Some time ago I wrote about the concept of flag theory and how different elements of your life don’t need to happen in the country where you were raised, or live.
This couldn’t be more true for an entrepreneur running an online business.
Running an online business gives you the freedom to incorporate in a country that best suits your business needs, or in the case of a lifestyle business, your personal goals as well.
By looking abroad at the many different entity types in many different countries, not only can you optimise for time, sanity and your customer experience, you can likely save on payment processing rates, bank fees, legal and accounting expenses, and tax as well.
This article isn’t about paying 0% tax. It’s about setting your online business up for success.
Can you reduce the tax you pay in the process? Sure. It’s easy to make blanket statements about which country is best to incorporate in. But tax is too specific to the individual for those statements to be correct.
So, for the purpose of this post I’m only going to discuss entities in countries that:
- have a sub-20% tax rate
- have no tax at all
- are a pass-through entity, meaning there is no tax at the company level; instead the shareholders are liable for their percentage of profit.
These entities that are flexible enough for people living in both high tax countries along with tax havens, and everywhere in between. They’re common among real estate investors, digital nomads, software companies and more.
But First, a Warning
Unless you are legitimately setting up an office and establishing residence of your company in the country you are incorporating, it’s very likely that your country of personal residence will have a claim on your company earnings.
In a lot of countries, if you own 100% of a company that operates in a low or no tax country, but the management of that company happens in your office at home, your home country can come knocking for their tax dollars claiming that you own a Controlled Foreign Corporation.
Don’t put your head in the sand!
Key Things You Need to Run an Online Business
A successful business does not need a 0% tax rate. But it does need customers, banking, payment processing and so on.
$1,000 in revenue, even with a 0% tax rate means you only take home $1,000. If your local environment enables that same business to flourish and bring $1,000,000 in revenue at a 40% tax rate, you’re still ahead by $599,000.
I’ve run companies in countries that seemed like a great idea from the outset, but with the benefit of hindsight wasted literal weeks, if not months of my life. I thrive on the learning, but this wasted time was probably the root cause of business failure.
Every business has unique requirements. My Andorran company is difficult for online business, but would be a necessity for investing in local real estate with local partners.
It’s not as simple as looking at individual countries. This section needs to be reviewed on an entity-by-entity basis;
- A UK Limited Liability Partnership works differently to a UK Limited Company.
- In the same way, a Singapore Pte. Ltd. is different to an Australian Pty. Ltd.
A lot of people quickly gloss over countries like Canada and say “the tax rate is too high”, but as you’ll see below, it doesn’t need to be. In doing so, they may have excluded an option that is otherwise perfect for their needs.
So let’s review the core elements that you want to be available for your new company before you cross anywhere off the list.
Banking
If you’re from a country where banking is easy, this may not make sense to you yet. Do business in a few countries around the world though, and you’ll begin to realise there’s a huge variance in the ease, cost and safety of banking.
One might think that it’s just the “offshore” jurisdictions that have bad banking, but it’s not as simple as that.
As an Aussie it amazes me that USA is still obsessed with cheques. A bank account at most Canadian banks is borderline useless if you don’t plan on being located in Canada, thanks to their requirements to walk into a branch to make a wire transfer.
When it comes to banking, you’re probably going to want:
- internet banking that allows you to make local transfers of at least $10,000 (or similar in local currency)
- internet banking that allows you to make wire transfers of at least $10,000 (ideally much more than this)
- at least a debit card for company spending
- ideally easy import/export of records to a well known book keeping system
Something a lot of people don’t realise is, you don’t have to bank in the same country as your company. If for example, you form a Private Limited Company in Hong Kong, it’s entirely possible for you to get a bank account in Germany. You’ll just need to jump through more hoops and have some good reasoning as to why you need this set up.
Merchant Accounts & Payment Processing
Have you ever wanted to buy a product, but it’s all just been a bit too hard? Chances are when you start your online business, you’ll be very grateful for those first few customers.
What you’ll come to learn over time is, paying for a product or services already brings friction, so you want to make it as easy as possible for each person.
If a client or customer in Canada has to send you a wire transfer that costs them an extra $35 and an hour of their time (as it involves a visit to their bank), you’ll be under scrutiny every time they’re standing in line at the bank.
The more you can remove this friction, the better. Credit card processing is probably one of the easiest ways to take payments.
There are a lot of payment processors around, and the one that works best will depend on your industry. Most online business owners will find themselves working with one or more of these companies:
- 2Checkout
- Braintree
- PayPal
- Stripe
Of course, each country has a different list of merchant account providers. And when you begin to process larger amounts it can be worth investigating better options as even 0.5% can make a big difference at the end of the year.
Limited Administrative Overheads
If you’re much smarter than me (highly likely) you can probably set up a business that doesn’t require much of your time.
But, if you’re like myself and need to commit a lot of time to launching and growing your business, the last thing you want to be doing is committing a ton of that time to a government’s bureaucratic systems.
I’ll give some of the most common examples below, but there are plenty more around.
Tax Reporting
In many countries you’ll need to lodge company and sales tax information on a quarterly basis. If we compare that to a country that requires it once per year well, it’s 25% of the work.
Compare that again to a country that doesn’t want you to lodge this information ever and it could be a game changer for your business. That free time can go into making sales or growing your team instead.
Business Licenses
In many countries, depending on the industry you are in, after registering your company you’ll also need a business license on top of that.
Similarly, this is more money and time that could go into the growth of your business.
Operating Agreements & Share Certificates
When you form a company, you need a document or documents that state who owns which percentage of the company, what the terms are for operating that company and so on. Different countries and entity types have different names for documents.
If we take a US LLC for example, you can update an operating agreement with the signature of other shareholders. That is, if you and I own 50% of a company together, and I want to sell my 50% to you, we can:
- update our agreement showing this change, and
- sign it digitally.
That’s it! You’ll need to notify your bank and payment processors after the fact.
To do the same with a “Societat Limitada” in Andorra, we need to:
- advise a notary of the necessary changes to this document (which you won’t be able to read unless you learn the local language; Catalan),
- physically visit that notary (in Andorra, which can sometimes take weeks to book a time with and is impossible over Christmas or summer holidays),
- review that document with the notary,
- sign that document in their presence and
- pay a good deal of money for that experience.
Now that the company has changed from 2 shareholders to one, it becomes a “Societat Limitada Unipersonal”, meaning your company name has now changed from an SL to an SLU. So in addition you need to:
- updated records with multiple government offices, each with their own lines, wait times and fees.
- notify your bank and payment processors need to be notified, and
- any references to your company name need to be updated.
The Andorran company just sapped a ton of time and money from your business, whereas changes to the US LLC might have cost you 30 minutes.
Resident Directors or Local Office Requirements
Some countries require at least one local resident director. What this means is, someone who is a resident (lives or has strong ties there) of that country needs to be a legal representative of your business.
If you have a business partner who lives or is a citizen in this country it could make good sense for you, but in many cases it’s just another cash and hassle grab, as you need to pay a “nominee resident director”.
In Singapore, you might pay $1500 or more per year for a nominee resident director of a Pte. Ltd.
Similarly, some countries have local office requirements, and they’ll actually send someone around to check once a year to make sure you’re meeting their demands.
If you’re operating through a UAE RAK as a foreigner you’ll likely have it set up in a free trade zone. Depending on which “free zone” or FTZ your RAK is registered in, you will probably have a requirement for a “physically functional” office space that is much larger than your online business needs.
These things might make sense when you’re seeing millions in profit each year, but if you’re pursuing a “4 Hour Work Week” online business model that helps you to earn a modest living while travelling the world, it’s probably best to avoid these types of hassles and expenses.
Perception & Reputation
Outside of the other points mentioned here, the core issue with forming a company “offshore” is that it’s a massive red X next to your business’ name for many people and entities.
It’s not that you are necessarily doing something illegal by operating your business an offshore jurisdiction, but the fact that others have in the past can make others skeptical.
- Banks will need to see more information.
- Payment processors will be more wary of your business.
- Credit card companies may block your customers’ payments pointing to “suspicious activity”.
- Your local tax department may decide to audit your affairs.
All of this is fine if you’re doing everything legitimately/legally; you can work through it.
Potentially worst of all though; clients may pull out of deals when they learn that you’re operating out of a “shady” country.
Sales and growing a business is hard enough, don’t make it more difficult for yourself.
Bonus: Reward Credit Cards
It shouldn’t be the highest on your list of priorities, but something to consider is whether or not reward credit cards are available to your new company.
Depending on what your online business does, there’s a chance that you do a lot of spending. Consider if you’re reliant on Facebook ads, or you’re buying products to be drop-shipped to your customer. Even paying contractors can be done by credit card.
It doesn’t matter if it’s to fund business class flights for your next holiday or to get 2% cashback on all of your business spending. If your card is hitting 5 digits or more each month, reward cards are worth investigating.
Friends of mine have moved their entire online business to Hong Kong and USA purely just to rack up air miles.
The Best Countries to Start a Business
You’re here to learn which countries are best so let’s get stuck into it.
Criteria for each country are both objective and subjective. You must do further research if one country appears to be suitable for your business.
British Virgin Islands Business Company
Known for: Asset Protection, Aviation, Consulting, Investment Funds, International Trading
Reputation: Negative
Bank Account Opening: Difficult
The BVI Business Company (BC) is well known as an asset protection vehicle due to their high level of confidentiality, flexibility and freedom of operation.
This tax neutral entity is not allowed to do business within the British Virgin Islands. As a result the entity is considered non-resident for tax purposes, in most cases making it exempt from local taxation.
BVI companies are increasingly difficult to open bank accounts. Where many business owners used to find it simple enough to open accounts for their BVI business company in Hong Kong or Singapore, many of those bankers are no longer interested in this new business.
Referrals will go a long way if you do not have any existing connections. Most bankers will want to see a business plan and letter of recommendation from your current banker or someone with a strong reputation such as a lawyer or notary.
Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 2 days
Min. Govt. Fees: USD$350
Corporate Tax Rate: 0%
Double Taxation Treaties: None
Min. Shareholders: 1
Min. Directors: 1
Resident Director: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Share Capital: USD$1
Public Records: No
Auditing: Not Required
Return Filing: Not Required
Canadian Limited Liability Partnerships
Known for: Consulting, Payment Processing, Marketing Agency, Sales Agents
Reputation: Excellent
Bank Account Opening: Easy
Cost to Start: €357 / US$389 (Using code “jase” at checkout)
OECD nations are quick to denounce the little countries that offer tax efficient structures in order to generate revenue, so it may come as a surprise to see Canada on this list. Canada offers both Limited Partnerships and Limited Liability Partnerships.
These partnerships can be used as a “disregarded” or “pass-through” entity, meaning profits are not taxed at the business level unless sales are made within Canada. They are instead paid by the partners themselves.
Most Canadian provinces offer an LP structure which requires a general and a limited partner (though the same individual or entity can be both). The general partner has 100% liability, while the limited partner (theoretically a “silent investor”) does not.
British Columbia however, offers a full Limited Liability Partnership which helps to protect both partners and is very similar to the UK LLP and multi-member US LLC.
Entity Type: Limited Partnership
Liability: Limited
Law Type: Common
Time to Establish Entity: 3 days
Min. Govt. Fees: CAD$210
Partnership Tax Rate: 0%
Double Taxation Treaties: Many
Min. Partners: 1
Resident Partner: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Capital: CAD$1
Public Records: Yes
Auditing: Not Required
Return Filing: Not Required
Estonian OÜ
Known for: Ecommerce (European Market), Information Businesses, Tech Companies
Reputation: Average
Bank Account Opening: Average
Well known for their e-Residency program, Estonia has become one of the best European countries to start a business for location independent entrepreneurs. Their marketing around e-Residency has been excellent, albeit misleading many digital nomads into thinking that it means they have tax residence in the country.
The osaühing, or OÜ for short is a private limited company that works very well for online business owners who have optimized their personal tax residency situation.
Estonian OÜ’s do not pay tax on realized profits. Instead, there is a 20% tax on distributions. When an OÜ is resident in Estonia, salaries paid out to non-resident directors are tax exempt. Do note however, that if your online business is effectively a one-man team, it’s likely your company will not be tax resident in Estonia.
Especially popular with tech startups, you’d think that Stripe would offer access to all Estonian companies. Unfortunately, Stripe is only available when at least one director is resident of a supported country.
Entity Type: Company
Liability: Limited
Law Type: Civil
Time to Establish Entity: 2 days
Min. Govt. Fees: EUR€190
Corporate Tax Rate: 0%
Double Taxation Treaties: Average
Min. Shareholders: 1
Min. Directors: 1
Resident Director: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Share Capital: EUR€2,500
Public Records: Yes
Auditing: Over €4M turnover
Return Filing: Monthly
Hong Kong Private Limited Company
Known for: Ecommerce, Investment Funds, Holdings
Reputation: Average
Bank Account Opening: Average
A former “offshore” favorite among online business owners, forming a company in Hong Kong is much less appealing today than it was in years past.
While the banking system is excellent, opening an account at many Hong Kong banks has become difficult for smaller online business owners. This is especially true for those who do not have a personal residence visa for Hong Kong.
In addition, China’s strong-arm tactics in Hong Kong proves that this jurisdiction may not have the same stability that it did a decade ago.
Though the headline corporate tax rate for Hong Kong is 16.5%, there are many ways to lower this percentage. One of which is the offshore tax exemption which can bring tax paid down to 0%. Of course, applying for and maintaining this exemption is not free; some consider it a form of tax in itself.
Reputation seems to range wildly for Hong Kong. As an Australian with many friends from South East Asia, these companies are “normal” to me, and the country has a great reputation. In Europe however, Hong Kong seems to scream “illegitimate”. Take your clients, customers and culture into account.
Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 4 days
Min. Govt. Fees: HKD$1,720
Corporate Tax Rate: 16.5%
Double Taxation Treaties: Average
Min. Shareholders: 1
Min. Directors: 1
Resident Director: Not Required
Min. Secretaries: 1
Resident Secretary: Required
Minimum Share Capital: HKD$1
Public Records: Yes
Auditing: Required
Return Filing: Annual
Singapore Proprietary Limited Company
Known for: Financial Services, Investment Funds, Trading Companies, Tech Startups
Reputation: Excellent
Bank Account Opening: Easy
Singapore is rapidly becoming the financial center of South East Asia. On face value, Singapore’s high tax rate and requirement for a resident director can make this entity unappealing.
For the right online business however, it may be the perfect location. Singapore is flush with cash, and venture capital is looking for tech startups to invest in.
Similarly, financial services, investment, trading and related companies may find themselves with a captive local audience to help launch their business.
Depending on the size and revenue of your company, you may be eligible for exemptions that can bring the corporate tax rate down to 0%.
Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 1 day
Min. Govt. Fees: SGD$315
Corporate Tax Rate: 17%
Double Taxation Treaties: Many
Min. Shareholders: 1
Min. Directors: 1
Resident Director: Required
Min. Secretaries: 1
Resident Secretary: Required
Minimum Share Capital: SGD$1
Public Records: Yes
Auditing: Over SGD$10M turnover
Return Filing: Annual
UK Limited Liability Partnership
Known for: Ecommerce, Payment Processing, Service Businesses
Reputation: Excellent
Bank Account Opening: Easy
Cost to Open: €267 / US$292 (Using code “jase” at checkout)
Very similar to the British Columbia LLP, the UK LLP is not seen as a separate entity and usually has no tax burden. This is known as a tax neutral, pass-through entity.
UK LLPs are popular among non-residents who do not trade in the UK, as it often results in 0% tax. That is, if you and your business partner own 50% of a UK LLP, and your business generated a $100k profit, each of you will declare $50k on your personal tax return.
Of course, as with all things international tax, it does come down to the situation of the individuals who run the business.
In general however, these are incredibly cheap and easy to set up and maintain, with lots of digital banking solutions available, and the brand name payment processors you’re probably on the look out for.
Many of my friends from Eastern Europe use a UK LLP to operate through as their customers find it more trustworthy than when they traded through a local company in Montenegro, Serbia, Ukraine and beyond.
Entity Type: Partnership
Liability: Limited
Law Type: Common
Time to Establish Entity: 1 day
Min. Govt. Fees: GBP£10
Partnership Tax Rate: 0%
Double Taxation Treaties: Many
Min. Partners: 2
Resident Partner: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Capital: GBP£0
Public Records: Yes (by default)
Auditing: Over GBP£10.2M turnover
Return Filing: Annual
USA Limited Liability Company
Known for: Ecommerce, Payment Processing, Service Businesses
Reputation: Excellent
Bank Account Opening: Easy
Cost to Open: €267 / US$292 (Using code “jase” at checkout)
Possibly the best and most common structure for internet business owners is the humble US LLC. Quick and cheap to set up, easy to maintain, with a great reputation and unlimited options for banking, payment processors and credit cards, there’s a lot to like here.
Despite outward appearances, many people consider the USA to be one of the best countries to start a business as a foreigner. There may be a few extra hoops to jump through but generally the country is accommodating.
Depending on the state, taxes and fees vary – sometimes wildly. Most common states are Delaware and Wyoming, however New Mexico seems to be increasingly popular.
Usually Delaware LLCs are favorite among larger companies or online businesses taking outside investment, due to the extensive corporate case law that the state has under it’s belt.
Wyoming LLCs are more affordable operate and can offer greater privacy, so these are more commonly used for small businesses.
When owned by non-residents these become tax-transparent pass-through entities, similar to the BC and UK LLPs. If not trading within USA, this can result in a 0% tax rate for owners.
For more information on this topic I recommend reading my guide on how to open a company in USA as a foreigner.
Details below refer to the Wyoming Limited Liability Company.
Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 1 day
Min. Govt. Fees: USD$25
Corporate Tax Rate: 21%
Double Taxation Treaties: Many
Min. Shareholders: 1
Min. Directors: 1
Resident Director: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Share Capital: USD$0
Public Records: No
Auditing: Not Required
Return Filing: Annual
Not Sure Where to Start Your Online Business?
When I started out, the idea of paying thousands or more for professional advice was hard to accept. Between then and now, I’ve spent tens of thousands on advice, much of which was flat out wrong.
As an online business owner, the final responsibility ends with you. I don’t give unsolicited advice, but if I could tell my younger self what to do, it would go something like this:
- educate yourself as much as possible on tax and company law,
- learn from other entrepreneurs who have done this before but are less biased,
- seek professional advice,
- cross reference all of this information to find the common truths, and continue to do this until you understand what you’re getting yourself into.
The truth is, there’s no best country to incorporate an online business. There’s no one size fits all solution to company registration. It comes down to your personal residence, company residence and your customers.
I love learning about tax but will happily pay more of it to make growing and operating my business faster and easier!
Still a little lost? Sign up to this free course on low tax business so you can make a better informed decision.
Outstanding content. Many thanks.
So much wisdom presented in this article. As another person with lots of hard won experience, I strongly endorse the content. Nicely written too! I would add Georgia to the list of countries worth a look, as it benefits from Free Trade Agreements eg with China and EU, Turkey, Ukraine, and Russia and other CIS countries. Thanks Jase. Well done mate!
Excellent article!
Excellent article!!!!
Thanks John, glad you found it insightful!
Very useful your article, thank you!
Glad you found it helpful Matias!
Hi Jase,
Lots of really useful information, thank you.
Could I bother you with a question…So if I’m exporting products from Vietnam into the UK and Europe mainly, where would you suggest the best place to setup an e-commerce business would be?
With Brexit this is starting to feel complex, or maybe I’m just thinking about it in the wrong way.
Hi Tariq,
Apologies for my slow reply. I’m not sure anyone knows how Brexit will really shake out yet, the best you can do as an entrepreneur is act with the info you have today and change course if you need to later.
Obviously you’ll need to speak with a lawyer on the tax side of things, but for simplicity’s sake I’d consider a UK LLP at least for your trading entity. It’s a great place for payment processing, cheap and easy to operate out of.
All the best with your business!
Wisdom is shining…a mind opening article. We really need more of this easy to understand information. For months I have been unable to find this advise neither on YouTube nor on any professional website. Please keep educating us!
Thanks a lot, Jase, it’s a very useful article, we learn a lot.
Very helpful article!! Regarding your advice to your younger self, which type of professional would you seek advice from? Online entrepreneurial-ism is a newish field and many people don’t have a clue. I note that some Caribbean countries provide a “nomad” type residency permit now to allow online entrepreneurs who work virtually to live there without the traditional “work permit”. I wish all countries would do this!! However, back to the UK, am I right in understanding that I would need a partner to set up there? Most convenient for me. Thanks…excellent info!
Thanks for commenting Judy, I’m glad you found it helpful. The issue with this industry is that there’s a great deal of smoke and mirrors, and you’re right, many don’t know what they are talking about.
When it comes to tax I think about my personal tax residency first, which then guides me on how I could set up a company. So for example, if I was a British resident, I’d speak with a tax lawyer who understands GB tax law, and ask them how different entities would be handled. “If I had a company in Hong Kong but I was a British resident, how would the tax be handled?”
Hoping this helps.
Yes, thank you Jase.
Judy
Sheesh lovely article; just re Judy’s question; which was also a “ah no” for me, is the issue of 2 Partners for the UK LLP. I’m 100% owner, so looks like that won’t work for me, altho UK was becoming a top pick….
I know many people who operate UK LLPs as the “sole” owner, but the structure becomes more difficult. Often they will have a “partnership” between their BVI BC, Estonian OÜ, US LLC and so on (which they own 100% of) and themselves. This can help with perception issues as UK is a very trustworthy location and has great payment processors, but comes with additional cost/hassle.
Many thanks for this intervening article Jase ! I’m very interested in starting very quickly an online business, drop shipping products from US and China, and affiliated marketing, which will and firstly operates in US but maybe later on in french speaking countries. I live in Switzerland, and if I would setup here a personal owned company, I would be taxed on my personal revenues which would make my taxes grow exponentially. In your opinion, would it be best to locate the company in US in order to get more trust from my future US located customers or isn’t it so important?
I also heard that Ireland and Portugal , and more recently Malta, Mauritius, could be interesting places to locate a business, do you (or others) have some infos about fiscal facilities in those countries?
The trust element really comes down to your customers. If it’s typical retail products, it can cause friction if your address and phone number is from an unknown or uncommon country (to your customer).
Do keep in mind that a US address and phone number can help here. It’s not uncommon for large companies to have a local address and phone number even when their company is registered abroad, so there’s no reason why you can’t do the same.
In regards to those other jurisdictions, it’s probably going to be a decision you’ll want to make with a tax lawyer, both where you are resident and where you’re thinking of forming a company.
hello jase
while i spend hours going throu the web to find a solution for my future i found ur words really good. im planning to open a small online business and some trading as well. i dont have much budget and im also looking for the a simple way of (outsoucing/smart) accounting from everywhere. im living in germany but i planning to leave the country and move from place to place w/o residency. do you have any suggestions which kind of crop would suite me and is cheap in running? thanks
Hi Patro,
I’m not clear on tax law in Germany. I suspect they will want to see that you are a tax resident of somewhere, so it may be a good idea to sort that out first.
As far as an easy/cheap solution to both registration, ongoing fees and accounting, the USA is worth a look. You might be interested in this guide as it covers a lot of the topics you discuss: https://jaserodley.com/how-to-open-a-company-in-usa/
Of course the most important part to all of this is to make sure you’re set up legally. Speak with a tax consultant/lawyer before making any decisions!
Great article Jase thank you ????
Just following up regarding the Canadian formation as I would like to establish a digital marketing / social media online based company and I was wondering if setting up the company in Canada is worthy! Since the tax is 0% and has easy requirements?
Also would I be able to open a bank account in Canada with full functionality while I am residing in Malaysia?
Thanks in advance,
Mus
Hi Mus, thanks for your comment.
Please do make sure to speak with a tax lawyer to clarify that revenue or profits from a Canadian pass-through entity is not taxable in Malaysia. Territorial taxation laws vary from country to country and I’m unfamiliar with Malaysia. Best to pay for some advice now instead of getting a big shock/fine down the line!
Your residence shouldn’t affect your ability to open a bank account. A Canadian bank will likely open for you as long as you can give them good reason to (a client in Canada for example). Do be aware that to get a credit card you will probably need to secure it (put down a deposit), otherwise you’ll need to live with a debit card.
Hoping this helps!
Hi
Thank you so much for the great overview.
I have a question, when I want to dodge taxes, my online business does consist of dropshipping orders from China mainly to US based customers and I am an EU citizen and residing there.
In this case would I have to pay the 21% or 0% tax rate with an American LLC?
Or would it be better to register a UK LLP to keep the tax rate down at 0%?
It would be of great help if you could briefly answer my questions.
Thank you and keep up the good work.
Hi Manu,
As always do consult a tax lawyer before making any decisions.
To be clear, these entities on their own aren’t going to lower your taxes or allow you to “dodge” them. Many of those here are “pass through entities” meaning earnings from that company are usually attributed to your personal tax return.
If you already have a UK LLP, there’s little reason to consider a US LLP as they are very similar. You’ve done the hard work, no point making it harder again by going and changing to an LLC when it’s unlikely to make a difference.
This said, I don’t know where in the EU you reside. I would consult a local tax lawyer to find out how well your current structure works and if you should consider a US LLC. If you live in a high tax country I’d guess that a local company (from your current country of residence) will lower your overall tax burden, but again it’s something you want a lawyer to guide you through.
Hoping this helps!
Hey Jase, I am starting my new business in the field of digital marketing and I found your article very useful for me. So thank you for sharing such a great article with us!!
Thank you, Jase.
Precise and useful information well presented.
Very informal article,
thank you Jase ????
I would like to know a little bit more about a starting a company in Canada. It would be a digital advertising / social media online based company.
I have a dual citizenship Canada and Macedonia.
I also have Canadian personal Bank Accounts
Thank you
Nice article! There are many facets to this and needs lots of investigating. Taxes might be lower in some places but it is hard to process payments, other countries might have a 0% rate but high fees and other compliance costs. It is quite a labyrinth. I openend a business in Romania because of having access to EU financial services, Stripe, Paypal, Transferwise, and being able to deduct VAT. Corporate tax 1-3% and dividends 5%. That’s it. Still working in my personal residence before I pay myself out dividends. Will set that up in Romania or NHR in Portugal. The downside is that Romania is somewhat bureaucratic so it is important to work with good people on the ground.
I want to form a LLC and its For non-resident.
Hi there, you might find this article about UC LLCs for foreigners worth reading.
Hey great article, I saw you are Aussie, I am too. What are you thoughts re setting up an internet company in Vanuatu ?
Hi Minni, I don’t know enough to comment in detail but at face value I’d suggest it is more effort than it’s worth. Countries like Vanuatu are generally known to tax authorities in other countries, meaning they raise red flags unnecessarily with both government departments and compliance officers at banks. If there’s a legit reason to be using an entity from a country like that (local market, dual taxation agreement, something like that) it might be worth it, but I’d hazard a guess that it will be more expensive and with more hassles than any of the benefits you might see right now.
Thank you so much for this post! It showed me the way out for my digital business. One question – has anybody here used FreedomSurefer’s business registration services? I’m trying to find reviews online but so far I haven’t found anything.
Hi Eliza,
Probably not what you’re looking for as I’m biased, but I’ve known Simon who owns Freedom Surfer for years now (5+, I don’t actually recall). He’s legit and never done be wrong.
You may be interested in hearing him speak on this podcast: https://www.theworldwanderers.com/guest-episodes/internationalizing-yourself-with-simon-from-freedom-surfer/
Hoping this helps in some way!
Hi Jase,
thanks for the confirmation – now I’m sure it’s not just one of those affiliate programs and Simon is someone you know personally 🙂 I listened to the podcast this morning and contacted Simon. But you know how many scams are out there, so best be cautious. He seems to offer a great service and is a nice guy.
The reason why I like Simon is, after the sale he still cares about you. That and, he actually knows what he’s doing!
A lot of “registered agents” are simply just that. They register your company and can’t help you with much else.
Simon knows and understands tax implications for citizens and foreign residents of different countries, and when he doesn’t know he’s so curious he’ll usually find out for you.
I have an agreement with Simon, but there’s a reason I’m not pushing the high paid affiliate programs here instead; I can send people to Freedom Surfer with a clear conscience!
Well said! I’ve contacted some of those “agents” and, frankly speaking, a rookie like me can answer more questions about stuff like taxes than many of them lol. Currently, I’m using my advantage of being a Russian citizen to pay 4% on my personal income in Russia, live in Serbia with my family, and am planning to expand my BookBildr website for more official use, hence the need for a registered business in a reputable country that uses a familiar currency (not the dinar or the ruble). Thanks for your recommendation!
Hi Jase,
I am interested in starting on online tutor/teaching web site and just wondering if you have any suggestions. The basics are that my teachers and students will come from all over the world and I need to pay salaries and collect fees from my students. I need a reliable payment and collection system. Do I need to register for this type of business and if so, where do you suggest. I have family members with permanent residence in Hong Kong and can set up there if need be but I don’t know if that is the best choice. Thanks for your help.
Hi Jason, it sounds to me the key things you need are:
1. payment processing
2. cheap/efficient payout system
If you’re handling considerable sums, the payment processing rates in UK and Europe can make a big difference. Stripe/Braintree/etc can be as low as 1.4% in this region, vs 2.9% in North America and 3.4% in Hong Kong, and if you go with other lesser known processors that can be sub 1%.
Something like Transferwise is going to be fairly efficient and very quick at paying out salaries, with low fees to send money to most places.
My gut feeling is a UK LLP could be a helpful option here, but keep in mind there are tax implications to consider, along with the fact that you need either another company or individual to be your partner.
Cheers!
Hi Jase, very interesting article, thanks for sharing your knowledge.
I was hoping you could share your thoughts on the following;
Together with my partner, I own a dropshipping business while living in Spain and we are looking to set up an off-shore company, to decrease the tax burden and the amount of time spent on tax reporting. We sell to European and American customers. I have been advised to set up in Canada, with a bank account in any country that offers IBAN bank such as Mauritius. As long as I declare this foreign asset every year it shouldn’t be a problem, right? Or would such a setup not be accepted.
Thanks for your time!
Hi Joost, thanks for commenting! I have no direct experience with living in Spain so I don’t know the answer to your question. At a high level I am guessing the Spanish tax man will want some of your company’s income, but as always, try to find a lawyer who you can trust.
Hi Jase, very cool summary!
I don’t see the UK LTD on the list though – is there a reason for that?
I’m looking for a setup that would be the cheapest to maintain – as I want to test multiple online business ideas (subscription services, maybe POD, maybe SaaS), all basically as a one-man show (at least in the beginning). Since it’s not clear which idea will become profitable and when, I would prefer a company that generates minimum overhead and costs (especially in the time without any income).
Do you have any suggestions that I should look into? (I reside in Switzerland). Thanks in advance for your help!
Hey Tom,
Really the core reason why it wasn’t included is brevity! This article was mostly written for those who have personal residence in a low tax country. If we’re talking about UK specific entities, the UK LLP is generally more tax efficient for these people than an LTD.
This doesn’t mean a UK LTD can’t be useful. I’m sure there are lots of tax treaties that make it valuable, and usually when you dig into these things you’ll find that the “headline rate” of 19% can often be lowered quite a lot. Speaking in more generalities, I’d guess that LLPs are more suitable to cashflowing lifestyle businesses whereas LTD are more suited to growth companies/startups that plan to be sold in a stock sale in future.
It sounds as though you have plenty of testing to do, so I 100% support your ideals of keeping costs low. For the type of businesses you are planning to test I’d be looking for something cheap and simple to operate, with access to Stripe and affordable banking. As I understand it, corporate tax is low in Switzerland but operating expenses are high (as far as online businesses are concerned). If I’m wrong, I’d look at setting up there as it could be the simplest from a tax point of view.
If not, I know Swiss personal tax rates depend on canton, but if your personal tax rate is low it may make sense to investigate a US LLC or a UK LLP. These give your customers familiarity, and you get Stripe and cheap banking. They are both about as easy as it gets, and very cheap to operate. The negative of the LLP is, you need 2 partners!
Hoping this helps – there are probably more questions than answers here, but the whole point is to encourage your research into forming an “educated guess”, which you can then take to a tax lawyer/consultant.
I’m reading the article to get out of a U.K. Ltd. I live in U.K. and it’s become a nightmare this year trying to do online memberships etc as the overheads are increasing dramatically with the accounting requirements, changing goalposts with VAT registration, Brexit rules (to sell to any EU customers digitally you have to register in EU and do duplicate tax work), everything is quarterly now and can’t be done without an accountant. Then there is compulsory data registration fees if you have any form of mailing list. My TransferWise multi currency account is being questioned so I can no longer submit micro accounts and need a full accounting audit at thousands of pounds. My online business is no longer viable unless I move it.
Dear Mel, interesting read. You mentioned this:
Brexit rules (to sell to any EU customers digitally you have to register in EU and do duplicate tax work), everything is quarterly now and can’t be done without an accountant.
Does it apply to UK LLP as well? If I launch UK LLP and have customer base in EU, is there any tax implications and reporting? I am non-EU citizen and UK LLP seems nice choice for now. But still exploring. Do you have any advice where best to register online business?
Thank you
Curious: A Wyoming LLC seems like the best choice, but you have an Andorran SLU. Are they connected? Is the SLU the member of the LLC? Or do you not have a US LLC?
(Background: I’m a Canadian with a green card in the US, exiting before I’m committed to a US exit tax and worldwide taxation. Based on skills and interests, there’s a good chance I’ll end up in Andorra.)
Hi Scott, they are in no way connected. To be an active resident in Andorra, one must own at least 20% of an entity in Andorra, hence my SLU. If I had the choice I would not operate here as it’s anything but easy. Regardless, what makes sense for me may not make sense for you. Please do not make any decisions based on how I have things set up.
Thanks, Jase. Don’t worry; I’m vetting all of my plans with an accountant.
Do you have any expat contacts in Andorra whose primary activity is investing? I’m curious if that’s best set up with assets owned personally or indirectly via an LLC. If you know anyone that’s familiar with that, I’d be grateful for an introduction.
Thanks for your help.
Hi Scott, yes there are quite a few. They are taking advantage of the fact that there are no taxes on capital gains when less than 20% of the entity is owned. I believe the entity/asset needs to be owned personally to get that benefit but have no direct experience. To be clear, are you looking for an intro to an agent/professional or a trader/investor? While I know both I’m not sure the traders/investors will be comfortable divulging their tax situation to someone they don’t know. If it’s to an agent, I can certainly help there.
Hi Jase, thank you for the article.
Wondering, wether in your opinion disadvantages of UK LPP such as potential liability of a partner or both partners (say if someone wants to sue the LLP) are not very dangerous? Will be my personal liability still limited by an LLP (which the name kind of suggests)?
Hi Dmitry,
I strongly recommend speaking with a professional to answer that question. There’s probably a specific use case/example you have in mind, and I am not experienced in this department. I don’t like to leave things to chance and recommend you don’t either! If you need a contact, please let me know and I’ll email you directly.
Jase, that is fair answer, thank you! I would be grateful if you can send me a trusted contact directly.
Thanks again for all the valuable content you provide!
Hi Jase, This post is a ton of information neatly compiled and put together. Thanks for that. I intend to start an online service website. There is no stuff being shipped or sold. All people do is register online and pay for the information. Which would be a good place to set up such a company? Im an indian based out of Kuwait. I was thinking about dubai. Your thoughts?
Hi Hrishi, glad you found it helpful. It sounds to me that you have some tax considerations there, and I’m completely unfamiliar with Kuwait’s tax system. If you want me to introduce you to a professional who can help to guide you, please let me know.
Hi,
The Canadian Limited Liability Partnerships needs only 1 partner as marked here or at least 2 partners as they say in Freedomsurfer?
From your experience, what and where would be the best structure for a company with a single partner?
Hi Luigi, while the Canadian LPs technically required 2 partners (a General and a Limited partner), that can be the same individual or entity. In regards to the “best” entity for a single partner, there are too many variables to give a blanket answer. My observation is that many people choose to go with a US LLC due to their low cost, simplicity, all documentation in English and so on. But of course you still need to be sure that it suits the requirements of your business, and satisfies your tax lawyer. Hoping this helps.
Hi Jase, this is the best compilation I have ever read about business registration outside my resident country. You are a one in a million, and I really appreciate the time and effort you put into creating this content and also answering all the questions. Thank you so much.
However, does Freedom Surfer help with account opening in Canada? A lot of transactions in Canada are with e-transfer and being a non-resident this is a restraint. Is it possible to open an account with a bank that doesn’t require my presents to send funds outside of Canada? Thanks again for being one of the most resourceful people I have ever come across on the internet.
Hey, thanks for your kind words! I know all too well how the Canadian banking system works. I’ve long said they must have the safest banks in the world as you can put money in easily, but taking it out is near impossible! Most of Simon’s clients who operate international businesses choose to go with Wise. While there are options for more traditional banks to allow international wires without physically visiting a branch (using a keyfob instead), this is only available for businesses with a serious track record, a good amount in deposit, and it still comes at a cost.
Hey very informed article. It definitely helped me get a step further. So much information is going all around, and you made it pretty clear. So thanks for that. Really appreciate all the effort you put into this.
I am just still very confused on how to go about it with my situation:
I hold a german passport, and lastly resided in Portugal (almost 3 years ago), am on a temporary visa in Australia. I am a nomad, basically have no residency.
My partner is Canadian. But also in Australia for the last 3 years and on a temporary visa now.
Basically, we are building our business, but on the visa type we’re on we are not allowed to conduct our own business in Australia. So now we’re looking into where to incorporate. Our business product is online services, so really our target audience could be worldwide. We wanted to start in Australia, and then expand globally. So we’re just really confused where to incorporate, where would the best country be so we can conduct business anywhere in the world from anywhere. Cause we have no fixed residency… (but theorically I could by just registering somewhere in Europe).
Hi Katy,
I’m not a tax expert but if you guys don’t have residency in another country, and you both hold visas in Australia, I’d guess that you’re at least temporary residents in Australia. What this means is, no matter where to register/incorporate, most online businesses would still be taxable in Australia (assuming you, or you and your partner own the majority of the business).
If you are looking for a way to run a business (get access to a separate bank account, payment processing, etc) that is outside of Australia, I’d probably go with something like a US LLC, UK LLP, BC LLP. This gives your business a location in which it’s registered. Then you as individuals can change your personal residency, and hopefully avoid too much hassle.
Compare that to registering a Pty Ltd in Australia (which I respect your visa doesn’t allow at this time). It may be tax efficient while living in Australia, but if you ever leave the country, likely becomes tax inefficient, and can be a major hassle to move elsewhere abroad.
Hoping this helps to provide some more insight.
Nice article!
What jurisdiction would you recommend for company registration? Not for investment. Micro-online-business. With the following inputs:
– Wishing to provide web-services, sell own courses, affiliate marketing, upwork .etc to the whole world (hooked up stripe/2checkout), maybe mobile apps at apple/google stores. Buy traffic at facebook, google etc.
– No office, no permanent partners, no employees in the country of incorporation.
– Single member (or plus a family member for LLP)
– Russian citizen. Resident of Russia.
– With administration for dumbasses.
– Low annual costs. Low taxes.
????♂️
Thank you!
I am an affiliate marketer with income mostly from the US. UK born but now living in Thailand for 6+ months a year. The 183 days makes me tax resident there, but overseas income is not taxable.
I currently just get affiliate commissions paid into my old UK PayPal and then into UK bank account. Transfer to thailand after 1 year. tax free.
I think I need to be setting up a company to take in the affiliate commissions but don’t know where. I was going to do HK but everyone now says its not good or stable place.
Anyone else in same position? Malta is my next choice but very much not sure!!!
Hi Sam, we currently have a holding company in Hong Kong but for exactly the same reasons you mention, we are seriously exploring our options. At the moment we are considering Wyoming and Estonia. Possibly both but still to work out the most tax efficient best solution.
One of the best articles Ive read on the topic in a while! great job. I was wondering why Malta was not included in this list?
Thanks Jose. Malta is indeed a suitable location for some business types and structures, but is less of a ‘one-size-fits-all solution’. It can absolutely be optimized but requires a few more hoops to jump through than the others in this list, so I thought it was best not to include it. Of course, that doesn’t mean it’s not worth considering if it meets your needs.
Jase, thank you very much. Great article, very informative, and real. I have been on the learning curve of ‘what the best company structure looks like’ for some considerable time. Your article helps frame that very realistically and articulately.
Hello Friends,
I am reading info on registering business in Estonian OU. There are several issues to consider as per my findings:
– accounting and reporting needs to be done in Estonian: non-Estonians outsource it to Estonian service providers.
– banking: some recommend to find other EU bank for more efficiency.
If you are currently operating business in Estonia, could you please share your experience of operation taking into account payment, banking, tax and accounting.
Thank you
UK LLP is one of my few choices.
I was wondering whether there are any tax issues, let it be VAT or so, to be registered or dealt with EU when there are EU customers of your digital products or services?
Thank you,
Elvin