
Ask HN: Is forming a company in UK a good option for a non-US resident - strls
I&#x27;m looking to form a foreign company because where I live (Eastern Europe) it&#x27;s much more feasible and legal to just do that compared to charging customers online as a domestic entity.<p>I&#x27;m wondering if it&#x27;s a good idea to register in UK or maybe Estonia for a small business selling a software product licenses and SaaS subscriptions online. No employees or any physical presence in the EU .<p>I&#x27;m mostly choosing between UK and the US. I&#x27;ve read a lot about US LLC formation and it certainly has it&#x27;s strengths, but I fear US tax and overall legal compliance issues. And the lawyers are super expensive. And travelling there is expensive. I&#x27;m also not going to seek outside investment which would otherwise be a major benefit of a US company.<p>From what I see on the web though it looks much cheaper and easier to form a UK limited company. Except for getting a UK bank account, which I could instead do in Latvia or Estonia. But this would limit online payment processing options although I&#x27;m sure there should still be some.<p>Have someone been in a similar position and went for UK incorporation? What has been your experience? There&#x27;s really lack of information regarding this topic on the web, compared to US-based incorporation.<p>particularly interesting is practical experience with things like:<p>- what UK taxes do you owe as a non-EU resident member of a UK company on salary (besides the obvious 20% of company income)
- can you deduct your salary from company&#x27;s taxable income?
- are there any legal complications from a small software business perspective or is everything simple and transparent
- downsides; why would one rather choose a US business entity (or some other jurisdiction)
- am I overlooking some important considerations?<p>I know I should talk to a UK lawyer regarding legal and tax compliance, and I will, but I&#x27;d very much appreciate to hear any thoughts from this community first so that I have at least some clue.
======
mary_goldspink
Hey - I just recently wrote a series of blog posts of creating a startup in
the US and UK for developers. It's based on my experiences. If you're based in
Europe being a UK based limited company is a great option. As others have said
you'll need a good accountant and lawyer, the posts cover my experiences with
various companies. Personally I'd recommend Crunch.co.uk for helping with the
company formation and accounts. Then Lawbite for the legal side of things.
They've answered a bunch of my questions.

One big thing to beware of is VAT and VAT MOSS scheme - it's a bit of a
nightmare to figure out your way around that. After discussing with accounts
and lawyers your best option is to not be VAT registered until you know you're
going to exceed the £82k threshold. Again - speak with your own lawyer and
accountants on this as everyone's situation is different.

Hope that helps!

TL;DR \-
[https://news.ycombinator.com/item?id=11360598](https://news.ycombinator.com/item?id=11360598)
\- Covers company formation (and recommends a couple of accountancy options
for the UK)

\-
[https://news.ycombinator.com/item?id=11360651](https://news.ycombinator.com/item?id=11360651)
\- Covers Legal advice for US and UK startups.

~~~
jcr
I have to give credit where due. It's unfortunately rare for someone with a
brand new HN account to immediately contribute so much relevant and
substantive information. Very Nicely Done!

Your articles are well written, easy to read, and seemingly accurate (n.b.
without me doing _any_ due diligence to check facts), but the meme images are
too distracting, even a bit annoying (this is most likely due to me being a
curmudgeon ;). Of course, opinions will vary, and I'm sure others might say
the memes break up the reading and help hold attention.

For notes, it's generally a poor idea to submit a bunch of good stories at
(roughly) the same time, particularly if they're from the same site. Your
submissions will be competing for attention with all other stories, including
your own. Though your "101" article is currently sitting on the front page of
HN, your second article "Dev Guide" suffers from the others' success. Spacing
out your submissions, like one a day, will give you better results. Also, the
HN Guidelines (link at bottom of most pages) ask for users to avoid submitting
so many links that the new page is dominated by your posts.

~~~
mary_goldspink
Thanks for your feedback- I will space them out in the future!

------
MistahKoala
You're perhaps better asking an accountant in the UK, rather than a lawyer.

It costs ~£15 to start a limited company in England and Wales (a separate
jurisdiction to Scotland and Northern Ireland). So long as you keep accurate
records and file your annual accounts correctly, that's all there is. An
accountant would normally do the filing for you. For a small business this can
often be done for £500-£1000. If you do your own bookkeeping and keep accurate
records, that will keep costs down.

As your business will be domiciled in the UK, it will be subject to the UK's
tax regime. But if you're outside the UK, your salary from the business
shouldn't be subject to UK taxation (do check that, though - double-taxation
isn't something I know much about).

TL;DR - Find an accountant in the UK who'll be willing to give you a free
consultation (most of them). You'll probably find one on
ukbusinessforums.co.uk (it's where I found mine).

~~~
dogma1138
The law is different for non residents.

So a lawyer which specialized in this is defiantly recomended.

~~~
MistahKoala
Obviously IANAL etc, but I'm really not convinced about that. I'm genuinely
interested to know why you say the law is different for non-residents. Even if
that was the case, I'd be very surprised if an accountant could not advise on
that aspect, given that dealing with company records and accounts is what they
do. It's OP's time and money, though - if he wants to see a legal advisor of
some kind, that's entirely his prerogative.

~~~
dogma1138
You can go to firms that specialize in incorporating shelf companies which are
commonly known as formation agents. To register a company in the UK you need a
local director address and a local company address (which are usually setup
with an international mail forwarding service) as well as some other
requirements most importantly a business bank account which under UK/EU money
laundering regulations isn't trivial to open (And with a thin credit file
almost impossible to open in the UK without a large deposit and a good
formation agent).

Depending on the type of company you are registering for the prices can range
from a few 100's pounds (plus fees/deposits) for a regular limited company to
considerably larger sums if you are buying/forming a shell corporation.

Another good reason to get a lawyer (in both jurisdictions) is that some
countries also have regulations regarding owning foreign companies. If your
business is in a regulated field, health care, finance etc. this usually tends
to complicate things even further.

------
falsestprophet
If I was setting up a SaaS company outside of the US, I'd be concerned with
tax rates, acquiring a bank account and processing credit cards.

It is worth noting that you don't necessarily have to have your bank account
in the same jurisdiction that the company is incorporated.

There are many zero tax offshore jurisdictions (like BVI and Cayman Islands)
and at a large scale you can get bank accounts and process credit cards
anywhere. But, starting from zero I think it's a lot easier to use Stripe or
Braintree.

I've listed several jurisdictions that are compatible with Stripe and
Braintree by corporate tax rates. You may be able to achieve a lower rate by
paying yourself a salary.

Stripe & Braintree

    
    
      Ireland (12.5%)
      Singapore (17%)
      United States (~35%)
      United Kingdom (~20%)
    

Braintree

    
    
      Lichtenstein (12.5%)
      Isle of Man (0%)
      Jersey (0%)
      Guernsey (0%)
    

So, I would consider Ireland and the above Crown dependencies.

Sources: [https://www.braintreepayments.com/country-
selection](https://www.braintreepayments.com/country-selection)
[https://stripe.com/global](https://stripe.com/global)

~~~
55555
I would think that to be approved for Stripe or Braintree in anything close to
a haven, Singapore included, the underwriting bank will require a utility bill
with your name on it, which could be a deal-breaker. Source: I am an American
who owns a Hong Kong company which was denied by Braintree (at that time we
were doing 30k MRR).

~~~
falsestprophet
Thanks, good to know. What are the options for banking and card processing for
a HK company? Why did you choose HK?

~~~
55555
When I started my HK company I had been living in Asia for several years
already and it just made more sense due to the lower effective taxation.

Card processing: Braintree, 2Checkout, and then some lower tier options like
PaymentWall. I'm not including old-school/direct merchant accounts here. Keep
in mind that 4%*$0.45+1.5% is totally standard, with that final 1.5% added for
non-HK billings. So you will pay 2% more to charge a card in HK compared to
US. But your tax rate can be literally zero percent.

A better option may be a US subsidiary or a US company wholly owned by a
foreign entity. This is something I am considering, because...

> banking

Absolutely everything is a pain. After four years I still don't have a
business charge/debit card. Applications for card processing and debit cards
each take dozens of forms and generally longer than a month.

Having said that, I have saved lots and lots of money.

Lastly, a HK company costs about $1,000 to setup and $2,300 yearly to
maintain.

------
jorgemf
In UK are very stricts with all the paper work, if you don't do something
right you will receive a fine (and not a small one regardless of what you
missed). There are companies with manage this type of things and deal with all
the paperwork. Just search for how to open a company in Uk. Some of them also
helps with opening the bank account.

For me the worst thing about a Europe company is to deal with taxes when you
sell to European countries. By lay you have to charge the tax where your
client is, it means you have to be aware of where is your client located and
the taxes in that country, plus fill all the paper work related. Keep this in
mind as it can be worth for you to open the company in your country just to
avoid this kind of things.

~~~
strls
I have no problem with them being strict as long as it's not very difficult or
expensive to comply. Is this the case?

I don't suppose IRS or any other authority is particularly casual either.

Thank you for mentioning the VAT issues. I've read about that, and as I
understand, there's a bunch of services for dealing with VAT collection. Some
payment solutions presumably even handle it for you.

~~~
pjc50
(Experience: I have been a director for a tiny UK "company limited by
guarantee", which is a funny-shaped nonprofit organisation.)

It's not at all difficult or expensive to comply if you're a small business;
the whole thing is pretty streamlined. You need to file accounts, but for a
small turnover you can file "simplified" accounts which are just two tables.
There is one subtlety - you can't be a limited company by yourself. The
minimum is one director and one "secretary", but you can get company-
secretary-as-a-service.

VAT is a separate issue - you have to deal with it regardless of whether
you're a company or sole trader, if your turnover is high enough or you're
selling digital goods (VATMOSS disaster).

Background info: [https://www.gov.uk/topic/company-registration-
filing/startin...](https://www.gov.uk/topic/company-registration-
filing/starting-company)

e.g. These people offer a full package for £70, which if your time is at all
valuable is a good deal: [https://www.rapidformations.co.uk/package/all-
inclusive-pack...](https://www.rapidformations.co.uk/package/all-inclusive-
package/)

 _\- what UK taxes do you owe as a non-EU resident member of a UK company on
salary (besides the obvious 20% of company income)_

[http://www.hmrc.gov.uk/manuals/rdrmmanual/rdrm10425.htm](http://www.hmrc.gov.uk/manuals/rdrmmanual/rdrm10425.htm)
: implies you don't have to pay UK income tax, which makes sense. You'd have
to pay your local income tax instead. I'm not sure how this applies to
national insurance (what Americans call "social security").

 _\- can you deduct your salary from company 's taxable income?_

Yes, companies are taxed on profit not turnover.

~~~
UK-AL
The company secretary and director can be the same person. It used to be the
case they had to be separate, however they changed it several years back.

Now 1 person can run a company.

~~~
pjc50
Ah, you're right - it changed in 2009 as a result of the 2006 act (which
otherwise made a whole bunch of things more complicated).

------
PaulHoule
Why not the Cayman Islands? I was involved years ago in a 'distributed
company' (US, Colombia, Brazil) that was offering a service to the Portuguese-
speaking world (Brazil, Portugal) and we were registered in the Caymans.

Things worked out pretty well and the only trouble I had relative to the
administration was that my name was on some paperwork that went to vendors and
I'd sometimes get calls from vendors who would ask "Is this some kind of
scam?" and then I would rattle off a list of well-known names that have
important subsidiaries in the Caymans.

Luxembourg seems to be the flag of convenience for the EU, just as Delaware is
here in the US, although Delaware puts you smack dab in the middle of FATCA
land.

~~~
strls1
I find there's too little open information on how for a software company to do
things properly in classic off-shore jurisdictions. Everything on the web
related to this seems shady so I don't know what to believe. Things like: are
there online payment processors that work with Cayman Islands? Where will I be
able to open a bank account? and more - are not clear. I'm sure there are use
cases for tax havens, but for me it looks like a more expensive and
complicated option. Maybe i'm wrong. I just a simple and sure way to do small
business, I don't mind paying some taxes and sending a report a year.

------
entropyneur
No experience with UK specifically, but being in the same position as you are
(Eastern Europe, problems working with payment providers because of both their
unwillingness and stupid local laws) I want to give you a warning. Do check
your domestic laws on corporate tax residence. A lot of countries (e.g. Russia
as of lately) will want to tax your company simply based on the residency of
the physical person(s) managing the company (you in this case). So make sure
you don't end up owing taxes in both jurisdictions. And even if your country
has a treaty on double taxation with e.g. the UK the procedure to apply for an
exemption may be really gruesome.

~~~
strls1
This is true. Care is required so that the company is not considered a tax
resident here. There are some specific things to avoid.

------
cardinalorder
One thing to bear in mind is that the UK is having a referendum on continuing
its EU membership on Thursday 23 June. While I sincerely hope we stay in the
EU, it's not 100 % clear that we will (although it seems likely). I know
hardly anything about doing business outside the UK but within the EU, but it
might be worth looking into what the change in situation would be if the UK
did leave (such as changes in the need to charge the client's country's tax
rate, rather than the company's country's tax rate).

------
ValentineC
If you're looking to do business outside the EU as well (and not have to
handle VAT-MOSS), you might want to read the Ghost blog on why they decided to
move their foundation from UK to Singapore: [https://blog.ghost.org/moving-to-
singapore/](https://blog.ghost.org/moving-to-singapore/)

(The HN discussion of the above link:
[https://news.ycombinator.com/item?id=11103274](https://news.ycombinator.com/item?id=11103274))

------
ashray
What's wrong with having a local company (hence subject to laws in your
jurisdiction) and then having a bank account in another country with
friendlier banking facilities?

If this is a new business it's not usually worth the administrative overhead
unless incorporating in the UK or US solves a specific issue (like stripe
support, or some other critical services you made need).

~~~
strls
The problem is not banking, it's compliance with local regulations. There are
some requirements that make global online sales like not practical.

So I would say the main purpose of this whole thing is payment processing in a
sane jurisdiction.

------
yummyfajitas
Singapore and Estonia both seem to be doing things right. Singapore (unlike
Estonia) also has a fairly long tradition of being a great place for
foreigners to incorporate, a well established and stable legal regime, sane
taxation, etc. Estonia also looks pretty good, but they haven't been around as
long so the odds of them making trouble for you in the future are probably
higher than Singapore.

A Singapore corp will require you to pay taxes once on corporate income. After
that it's simple - make distributions to yourself and pay only local taxes.
It's as if Singapore asked economists what the most efficient way to run a
society is and then actually did that.

A US business entity is probably a very bad idea due to things like taxation
on global income and just general US insanity.

------
vonklaus
Are you familiar with Stripe Atlas?

It was built for this usecase, and allows non-US companies to:

\- Get US Bank Account at SVB

\- Incorporate as Delaware C corp

\- Accept Payments immeadiately using stripe

\- have access to PWC consultants about tax and accounting info

\- AWS credit

It is in beta, but they are accepting applications. You should give it a go if
it makes sense

------
tim333
I've got a Delaware LLC and the tax is pretty simple - you just fill in a form
(w8-ben) to say you are non US resident and that's it for US tax. Whatever
income and gains are regarded as being yours personally and you are supposed
to declare them where you live.

For the UK there's some info here on getting bank accounts (2013)
[https://www.rapidformations.co.uk/blog/business-bank-
account...](https://www.rapidformations.co.uk/blog/business-bank-accounts-for-
non-uk-residents/) I'd recommend phoning them / the banks for the current
situation.

------
ecesena
From my point of view, you should consider first where are your customers, and
then -assuming you'd like to- where you'd like to look for fundings.

If you plan to market US companies and potentially raise money in the US, then
you should incorporate in the US. You don't need to live there, although I'd
recommend for alignment with your customers' time and build connections to
raise. After initial expenses (i.e. the company is alive and running) it's
relatively easy to get a visa.

If you're serious about your biz, you should take any decision to maximize its
success, not to save a few bucks at the beginning.

~~~
restalis
_" If you're serious about your biz, you should take any decision to maximize
its success, not to save a few bucks at the beginning."_

Being serious and looking for ways to maximize (i.e. capitalize on) the
existing success appears to make more sense when you already have a working
business model. When you're in the phase of experimenting ideas and there is a
high chance of failing it sounds better to fail as cheap as you can.

------
jasiek
Running a company in the UK is super easy compared to some eastern european
countries - far less bureaucracy, regulations (maybe apart from VAT-MOSS, but
that's an EU thing) are easy to follow and most things can be done online. An
accountant can do _a lot_ of this for you and they cost between £60-120 a
month. You will have to show up in person for an appointment to open a bank
account though, and UK banks, generally - suck.

In terms of taxation, CIT/VAT are similar to everywhere else in Europe, PIT
depends on where you live, so you need to talk to an accountant in your home
country.

~~~
strls1
I've read that it's next to impossible to open a UK bank account as a non-
resident (even for a company) unless you can deposit a large amount of cash.
The are afraid of fraud or something.

Is this true?

Would be nice to have a bank account in the same country.

------
sandGorgon
Check out Stripe Atlas. [http://www.wired.com/2016/02/stripe-gets-business-
making-bus...](http://www.wired.com/2016/02/stripe-gets-business-making-
businesses/)

------
arun_bansal
You could consider [http://stripe.com/atlas](http://stripe.com/atlas)

~~~
strls
Thank you. Atlas could help one incorporate, but I don't see much value for me
in what they offer. I just want to know if I should bother with a US company
just to process payments.

------
simonebrunozzi
Take a loot at Atlas, by Stripe:
[https://stripe.com/atlas](https://stripe.com/atlas)

~~~
peachepe
People really need to stop recommending Atlas without having a first-hand
experience. They are currently in wait list phase. They said they would be in
that mode for many months (not even an ETA), and apparently, they are picking
unicorns for now.

------
therealmarv
\- deleted comment about US company... - Regarding UK limited... there are
special service companies which assist you in creating one, also helping you
with taxes etc. But I don't know how this works for non EU residents.

~~~
strls
No offence, but this is contradicting everything I've learned about US
incorporation so far :) Do you have any sources I can look into?

From what I know you can easily form and operate a company in the US without
ever being present there.

You would have to come in person to get a bank account though.

I know there are always companies who will take money for assisting with any
kind of crazy stuff. Here I just wonder if anyone who's not selling such
services could share some real-world experience.

~~~
jcr
The post from "therealmarv" is wrong on just about everything.

Incorporation laws vary from state to state in the US, but they tend to be
fairly similar. Many states do not have state income taxes for companies, and
have business-friendly laws, hence the reason why so many humongous companies
are registered in the tiny state of Delaware. A lot of publicly traded
companies (and I _think_ most YC-funded startups) are registered in Delaware.
In Delaware, all you need in your incorporation filings is an "Agent of
Record" and there are many "create your own Delaware company" type sites that
provide "Agent of Record" services, including postal mail forwarding and
similar.

BTW, you might want to dig on the main YC site. I recall seeing something
about incorporation paperwork and such.

Once you have a US corporation, you can get an EIN number from the IRS which
is basically your tax ID for filing Federal Income taxes with the IRS. Your
EIN number and incorporation papers is enough to get a US bank account for
your business. From there, everything else you might want to do becomes even
easier.

None of the above is difficult or particularly expensive. It might cost you
about $1K total, plus yearly recurring fees for Agent of Record services.

~~~
logfromblammo
Delaware is somewhat of a specialist in corporation organization, and a huge
portion of the state's legislative and judicial resources are invested in
being the venue of choice for incorporating a business. That's why the taxes
on individuals living in the state are so low, they get a lot of income from
corporate taxes and filing fees.

If you are incorporating somewhere solely for the purpose of doing business
elsewhere, a Delaware C corporation will definitely do the job, in the same
way that a rocket propelled grenade can _technically_ fulfill the same role as
a flyswatter.

If you have a functional business, and don't need investor money, an LLC will
work just fine. Delaware, Nevada, and Wyoming are the most popular states to
register an LLC, but by now, all states offer their own flavor of a limited
liability partnership-based company.

A New Mexico LLC does not require annual reports or fees, does not require
naming your principals or filing much more than just the articles of
organization. The filing does not have to be done by a member of the LLC. You
just need to maintain a registered agent somewhere in the state, and that is
pretty much the only requirement for staying in good standing as far as the
state is concerned. You literally just need to hire a registered agent, fill
in a very simple form, and pay $50. No lawyers are required (unless you hire
one as your registered agent). If you are not doing any business in the US,
and none of your LLC members are US persons, I don't think you need to concern
yourself with US taxes. You register your foreign corporation wherever you
_are_ doing business, and if they call up the New Mexico Secretary of State,
they will say, "yep, we do have an LLC registered in that name".

If you want a US bank account, you will need an EIN from the U.S. federal
government, which can also be done by a nominee having no other association
with your company.

