Are you sure about this? That the UK is a more straightforward place to incorporate than the US? I'm dubious.
* First, there's not much evidence that the person we're talking about really owes a dime to Delaware. He set up a C-Corp (!), which apparently owes some corporate tax, but that doesn't make him personally liable. So, despite choosing the most complicated conceivable way to incorporate in the US, he can probably still just walk away.
* Second, does the UK have an LLC or S-Corporation equivalent? That is to say: is there a structure you can use to get pass-through taxation (business proceeds taxed once, as income) instead of corporate taxation, and have a shareholder structure that allows you to grant equity to employees? Because that is exactly the structure most pre-VC and bootstrapped startups want.
* Third, the US doesn't have the UK's system of rules requiring qualified directors; for instance, a bankruptcy in the US can't prevent you from being a principal in a company.
* Fourth, isn't it more expensive to incorporate in the UK than it is in the US? It costs under $100 to get a liability shield to do business under in the US. What's the equivalent UK cost?
* Fifth, and finally, aren't the laws in the US simply more business-friendly than in the UK? UK employees need to be given reasonable notice or compensation prior to termination; the UK is also not an "at-will" employment regime, making it harder to fire and thus harder to hire employees.
The UK is, from what I've read, the best of the business regulatory regimes in Europe, and the rules don't look onerous; they only look marginally more annoying than those of Delaware. However, I think that by looking at the weird choice made by one blogger (a full-on C-Corp), you might have gotten a distorted idea of what the regs in the US actually are.
I should note that I am not a lawyer or an expert on this stuff ;-)
Second, does the UK have an LLC or S-Corporation equivalent? That is to say: is there a structure you can use to get pass-through taxation (business proceeds taxed once, as income) instead of corporate taxation, and have a shareholder structure that allows you to grant equity to employees? Because that is exactly the structure most pre-VC and bootstrapped startups want.
A LLP - http://en.wikipedia.org/wiki/Limited_liability_partnership - provides pass-through and though it's called a "partnership" is actually a true corporate body. They are not very common as they were only created a few years ago and are not like US LLPs.
The standard "private limited company" represents nearly all of the corporations I encounter. These attract double taxation but this is not particularly onerous. Bear in mind that there are no "state" income taxes in the UK. There's one system, one set of rules, so on a £150k profit, the company would pay 20% corporation tax, and then the remainder split however many ways would attract personal dividend tax from each person. Thanks to a tax credit you get (to help counteract the corporation tax) the basic rate of dividend tax is effectively 0% (then you pay higher bands based on the dividend added to your normal income).
It's not exactly 1 + 1 = 2 territory, but it's a single system that any business owner or small-time bookkeeper can look up and feel confident about doing the calculations for.
Third, the US doesn't have the UK's system of rules requiring qualified directors; for instance, a bankruptcy in the US can't prevent you from being a principal in a company.
Yes, but this is an issue of personal bankruptcy which only lasts for 12 months (and potentially less). It's now common to take out an IVA (Individual Voluntary Arrangement) to avoid bankruptcy. Flipping it around, the UK doesn't have the US's system of "accredited investors" meaning that investment opportunities are open to more people ;-)
Fourth, isn't it more expensive to incorporate in the UK than it is in the US? It costs under $100 to get a liability shield to do business under in the US. What's the equivalent UK cost?
Fifth, and finally, aren't the laws in the US simply more business-friendly than in the UK? UK employees need to be given reasonable notice or compensation prior to termination; the UK is also not an "at-will" employment regime, making it harder to fire and thus harder to hire employees.
Yeah, there is some of this. However, a British company doesn't have any pressure to sort out health benefits and the legal costs are a lot lower (and the risk of getting sued for this and that seems to be somewhat lower based on the US and UK companies I know). So it's swings and roundabouts, as we say.
While "at will" employment is not (legally) done in the UK, it's not a particularly onerous system for businesses as long as they are careful. The notice period for an employee who's been with you for under 2 years is only a week, for example. For someone under a month, there's no notice period. As long as you aren't sloppy or outright discriminatory, you shouldn't be getting hauled in front of an employment tribunal.
you might have gotten a distorted idea of what the regs in the US actually are.
I did say it was subjective ;-) But I think a lot of it comes from the way in which the US has a plethora of particularly local laws. England, on the other hand, is more equivalent to a state and the laws across England are generally one and the same. Scotland has its own legal system but no-one in England would think to incorporate there (or in France, Germany, or wherever) in the way Americans incorporate across states.
Perhaps if people stuck to their own local states and were aware of their local laws, the situation would not be any more complex than in the UK. The interconnectivity of the US, however, means people do a lot of things across borders and seem to need expert help for everything.
* First, there's not much evidence that the person we're talking about really owes a dime to Delaware. He set up a C-Corp (!), which apparently owes some corporate tax, but that doesn't make him personally liable. So, despite choosing the most complicated conceivable way to incorporate in the US, he can probably still just walk away.
* Second, does the UK have an LLC or S-Corporation equivalent? That is to say: is there a structure you can use to get pass-through taxation (business proceeds taxed once, as income) instead of corporate taxation, and have a shareholder structure that allows you to grant equity to employees? Because that is exactly the structure most pre-VC and bootstrapped startups want.
* Third, the US doesn't have the UK's system of rules requiring qualified directors; for instance, a bankruptcy in the US can't prevent you from being a principal in a company.
* Fourth, isn't it more expensive to incorporate in the UK than it is in the US? It costs under $100 to get a liability shield to do business under in the US. What's the equivalent UK cost?
* Fifth, and finally, aren't the laws in the US simply more business-friendly than in the UK? UK employees need to be given reasonable notice or compensation prior to termination; the UK is also not an "at-will" employment regime, making it harder to fire and thus harder to hire employees.
The UK is, from what I've read, the best of the business regulatory regimes in Europe, and the rules don't look onerous; they only look marginally more annoying than those of Delaware. However, I think that by looking at the weird choice made by one blogger (a full-on C-Corp), you might have gotten a distorted idea of what the regs in the US actually are.