
First tax year with Stripe Atlas - jmstfv
https://tryhexadecimal.com/journal/business-taxes
======
cperciva
For a supposedly business-friendly country, the USA certainly seems to have a
bunch of fees.

Tarsnap is incorporated in BC, Canada. I pay less than $50 to file an annual
report with the government (basically just a "the company still exists and the
mailing address and directors haven't changed"); there's no franchise tax; and
Tarsnap's corporate income tax is easy enough for me to do by hand (it takes
about 2 hours and I usually file in the first week of January).

The notion of spending $1000/year just to keep a company in existence seems
crazy to me.

~~~
jmstfv
I wish there was a service like Atlas, but for Canada.

I wasn't gung ho about incorporating a business abroad, as it introduces
unnecessary complexity and costs money in the early stages. But as someone who
didn't have access to the modern financial infrastructure (to accept cards on
the Internets), there weren't that many options available (and most of them
involved traveling to foreign countries).

I use Tarsnap daily!

~~~
mamcx
Yeah, the same. We have a SAAS product in Colombia and considering if is
better to incorporate abroad, but wish to be in better than USA (mostly
because the litigious nature of USA system).

~~~
jmstfv
There are other options like Singapore and Estonia, but the last time I
checked, you had to travel there to open a bank account.

~~~
def_true_false
IIRC Revolut Business is available in Estonia, so probably no need to travel.

~~~
klausjensen
Please do not rely exclusively on one of the new fintech "banks" as your only
bank. It is a recipe for disaster.

Revolut for business closed my account with very short warning and fucked up
sending me my remaining balance.

Lukcy for me, previous issues had meant I was loyal to the concept of having
at least two banks at any given time, because one might crash/throw you out
etc, so it didn't cause me too many problems.

Now I have a boring, expensive local bank which is stuck in the 80s (but
presumably safe) and Transferwise for all the online stuff.

~~~
krn
> Revolut for business closed my account with very short warning

Could you share what was their reason for doing this? Any non-standard type of
business or account activity?

~~~
klausjensen
There is very little to tell...

Pure software development/consulting business for other business clients in EU
countries. As clean as it comes, I think.

I was never told what the problem was. This is standard operating procedure
for banks, I am told. So I still have absolutely no clue what the problem was.

------
ssijak
The advantage of Stripe Atlas was that they would open a bank account for you
which was a big plus for foreigners because of the KYC rules. But now that
Mercury bank is a thing and everyone can open a bank account online, there is
no advantage to Stripe Atlas. Especcially now that Atlas does not allow
foreigners to open a LLC. Everybody can form Wyoming LLC online for 100 bucks
and pay 25$/year for an agent/mail address, or if you want someone else to do
it there are reliable services to do that for around 350$.

~~~
mamcx
With a mercury account is possible to setup stripe from abroad? Not in a
country listed for stripe?

~~~
rtsil
Yes. You can open a Mercury account only if your company is registered in the
US, so for Stripe's purposes you are just a US company like all the others.

------
mattferderer
I considered the Stripe Atlas route because I wanted someone to handle things
for me & make it easy.

I ended up finding a friend recommended accountant who could handle my taxes &
help me setup everything.

An option I didn't know about that seems to work out really well for tiny 1 or
2 person startups not looking to raise money is a LLC taxed as an S-Corp.

I would recommend both finding a good accountant (or 2) and having them help
you set it all up with you. This way you have a person you can bounce
questions off of throughout the year.

Another item I learned. Pick your bank wisely. A lot of people were left high
& dry for a long time when looking to get the PPP loan this year. You need a
bank that's actually going to care about you and doesn't think you're not
worth their time. I heard a lot of people who couldn't get a hold of their
bank & the bank didn't return their calls.

Also don't expect anyone to loan you money for a mortgage or personal reason
until after running the business for 2 years. Your income won't be counted, no
matter what to most banks.

The USA has a lot of hurdles & pains if you want to run a business but once
you cross the moat, it can be much better than being a W-2 employee for
someone else.

~~~
andrewflnr
How do you tell before the crisis whether your bank is going to care about
you?

~~~
jjeaff
Pretty much any small bank or credit union will work with you. All large banks
are complete garbage to all but their wealthiest customers.

------
Digory
1\. On taxes, a C Corp might be the right choice, but he didn't say enough to
reject an LLC that elects to be taxed under Subchapter S. A C Corp taxed under
Subchapter C creates the classic "double taxation" problem, where any profit
distributions are taxed twice before hitting the founder's pocket.

2\. A CMRA (virtual mailbox) is not a good registered agent. The "registered
agent" is the place the sheriff or process server delivers a lawsuit to a real
person. If your mailbox address doesn't accept hand-delivery, they'll reject
service.

And if that happens, you may not hear about any lawsuit until the court has
already ruled against you and entered a judgment. Most states say that if you
don't have a place for hand-delivery, the person suing you can mail it to the
Secretary of State, who then mails it to your last known address. You rarely
get the suit in time to answer.

You can find registered agents cheaper than $100. But don't assume your
virtual mailbox is a good solution.

~~~
withinboredom
They did cover 1 quite clearly. At least to me, an American that lives outside
America with some US income. You do not want pass through outside the US.
Unless you just like paying taxes.

Edit:

Just to clarify why I said this. The US has a “anti-double taxation” treaty
with most countries. Except that it doesn’t really apply fully to businesses.
For example, I basically paid almost 50% income tax on income made from the US
last year. I’m trying to figure out how to restructure to fix this.

~~~
eli
I think you're discussing a different problem from the parent post. Depending
on how you form your US company, you can end up in a situation where the
company pays corporate income taxes on any profits, and then when you
distribute those profits to yourself you pay personal income tax on them too
-- so the same income is essentially taxed twice.

There are separate issues with how the US taxes money made overseas.

~~~
mbreese
_> the same income is essentially taxed twice_

What about if you pay yourself as a W2 employee? Then, isn’t your salary
treated as an expense of the corporation and thus only taxed at the personal
level?

~~~
Digory
Top Federal rate for W2 income: 37% + 2.9% Medicare + 12.6% on the FICA
portion.

Top Federal rate for dividend/profit distribution: 20%

All other things being equal, as the company earns more than your base wage,
you want it to be treated as dividend income.

------
kureikain
If you lived in California, and do business in California, and you incoporate
in Delaware you still have to pay $800 tax per year for California. You cannot
escape it.

~~~
AlchemistCamp
Can't you just leave California?

~~~
thinkloop
That's likely to cost more than $800

~~~
jjoonathan
It's likely to save you more than $800 too.

------
stevehawk
As a US Citizen living in the US, I've created ~5 LLCs in the last fifteen
years.. 2 with Stripe.. I didnt really see an advantage of Stripe over doing
it myself. A decent CPA seemed to be cheaper and more personal.

That said, only the Stripe ones were created as Delaware corps which was
probably unnecessary for both of them, but made them infinitely more complex.

------
Andrew_nenakhov
We have chosen Estonia E-residence program. Very friendly, filing taxes is
easy, and one can hardly beat 0% tax on corporate income.

~~~
sireat
I thought the 0% tax only applied on invested income in Estonia did it not?

[https://taxsummaries.pwc.com/estonia/corporate/taxes-on-
corp...](https://taxsummaries.pwc.com/estonia/corporate/taxes-on-corporate-
income)

That is once you want to distribute the income then you do have to pay
corporate income tax of 21%.

~~~
def_true_false
Why would you ever want to distribute income? I mean, why not just reinvest
it?

~~~
juskrey
Eventually you'll have to buy food, and maybe, for some really lucky ones,
have kids and house.

~~~
Andrew_nenakhov
You can pay yourself a salary. This doesn't count as 'distributing income' and
is taxed according to the laws of your residence location.

That being said, if your salary will be more than 80% of corporate expenses,
that _might_ attract unwanted attention from tax service.

~~~
PeterisP
In general, paying out dividends would have a lower total tax rate than paying
the same amount to yourself as salary.

~~~
Andrew_nenakhov
True, but not everywhere. In my particular country it would be far lower due
to some loopholes.

------
an_opabinia
Typically you also pay franchise tax to California if you live and work there.

Some states like Massachusetts have you pay into an unemployment insurance
fund.

Usually you will pay for QuickBooks and a payroll processor like Gusto, which
is $960/yr together. So for not profitable entities $800 CA FTB + $450 DE FTB
+ ...

C Corps enjoy a 21% flat tax rate. They are a very attractive way to conduct
business on that alone, if you are actually profitable. The little taxes and
fees may make your effective tax rate compared unfavorably to pass through,
however if you’re making that little money what was the point then?

~~~
danielrhodes
The reason to not have a C Corp if you are small is double taxation - if you
are small you would be paying payroll taxes, corporate income taxes, and
personal income tax all on money that is going to you.

~~~
jmstfv
That, and LLCs tend to be easier to run.

------
vincentmarle
When I moved to the US from Europe, I was suprised by how complicated
everything is (and I thought the EU was unnecessarily complicated).

Yes, you have the same language and the same currency, but other than that
you’re pretty much dealing with 50 different countries all with their own laws
and taxes. Sales taxes can be different even on the county and city level.
Luckily everything has been done and solved before but it means you’re gonna
have to rely much more on lawyers and accountants to get things done.

------
dzink
I’m not an accountant so confirm with one:

1\. C Corp with S corp taxation would be ideal, but if you don’t have that,
make sure you store all of your legitimate expenses including accounting,
taxes, ads, etc. You can save any losses as NOLs and use them to offset future
gains for a while. Many SV startups don’t have a profit for a long time but
the losses are still worth something (some get acquired for the losses).

2\. Small number of initial stock issuing below 5000 helps reduce expenses
until you get a valuation that matters.

3\. A Delaware CCorp that doesn’t yet make money with founder in California
who owns property will spend close to $2000 annually between 800 california
FTB tax, delaware minimal tax, turbotax, registered agent, etc.

------
aledalgrande
SVB account is free for 3 years if you do it directly with them. But Atlas
cost is lower than the cost of opening with a good lawyer.

~~~
OkGoDoIt
SVB was a horrible antiquated banking experience. It was heavily recommended
for my last startup so I signed up without shopping around. It was literally
the worst online banking experience I’ve ever used, straight out of the 90’s.
And there were fees for every little thing. Maybe they’ve improved in the last
5 years, but I will never try them again.

~~~
aledalgrande
What did you transition to? It's true that everyone recommends them.

~~~
manigandham
Stay away from SVB. Mercury or Azlo are much better start-up focused banks.

[https://mercury.com/](https://mercury.com/)

[https://www.azlo.com/](https://www.azlo.com/)

~~~
aledalgrande
Are they kinda like Brex?

PS: funny both banks use the same color for their branding

~~~
manigandham
Azlo and Mercury are more traditional banking. They're fintech companies
offering banking services while backed by regulated banks on the backend (a
common setup to avoid the years long regulatory hurdle of starting a new
bank).

Brex started with corporate credit cards and now also has the "Cash" banking
product but its not quite the same. It's more like a corporate paypal account
that looks and feels like a bank account. It's also another good choice.

------
edoceo
For Comparison: I'm a 5yr old WA C-Corp, have lawyer and accountant and nexus
in three states - all in I'm at $4k/yr for the fees and the labor to process
this.

------
jamesponddotco
Slightly off-topic, but is there something similar to Stripe Atlas for other
jurisdictions?

I run a privacy-focused WordPress hosting company, and while in closed alpha,
I registered a personal company in the country where I live to be paid, but I
would like to register a proper company before launch, as I do not wish to
register it in the country I live in — especially since I want to leave the
country once the pandemic is over.

The other founders and I have been researching and looking into incorporating
in Romania, as the country seems to offer good opportunities for new companies
and even make moving there easier if you incorporate, but the amount of shady
lawyers we found is worrisome.

A service like Stripe Atlas for jurisdictions in Europe would be much
appreciated — not necessarily for Romania, as we also looked into Germany and
Finland, just something less fishy than random lawyers on the internet.

~~~
sjilo
Have you looked at Estonia?

[https://e-resident.gov.ee/](https://e-resident.gov.ee/)

~~~
jamesponddotco
I did, although, I cannot remember why it was ruled out.

EDIT:

Okay, reading past mailing lists inside the company, it seems like key
disclosure laws may apply in Estonia, which raised a few eyebrows here.

As a hosting company it is obvious that we will deal with bad actors at times,
and we already have procedures in place to disclosure the little information
we have to authorities if asked.

However, I read more than one account on authorities raiding data centers for
drives without talking to anyone before doing so, and we want to have the
legal right to deny them access to the encryption keys in court.

------
crispyporkbites
Strip atlas vs a UK Ltd company, assuming you have the choice, what’s best for
a SaaS?

~~~
matthewheath
I am from the UK, so I am biased. I've also never used Stripe Atlas myself so
I am ignorant of how easy or hard it is to wind things up there.

\--

Stripe Atlas appears to tie you in to a bunch of services(?) and I'm guessing
it would be hard to re-incorporate in another state for friendlier tax
treatment or whatever, whereas a UK Ltd company doesn't tie you into anything
and the regulatory fees are minimal.

Most of the expenses are in business banking and accountancy services once you
start making money. It only costs £12 ($16) to register a company in the UK,
and then £13 ($17) each year for the annual filing.

Business banking will cost £5-10 ($7-13) each month. Accountants will cost a
lot more, and you may not need them if you're a small company prepared to do
all your own bookkeeping, etc.

Our tax laws are uniform across the jurisdiction and we have a lot of double-
taxation treaties set up with other countries, as well as a culture that
accepts foreign ownership of companies.

The hardest part would be acquiring a business bank account because of the
Know Your Customer anti-money-laundering regulations and checks, but that can
be dealt with by most banks and you don't need to visit the UK or live here
for that.

A UK Ltd would give you a lot of flexibility, and is easy to wind up if things
don't pan out. I don't have any experience of Stripe Atlas so can't comment on
the ease of winding the company up there, but it seems difficult based on
other comments in this topic.

~~~
a_imho
I used neither. Not sure about the lock in, but the Stripe cloud credits seem
very generous.

Isn't business office required in the UK? Also mail forwarding if one is
outside of the UK. It is still way lower than anything I researched, but all
these service costs keep adding up and I can't help wondering about some real
nasty landmines further down the road. Like what happens when something goes
wrong? Getting caught up in some legal matter in a foreign country I have no
presence in nor any knowledge how their legal system works sounds like a
recipe for disaster.

------
vmception
> While Delaware doesn’t have a sales tax, they do impose a Franchise Tax on
> registered businesses.

Whoops, they should have gone with any other state!

Delaware's court of chancery is overrated.

------
sudhirj
How do you close down a Stripe Atlas LLC? Stripe has since opened up in my
country and I don’t see the need for the added complexity and expense any
more.

------
manigandham
Please talk to a finance/tax professional first before doing anything.

While you can get a good overview of the various corporate structures online,
there are so many complexities and unique details about _your_ business that
you just won't know by trying to do it yourself and these formation tools
usually default to the lowest-common denominator.

Surprise taxes and fees can kill your business before it ever starts.

------
puranjay
I've been considering taking the leap for quite a while. Is there anyone from
India here who has used Stripe Atlas? Would love to chat!

------
kevindong
So all in and assuming the company gets charged the Silicon Valley Bank
monthly account fee, the annual cost of existing is $1,100. Which honestly
doesn't seem that substantial to me (someone who's never founded a startup).

------
martinesko36
Is the only reason international founders, who otherwise have lower fees/admin
for an entity in their home country, incorporate in Delaware just to become
investment-friendly for VCs?

------
danschumann
How does it make sense to pay taxes to another state when your business
doesn't even operate from there? I would assume your home state doesn't like
that very much.

------
bitxbit
How’s the initial business formation process compared to Clerky?

~~~
jmstfv
With Atlas, I filed a form and received an email with docs (to sign) a few
days later. I got my Certificate of Incorporation and a bank account (got
blocked, but that's a different story) the same day I signed docs. Then, they
invite you to issue the stock via the web form, and that concludes the process
on their end.

The only hiccup was with receiving an EIN confirmation later, so I had to call
IRS so they could _fax it_ to the third-party designee.

Haven't used Clerky, but the biggest perks with Atlas are a bank account
(which is generally a pain to open for non-residents) and $5k AWS credits.

~~~
thiscatis
You can get a Revolut USD account with no hassle that supports local ACH
transfers and 100.000 usd in AWS credits with a compelling startup story.
Stripe atlas has become obsolete already if these are your needs.

~~~
jmstfv
[https://www.revolut.com/en-US/help/profile-plan/verifying-
id...](https://www.revolut.com/en-US/help/profile-plan/verifying-
identity/what-countries-are-supported)

> We are currently only supporting legal residents of the European Economic
> Area (EEA), Australia, Canada, Singapore, Switzerland, Japan and the United
> States

The problem is that if you're not from the "right country", you're pretty much
locked out from the finanical infrastructure needed to process payments on the
Internets. I wasn't that gung ho about incorporating a business abroad but
didn't have much choice.

------
kemitchell
What about tax in the home country?

------
nicdc
Is there a Stripe Atlas equivalent service for Canada?

