be looking at.

I like living here because although my condo costs a significant percentage of
what I paid in SF, it's also 3x bigger. Cars are a lot more expensive but they
also hold their resale value much better than in the US. I also never have to
cook a meal, wash my car or clean my place. That means I can spend 100% of my
time working if I choose to. The value of that can't be stressed enough if
you're an obsessive workaholic (like I would imagine a lot of people here
are).

Compared to the US, having access to good, low cost health and dental is also
great. My wife needed major surgery a while ago and even with her generic
coverage-as-a-perk corporate health plan I think we paid 500$ out of pocket
for the procedure. This was for a minimally invasive procedure at a private
hospital. I can't imagine what it would have cost in the US without additional
coverage.

------
sachitgupta
What about incorporating in the US but running it from Asia?

Check out the guys at Tropical MBA: <http://www.tropicalmba.com> They're
running a profitable startup from Bali.

For mail, a lot of traveling entrepreneurs recommend Earth Class Mail
(<http://www.earthclassmail.com>).

------
issa
If you are just looking for a cheap place to live, you're actually better off
staying in the US. Medium size American cities (think Portland, Richmond, etc)
are essentially free compared to SF, NYC, DC, etc. While they aren't as cheap
as some other countries, you don't have to buy a plane ticket, and you have
all the convenience(ish) of home.

------
dylanhassinger
Def check out the TropicalMBA. They also have an awesome podcast and an online
community full of expat entrepreneurs.

<http://lifestylebusinesspodcast.com>

<http://tropicalmba.com/innercircle>

~~~
danspodcast
Hey thanks for that, appreciate you'd bring it up.

------
redwood
I'd say stay in the US... but then again I'm coming from a pretty extreme case
right now (Bangladesh where I'm living for the year). It's amazing how much we
take for granted in the states... things that add up to make you efficient in
your work. Little things like not having reliable commuting options
(transport), reliable electricity and internet, and having automatic laundry
and dishwashing machines make life in the states _so_ easy so you can focus on
other things. It's fun to live in the moment as South Asia forces you to do,
but it's tough to be anywhere near as productive.

Here there are moments of uninterrupted efficiency but so many things are
unreliable

\- internet: slow during peak hours, not unlimited, western prices

\- electricity: cuts out for about 2 hours a day randomly...HUGE productivity
killer and makes it really hard to plan, stay cool, etc

\- weather: extreme heat and humidity, always fighting elements, dust, drying
clothes outside in moments between rain downpours etc

\- transportation: getting across town can take an hour in choking smog

\- politics: shut down the city's commerce once a month

Now you _can_ get around most of the challenges above by paying enough, hiring
service, living where you work, etc, but then you're spending _almost_ as much
as you would in the states.

Then you need to consider how there are fewer opportunities to sell, share,
network here... but that depends. If you're selling something for developing
countries then it's a different story. I'm using my time to do something
unique to this market while I'm here.

~~~
kiwidrew
I thnk Bangladesh is far behind Southeast Asian countries such as Thailand and
Vietnam. Most of the issues you raise simply aren't a problem in Bangkok or Ho
Chi Minh City (except, perhaps, the traffic in Bangkok... my god is it bad...)
and as others have mentioned, it's both inexpensive and expected to have a
maid to deal with laundry and cleaning.

Having lived in both cities for periods of time, I was amazingly productive
because I didn't have to worry about mundane chores and could get healthy and
inexpensive food at any hour of the day or night. And it was cheap.

------
vellum
You're going to run into a world of trouble thanks to the new FATCA law [1].
You better have a good lawyer and accountant lined up.

1: [http://www.nytimes.com/2012/04/16/business/global/for-
americ...](http://www.nytimes.com/2012/04/16/business/global/for-americans-
abroad-taxes-just-got-more-complicated.html?pagewanted=all)

------
MortenK
I've had a company incorporated in Hong Kong (HK) while living in Thailand,
and a company incorporated in the British virgin isles (BVI) while living in
Russia. These were both very small software development shops around 5
employees.

The cost of incorporation in both HK and BVI is around 2 to 4 thousand USD, if
you pay a company to sort out all the paperwork, bank accounts etc. You also
have to pay every year (roughly the same amount though a little less), to
maintain the company. This again if you pay an agent company to take care of
all the paperwork, which I'd highly recommend.

As for internet, both in Thailand and Russia it was absolutely fine for most
purposes. You do have the occasional outage, but it's seldom. We did however
have a backup 3G mobile internet line we used in these cases.

Whether or not you have to worry about handle physical mail, depends entirely
on your business. We didn't have any use for it, but we were doing software so
your mileage may vary. In most cases I'd think you'd be fine with a physical
mail address in the US (or whereever your customers are), that can forward any
mail to you.

As for tax, I wouldn't really know US rules - I formally emigrated from my
home country, thereby making me tax exempt (but also non eligible to receive
any services). Whether or not you need to pay personal income tax in your new
country of residence, depends on the individual tax laws of the country. If
you live like most expats do (on some form of a tourist visa), you usually
don't pay tax there either. But you really should consult a local lawyer for
details on this, as you generally do not want to risk breaking any laws in a
country like Thailand or Cambodia.

As for corporate tax, this is zero percent if your company is incorporated in
either HK or BVI. Heck, in BVI you don't even have to file annual accounting
papers!

If you are curious we used www.ocra.com to incorporate in BVI and
www.willsonn.com for incorporation in HK. Both of those companies can get the
job done, but neither of them are very good at customer service. If I had to
do it again, I'd probably look for a different agent.

Apart from that, there is really not much to it. Again depending on your
situation, almost everything can be handled on telephone, email or fax (!).

Main issues are as others have mentioned:

You are far from family and friends.

You may have to do lots of expensive business travel.

It can be really hard to scale the business, unless you are able to work
within a distributed team.

~~~
reledi
Why did you set up a software development shop in the BVI, are the problems
they are solving specific to the BVI?

I'm asking because I'm considering starting a startup on a Caribbean island
that I'm originally from. If you have any advice you'd like to offer, I'd be
glad to read it.

~~~
MortenK
I only had the company incorporated in the BVI. We had a small sales office in
London, and I was personally living in Russia at that time.

The reason I setup in BVI, was because it was reasonably easy, and because no
annual reporting of accounts is neccessary (no more "accounting preparation
panic" every year).

So our customers were not in the BVI, rather they were spread out over Europe.

If you have the option of living and starting a startup on a Carribean island,
what's holding you back? :-)

~~~
reledi
> what's holding you back? :-)

My biggest worry is recruiting. Paraphrasing Valve, I want hires who are not
only talented or collaborative but also capable of literally running the
company, because they will be. I don't want to lower the hiring bar because of
my location.

I would probably have a recruiting strategy similar to TropicalMBA.com.
Recruit via internships and offer them the chance to solve challenging
problems in paradise.

~~~
MortenK
Recruiting can be a problem in these kinds of destinations, and so can
employee retention. It will probably be hard if you need access to a large
talent pool of highly talented and self directing people.

