
Make Life Easier for European Startups: Simpler/Cheaper LLC's - davidw
http://journal.dedasys.com/2010/04/16/make-life-easier-for-european-startups-simpler-cheaper-limited-liability-companies
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antirez
In Italy the situation is _very_ bad (as usually):

\- Just to open an srl company (the name for our limited) 5000 Euros are
needed in taxes, notary stuff, and so forth.

\- You need a minimal capital of 10,000 Euros just to start. But with a trick
you can just put 25% of it as real money.

\- The process is as complex as you can imagine if you try hard, requires a
lot of time, and in no way you can be able to do it without the help of an
expert (that you need to pay as well).

That said in Italy is also very hard to get money if you build a company.
Banks require a number of absurd guarantees even to give you little money (and
if you have this guarantees you don't need the money, usually).

There are a very limited number of VCs, but that's not what people need to
start, also if you think VCs are evil in US you should check ours: as you can
guess in an environment where funding is so rare they gain a lot of rights on
your company.

To add this to the already sad mix, the average italian, regardless of how
smart it can be writing code, has the insane feeling that's not possible to
just build companies that will succeed without any kind of external help, but
just your customers or other companies enjoying your products.

That's why I think my country is full of talented people but it is absolutely
unable to develop an IT industry.

~~~
pavlov
In Finland, the minimum capital required for a limited company ("osakeyhtiö",
Oy for short) is 2500 euros. The registration costs something less than 100
euros, IIRC.

The paperwork is simple enough that it can be filled out with common sense.
I've done it myself. The only slightly mysterious bit of protocol was the need
to open a bank account in the company's name _before_ the company is actually
registered, in order to hold the capital. Luckily the banks and the
registration office are well familiar with how this works and can explain the
process, so it turned out be quite simple in the end.

Simplifying the process of creating limited companies is probably the easiest
way that governments can stimulate startup activity -- there's really no
reason to keep it complicated.

~~~
antirez
This sounds a lot better than Italy. Btw in Italy to open the bank account is
also needed, but very complex:

\- Create a temp account (/tmp/my-bank.account)

\- Put the capital

\- Open the company (N complex steps)

\- When you are done, go to the bank and rename your temp account into the
real one (mv /tmp/my-bank.account /var/company/bank.account)

This sounds like an algorithm, but you can't write shell scripts to do this.

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pmjordan
I've observed that a number of Austrian and some German Startups have actually
incorporated as UK Limited Companies, which just happen to be headquartered in
Austria/Germany. German courts have confirmed that this is fine. FWIW, forming
an Austrian GmbH requires €35,000 in starting capital, half of which must be
an initial cash deposit, in addition to all the legal/bureaucratic hoops you
need to jump through. (It's not clear to me where the other €17,500 come
from.)

I'd be interested in people's experience with incorporating in Europe,
especially regarding whether it affects international investment, and how much
of a problem it is for day-to-day operation if you're a UK Limited Company but
not located in the UK.

~~~
DeusExMachina
I am italian and I opened a UK Ltd to go around these problems in Italy. But
it has been a pain nonetheless.

Opening an Ltd in the UK is cheap as long as you have a location there and you
can do it all by yourself. This was not my case.

If you have to rely on another company, like me, costs grow a lot. You have to
pay people to do these things, to advise you and to give you a legal location
for your company. This cost me a lot to setup and is always a pain to
communicate.

So the problem persists, if you are not able of making money to cover your
expenses. Now I have relocated to the Netherlands. I don't know what the
situation is here, but I know that my Ltd is costing me too much to mantain
(paying people that opened my Ltd and then did almost nothing more), so I'm
closing it and I will try to convert it in something cheaper here.

I did never seek investments, so I'm not able to relate on that part.

~~~
pmjordan
Interesting, thank you. Is the presence you need to maintain in the UK
essentially a glorified P.O. box, or is there more? What order of magnitude in
fees are we talking about (if you don't mind)?

~~~
DeusExMachina
I think you need a real location, but I'm not really sure. That is what they
are providing to me. You also need two distinct people, one director and one
secretary. They are providing me the secretary.

The rates were: 4000 euros for the setup (one year ago), including the place,
the secretary and accounting for one year. They took me an appointment with a
bank to open a bank account, but I was the one who opened it. For subsequent
years they told me it would be around 800 pounds, but now the bill is 3300
pounds (that is nearly the same price I paid the first year). That's why I
decided to close it. Their service really sucks.

But if you look on the internet prices really vary and you can find cheaper
ones. They try to scare you telling you that if you don't do everything right
there might be consequences.

In my opinion the best solution is to go there for some time and do some
researches in the city, or at least have someone there. Because if you don't
need all these "services" it really a lot cheaper, in the range of the 300-400
euros.

Also, we are speaking about London, not the entire UK. London has special laws
regarding this and it's much easier than in the rest of the country.

~~~
djhomeless
You don't need a real location. There are tons of services on the web where
you can use a "virtual" location or the address of the service with the
Companies House.

I think lost in all this is regardless how easy it is to create a company in
the UK, you still have to deal with European taxes and completely moronic
banks.

------
patrickk
There's a fantastic spreadsheet you can get from the World Bank website
DoingBusiness.org:

<http://doingbusiness.org/documents/Simulator_2010.xls>

You can select which countries you want to compare in the first column.

For example, I selected the US, UK, Ireland, Germany, France, Spain and Italy
just to compare them.

The US: 4th easiest in the world for ease of doing business. Setting up a
business takes 6 procedures, 6 days and 0.7% of per capita income.

UK: 5th easiest in world, 6 procedures, 13 days and 0.7% of per capita income.

Ireland: 7th easiest in world, 7 procedures, 13 days and 0.3% of per capita
income.

Germany: 25th easiest in world, 9 procedures, 18 days and 4.7% of per capita
income.

France: 31st easiest in world, 5 procedures, 7 days and 0.9% of per capita
income.

Spain: 62nd easiest in world, 10 procedures, 47 days and 15.0% of per capita
income.

Italy: 78th easiest in world, 6 procedures, 10 days and 17.9% of per capita
income.

All these countries except Spain and Italy require no minimum capital.

Btw, I came across this great website in a footnote from a pg essay.

~~~
davidw
Interesting - do they specify anywhere what _kind_ of business? Italy, for
instance, has several kinds of companies that are "companies of persons"
instead of "companies of capital", which are cheaper and easier to set up...
but not very good from various legal points of view.

~~~
patrickk
It doesn't specify what type of business in Italy in the spreadsheet, but two
more interesting facts from the spreadsheet:

Cost to export a container (US$ per container):

UK(island nation disconnected from mainland Europe, has rail tunnel to
France): 1030

Ireland(island nation disconnected from mainland Europe): 1109

Italy(connected to mainland Europe by rail and road): 1231

Bureaucracy in Italy adds more cost to exporting a container than a sea/air
voyage does from the UK or Ireland.

If this kind of thing interests you, then perhaps check out Eurostat, the EU
body for statistics, or the OECD website etc. I know that here in Ireland a
body called the Central Statistics Office maintains that kind of data on Irish
business, maybe there is an Italian body that does the same in Italy?

~~~
varjag
Sea transportation is cheaper than by truck.

(But of course, Italy has the option for sea transportation as well, so it's
not that)

------
wheels
This isn't so much a "Europe" problem as a country-by-country problem since
there's still not a lot of harmony between the European incorporation forms.
I'm familiar with incorporation in the US, UK and Germany, and the UK is the
easiest of the batch.

This is a good explanation of the German reform for the UG (mini-GmbH):

<http://www.howtogermany.com/pages/mini-gmbh.html>

It's a little more onerous than a US / UK incorporation, but not much.

~~~
davidw
Yes, I noted that "Europe" is a bit imprecise, but it is a problem common to
many European countries, so rather than list them all, I went with "Europe"
plus an asterisk.

------
adnam
Wow, in the UK you just send off a few forms and 20GPB to Companies House.
[http://www.companieshouse.gov.uk/infoAndGuide/companyRegistr...](http://www.companieshouse.gov.uk/infoAndGuide/companyRegistration.shtml)
In Spain there are more setup costs, and a minimum capital of ~6000EUR IIRC.

~~~
arethuza
When we set up in the UK I'm pretty sure we had £100 of authorized share
capital, but that we only had £2 of issued shares. So each of the two founders
had one £1 share!

------
fierarul
Sole proprietorship is pretty easy to do in some EU countries. Then again, in
might have a different juridic status so an LLC is preferable.

But I wouldn't focus only on how simple/cheap doing an LLC is, we should look
at the total cost of it all. For example, what good a cheap initial tax if
operating or closing an LLC involves tons of bureaucracy, heavy taxes and a
ton of time.

~~~
davidw
Well; you have to start somewhere, and it's pretty easy to point out, even to
people who are not really concerned much with the world of business, that it's
absurd to charge so much before a company has even made a cent.

------
bond
Here in Portugal you can register a company for 350euro and it only takes
1hour to do it, the downside is that you have to chose your name from a pre-
selected list. If you want your own name it will take some more euros to
register the name and the process can take a few more days. You then have 5
days to get 5000euros in your bank account, that's the minimum capital
required...

~~~
fauigerzigerk
Do you know what the minimum social security contributions are in Portugal?
This has been the biggest issue for me in continental Europe.

~~~
bond
It's 11%.

~~~
fauigerzigerk
So if you're a startup and you earn nothing for some time, that would be zero
euros then. That would be great because in most countries there is a nominal
minimum contribution regardless of how much you actually earn.

~~~
bond
You can say to Social Security that you wont be earning a salary so that you
don't have to pay taxes for some period of time. You really need to say to
them that you will not earn a salary because even if your startup doesn't have
any revenue, they will still require you to pay the tax...

------
fauigerzigerk
Yes the minimum capital requirements for a limited company are onerous in some
European countries, but at least that money is not lost. In my experience the
greatest burden on startup finances are minimum social security contributions,
which can be as high as 300 euros per month without earning a cent.

The UK and Ireland are without a doubt the best places to incorporate in
Europe.

