For example, in Australia, a foreign company is taxable if
i) Australian tax residents control the company’s voting power; or
ii) Its “central management and control” is in Australia.
Other jurisdictions have similar laws.
You have to check tax treaties between the US and the other country to see how it goes. Usually when there is tax treaty, there is no double taxation.
For corporations fixed place of business is important legal concept in OECD couturiers. Significant digital presence is a new emerging concept.
See the permanent establishment article of...nearly every tax treaty based on the US or OECD model tax treaties.
I always wondered about this and how it affects startups. In particular, YC requires that all the companies it funds be registered as US entities. How do these companies manage double taxation ?
They need to file at least the following:
1) US federal corporate income tax
2) Deleware state franchise tax
3) Australian income tax
Probably more. If you want to stay fully legal and compliant, it's just what you have to do.
Also, I have read that some services like 2checkout offer "name of record" where they seems to pay taxes on behalf of a company globally. But I haven't seen any other company offering that, so I'm not sure if it it's standard or not...
That being said, for SaaS, it is still currently generally the prevailing rule that sales/VAT/GST/whatever compliance isn't required in the customer's country unless you have a physical nexus to that country (i.e., office, employee, etc.)
However, the US tech dominance has resulted in many countries proposing or even adopting rules that would subject SaaS transactions to VAT/GST/whatever compliance regardless of the location of the vendor. Most intl tax experts agree that this will become the standard within a decade, though there is substantial disagreement as to how soon within the next decade the transition will occur.
Are there situations where Stripe Atlas would not be the best choice?
(Also curious if anyone has experience with Clerky or Gust Launch, which are also mentioned in the article.)
I've talked to a couple lawyers since that are familiar with the Clerky paperwork, and they said that legally it's pretty solid as long as you're doing something fairly standard. If you've got complicated ownership structures (converting from an LLC, founders quitting or joining after incorporation, spinning off IP that might not be yours) you probably want to talk to a lawyer, but for the standard situation where a bunch of friends get together, can all agree on ownership percentages, and start a company from a clean slate, Clerky's great.
It's not that simple. There are plenty of horror stories from founders explaining how the ideals of 50/50 or 33/33/33 equal splits actually caused problems and resentment about unfairness.
Sometimes equal splits will lead to problems.
Sometimes unequal splits will lead to problems.
Therefore, there isn't any one-size-fits-all advice. Each group of founders have to figure out what type of equity split is appropriate for their startup.
To add some observations.
Equal split can work if the cofounders have known each other for a long time and have already worked together on a previous project. They have the history to confidently gauge each others' future work dedication. An example would be family siblings. Another example is Larry Page & Sergei Brin of Google. When they cofounded Google Inc in 1998, they had already met in Summer 1995 and worked on the "Backrub" research (precursor to google) for more than 2 years.
Unequal split may be more prudent when the entrepreneurs haven't worked together much and therefore haven't tested each others' resolve and dedication to a startup. A famous example would be Drew Houston and Arash Ferdowsi of DropBox. Drew needed to add a cofounder in a hurry and a friend helped him connect with a possible candidate. In this case, he gave cofounder Ferdowsi a smaller ~25% instead of 50%. Other examples of unequal splits include WhatsApp, Instagram, Youtube, Microsoft.
Every situation is different. Robin Chase (Zipcar) thought she was in the 1st scenario of equal cofounders giving equal effort when she was really in the 2nd scenario of unequal effort. That ignorance led her to regret her decision for equal split.
Another generalization I've noticed is that more experienced founders that had equal splits in their 1st startup prefer unequal splits for their 2nd startup. I can't think of any famous founders that went the opposite direction of unequal to equal.
Further more, if two (or more) co founders cannot decide before hand on how to deal with a deadlock, then it is always better to quit while you are ahead.
And yes, I had this experience as well as one that was the opposite.
If you want to be employed by your company and live in the US, currently the E2 is the best option (for that, you already need ongoing substantial operations in the US).