International Payments · Legal structures

Where is the best country to build a company?

Diego Monteiro Entrepeneur developing new projects in education for career

March 30th, 2015

Thinking about selling a SAAS for all world, sending invoice, receiving payments, and paying taxes.

March 30th, 2015

If you are worrying about taxes, then you really don't have a business idea that's worth pursuing.

What matters is
a) where are your customers
b) where are you likely to be raising funds

The rest doesn't matter

Gopi Mattel General Partner. Lifeboat Ventures

March 30th, 2015

We are today selling a sales commission SaaS application all over the world.

I would say as a market the USA is the best in the world. Our experience shows that countries with English language are early adopters of SaaS solutions ( Australia, New Zealand, South Africa), etc. It is also comparatively easy to start a business in the USA. And if your market is in the USA, there may be real value here.

From an operational perspective, lower cost operations would be far better. Countries such as India, Phillipines, some eastern european countries may be good fit. The low cost of operations can give you more runway. Though there will be some risk due to communication and liogistics challenges.

Alex Ermolaev Founder at TeamCamp

March 31st, 2015

Most international surveys list Scandinavian countries as the best place to create a start up. Those countries offer the best safety net and the best support 'infrastructure' which helps during early stages. If your business requires a lot of money, you might want to consider moving close to financing centers like San Francisco, New York, London or Berlin. As we know, most early stage investors don't like to travel. If you need a lot of engineering talent, you can consider Seattle, Silicon Valley or Boston. If you are targeting specific vertical, then being close to the biggest clusters of this industry helps a lot from early traction and eventual exit point of view. I would not imagine tax rates to be important since most start ups do not pay much until exit. However, if you are looking for tax optimization, then Ireland and Singapore might work.

Joseph Wang Chief Science Officer at Bitquant Research Laboratories

April 19th, 2016

It depends. The best country is usually which ever country you find yourself in, because you have the most knowledge of how that country works.

Once you go global, you'll find that there isn't one best country, and that the question is what parts of your company you put where. That really depends on your business model and investors. For example, if it turns out that you have US investors, then the ideal structure changes radically from if you don't.

Trevor Power Business Development Manager at Warwick Ventures Ltd.

March 31st, 2015

I agree with Karl (and Peter Thiel, as reported by Jessica Stillman on Inc, see quote below)

"Be a Delaware C Corp

No if, ands or buts about it. "A very important preliminary question is how you should set up your company. This isn’t a hard question. You should set up as a Delaware C corporation. That is the right answer," insists Thiel. This separates your business and personal affairs, offers flexibility when it comes to issuing stock, and makes it possible to exit the business by going public. "The big disadvantage for C corps is double taxation," but the advantages outweigh this problem."

http://www.inc.com/jessica-stillman/peter-thiel-3-rules-for-starting-a-business.html

If you click around you can probably find his lecture series online (Blake Masters recorded and posted them) or his book Zero to One is worth a read.

If you find that Europe becomes a significant market the UK is a very friendly environment (and corporate tax is going to fall to 20% from 1st April). If you want an English language location with good incentives for inward investment, a strong tech community in the Euro zone, then look at Ireland.

Joe Milam CEO AngelSpan, Inc.

March 31st, 2015

From a standing start:

US (Texas/Austin), Israel.

Business models will dictate from there.

Karl Schulmeisters Founder ExStreamVR

March 31st, 2015

I disagree with the recommendation for NECESSARILY doing a C Corp. Most startups never go public. And unless you have VC investment you don't need to be a C-Corp (you actually don't need to be a C-Corp there either, but its easier and you have broader options).

And while you can go fairly easily from an LLC to a C-Corp, going back is much harder.

For an initial startup there are few places easier to do a startup than France. But you are basically limited to 30kE per year until you have to step up to the next level of complexity and it really gets complex after 10 employees.

The other problem with France is that essentially there is no Venture Capital whatsoever because of the way the tax law is structured.

BUT if you are doing something as a Web Service - there is no reason even to be based in the USA. The ONLY real reason to be in the USA as a startup is access to VC funds

Vivek Ghai Entrepreneur, Founder & CEO Panacea Infotect I Startup Enthusiast I Outsourcing

March 31st, 2015

No doubt, USA is the best place to start up as it adds value to your business, plus you have direct access to one of the largest market in the world and to VCs too.

If you want to do cost savings that you can consider having a back offie in countries like India, Philippines, etc.

Joe Milam CEO AngelSpan, Inc.

March 31st, 2015

Karl,

I would like to weigh in on the C Corp structure.

For investors that invest directly (angels), the LLC is a bit of a pain, as K-1's are annoying at best. And they are an additional cost burden for the start up.

In addition, the pass-through benefits are negated by QSB 1244 treatment should the company fail (it happens), and the deduction is an 'above the line' deduction, which means the ordinary loss treatment of QSB 1244 is a more favorable deduction than if the individual tax payer gave an equivalent amount to charity.

So, cheaper to maintain for both start up and investor, less annoying, favorable tax treatment. more cost efficient.

Trevor Power Business Development Manager at Warwick Ventures Ltd.

April 1st, 2015

I think the overall sense of the advice above is correct - identify your bottleneck (access to capital, qualified/affordable employees, customers, whatever) and locate to be close to them. Don't obsess about the tax implications, but treat them as a secondary factor. The devil is in the detail (as Einstein said: "The hardest thing in the world to understand is the income tax.” The UK has a number of schemes to help out startups and early stage investors, including founder's relief (the net effect is to limit tax on capital gains to 10% for company founders), patent box (reduces corporation tax on profits earned on IP) SEIS and EIS (Seed- and Enterprise Investment Scheme - effectively reduces the exposure of angel investors to about 20% of their stake).

France got a mention above. There's a lone entrepreneur scheme there that a friend used once, which worked OK. But the corporate tax regime is horrible and the employment laws are worse (and even more so if you employ >50 people).

As an aside, I met one of the founders of Tinbox. They raised funding from French investors and moved there - there's an outline of their story and a link to their website here:

https://medium.com/@tinbox/what-is-tinbox-376a6562f91d

...an exception to every rule!

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