7 ms·

Paperwork is just an excuse, the issue is cultural. People in Europe are simply less entrepreneurial than in the US, maybe because the employer-employee relatio

by vfc1 7y ago

Paperwork is just an excuse, the issue is cultural. People in Europe are simply less entrepreneurial than in the US, maybe because the employer-employee relationship comes with more perks, like several weeks of vacation so people take less risks. It's considered risky to start a company and generally not that well looked upon, when compared to staying as an employee all your life and getting a higher position in a company, even though your revenue would probably be lower. There is much more social status associated to being a higher level employee than to being an owner of a small to medium sized company. Paperwork is not a problem, a few phone calls and meetings and its done. You can start a company with the help of your accountant in Europe, the accountant will take care of everything. The accountant will schedule the appointment with the notary, do all the paperwork, etc. Developer freelances are asked nowadays to have their own limited responsibility company, that can be used later for an online enterprise as well, that's what I did. There is even an option of paying a very small amount and setting up a quick limited responsibility unipersonal company, that then can graduate to a regular company later on. There are of course other factors, but I think 90 to 95% is purely cultural.

mytailorisrich 7y ago
People are entrepreneurial, not least in tech. I think the issue is not lack of people willing to take risk to setup a company but lack of investors willing to take risk to finance them. IMHO, the success of the US and Silicon Valley hinges a lot on the VC culture.
- yoz-y 7y ago
  I'd second this. Trying to raise money from European investors is like pulling out hair from a damp blanket. "I will give you a 'relatively small sum of money' if the other eight people you talked to will give you 'relatively large sum of money'" is common when talking to self proclaimed risk capital investors.
jen20 7y ago
I would suggest that writing off "Europe" as a single culture is naive at best.
gadders 7y ago
I don't know how this works in the UK, but personal bankruptcy still has a stigma attached. I also know that if ever happened to me, I would be extremely unlikely to ever work for a bank again.
- vfc1 7y ago
  With a limited responsibility company, if it goes bankrupt its the company and not you personally. Any debts would only go against company accounts and not your personal bank account. I think the judge in some cases could still hold you accountable depending on lots of factors, but for most cases the debts of the company would not go over to you (AFIK).
CathedralBorrow 7y ago
I like HN for insightful, often critical, commentary but I have to admit I'm getting pretty tired of these quick dismissals based on anecdotes and gut-feeling. "No, X is not the issue at all, the issue is Y because Europeans are like this and this is why Europeans do things. I know this because I know."
- refurb 7y ago
  I’ve noticed this to. Even in areas where I have domain knowledge and know the article conclusions are accurate, I’ll see dozens of posts saying “That’s not it at all, the real reason is...”. There are a lot of very confident, but very wrong people out there.
- vfc1 7y ago
  For this subject, it's really just a matter of opinion more than anything. I think if someone is commenting and has subject matter expertise, they should mention that ("I'm a doctor and happen to know that ..."), it's better than having everyone else adding disclaimers to their comments. In an online comment no expertise is usually assumed, but yes this leads to stuff like a scientist with decades of experience publishing a study saying something that people don't want to hear, and then some troll on twitter says "No it's not" and people run with it because that's what they want to hear. I think it's the Internet in general, it's not specific of HN.
hrktb 7y ago
I think you are right in that it is cultural. Then, it could be less a matter of being risk averse or not, but more that people like independence, and the preferred status is not 'founder of a company' but 'self-employed'. There was this interesting survey: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Self-employment_statistics https://ec.europa.eu/eurostat/statistics-explained/index.php... a quote: > 1 in 2 self-employed persons highly satisfied with their current job Looking at the other numbers, around 2/3 of them don't have employees, so a large portions of them just don't want to grow beyond and take the full burden of managing a company.
bjornsing 7y ago
And since the OP is about issuing options to employees (and not incorporating a business), how many such options have you issued? I have issued a lot of those (in Sweden) and its a nightmare. One of the major issues is that you can’t be absolutely certain what the tax consequences will be.
KaiserPro 7y ago
in the uk in 2017, there were 387,000 limited companies formed [1] in the USA in 2015 in q3 there were 240,000 (so about 960 annually). As the USA is 80% larger, population wise, you'd expect that number to be higher. [2] > There is much more social status associated to being a higher level employee than to being an owner of a small to medium sized company. I'd contest that. There is much more status in being posh, rich, attractive, than having a good job. being a manager at a no-name company is good, being an owner of a cool company is much better. [1] https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf https://researchbriefings.files.parliament.uk/documents/SN06... [2] https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf https://www.sba.gov/sites/default/files/advocacy/2018-Small-...
denton-scratch 7y ago
"asked nowadays to have their own limited responsibility company" Freelancers (in the UK at least) are required to pass their pay through a limited company, and subject it to payroll tax. It's not to help them set up a later online enterprise; it's to make it trivially easy for the tax authorities to extract their pound of flesh. (Before this was introduced, many freelancers didn't bother to pay tax on their income. When they flitted, the bill fell either on their employer or on the government)
- matthewheath 7y ago
  > Freelancers (in the UK at least) are required to pass their pay through a limited company, and subject it to payroll tax I don't believe they are _required_ to do this. Of course, there are certain tax incentives to running a limited company (as well as commercial pressures as a lot of clients will only deal with limited companies) but you can certainly still be a sole trader (I'm one) — you just file your standard self assessment return every year and pay accordingly.
  - vfc1 7y ago
    I don't think it's mandatory, but I had clients asking me this otherwise they would not hire. The reason is, if you work without a company, after a few years they could be forced to convert the freelancer to an employee, which usually neither wants.
    - Roark66 7y ago
      You do have to have a limited company, but no one forces you to pass the earnings as a salary subject to payroll. You can simply take the earnings out as dividend, but then you would be taxed twice on those earnings. So there is tax incentive to pay yourself a salary and not to report any company profit at the year's end, but it is not compulsory.
      - vfc1 7y ago
        Taking the whole earnings as a dividend is not advisable, because this means that you would have no salary and therefore no retirement pension at all. Governments usually incentivize entrepreneurs to have a reasonable salary, and to not take a lot out of the company as dividends, by providing beneficial profit tax brackets if these conditions are met. This incentivizes the entrepreneur to have a pension, which means less people living in poverty over time as they hit the retirement age. It also means that more money will stay in the company, incentivizing investing in the company via equipment and employees for example.
CalRobert 7y ago
I don't _want_ to like this, but it definitely rings true for the place I moved to (Ireland). In my circle of friends I don't think the idea of starting a business has even come up - except for other Americans like myself, weirdly. So far as I can tell it just isn't that appealing since (for the moment) there are decent jobs and it's less hassle. I don't know about other places in Europe but Tall Poppy Syndrome, "Notions", etc. is a big thing here - people should know their station, evidently.
rb808 7y ago
Absolutely its cultural. There is a huge difference in attitudes to success and wealth. In America everyone is working hard and the more money you make you more "successful" you are. In Europe people would rather be a well educated regular middle class secure job than work 80+ hours a week and buy a huge house. You probably can't even buy a huge house because planning regulations prohibit it. Europeans would rather be a broke well-educated artist than a rich hardworking entrepreneur. TBH with good holidays and secure safety net I'd probably do the same.
- vfc1 7y ago
  I'm pretty sure it's mostly cultural, and has a lot to do with the American Dream whatever it means. I think its this general idea that anyone can make it if they work hard, I don't think there is an equivalent notion in most European countries, at least the ones I have contact with due to having family all over the place.

by vfc1 7y ago

mytailorisrich 7y ago

People are entrepreneurial, not least in tech. I think the issue is not lack of people willing to take risk to setup a company but lack of investors willing to take risk to finance them. IMHO, the success of the US and Silicon Valley hinges a lot on the VC culture.

yoz-y 7y ago
I'd second this. Trying to raise money from European investors is like pulling out hair from a damp blanket. "I will give you a 'relatively small sum of money' if the other eight people you talked to will give you 'relatively large sum of money'" is common when talking to self proclaimed risk capital investors.

jen20 7y ago

I would suggest that writing off "Europe" as a single culture is naive at best.

gadders 7y ago

I don't know how this works in the UK, but personal bankruptcy still has a stigma attached. I also know that if ever happened to me, I would be extremely unlikely to ever work for a bank again.

vfc1 7y ago
With a limited responsibility company, if it goes bankrupt its the company and not you personally. Any debts would only go against company accounts and not your personal bank account. I think the judge in some cases could still hold you accountable depending on lots of factors, but for most cases the debts of the company would not go over to you (AFIK).

CathedralBorrow 7y ago

I like HN for insightful, often critical, commentary but I have to admit I'm getting pretty tired of these quick dismissals based on anecdotes and gut-feeling. "No, X is not the issue at all, the issue is Y because Europeans are like this and this is why Europeans do things. I know this because I know."

refurb 7y ago
I’ve noticed this to. Even in areas where I have domain knowledge and know the article conclusions are accurate, I’ll see dozens of posts saying “That’s not it at all, the real reason is...”. There are a lot of very confident, but very wrong people out there.
vfc1 7y ago
For this subject, it's really just a matter of opinion more than anything. I think if someone is commenting and has subject matter expertise, they should mention that ("I'm a doctor and happen to know that ..."), it's better than having everyone else adding disclaimers to their comments. In an online comment no expertise is usually assumed, but yes this leads to stuff like a scientist with decades of experience publishing a study saying something that people don't want to hear, and then some troll on twitter says "No it's not" and people run with it because that's what they want to hear. I think it's the Internet in general, it's not specific of HN.

hrktb 7y ago

I think you are right in that it is cultural. Then, it could be less a matter of being risk averse or not, but more that people like independence, and the preferred status is not 'founder of a company' but 'self-employed'. There was this interesting survey: https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Self-employment_statistics https://ec.europa.eu/eurostat/statistics-explained/index.php... a quote: > 1 in 2 self-employed persons highly satisfied with their current job Looking at the other numbers, around 2/3 of them don't have employees, so a large portions of them just don't want to grow beyond and take the full burden of managing a company.

bjornsing 7y ago

And since the OP is about issuing options to employees (and not incorporating a business), how many such options have you issued? I have issued a lot of those (in Sweden) and its a nightmare. One of the major issues is that you can’t be absolutely certain what the tax consequences will be.

KaiserPro 7y ago

in the uk in 2017, there were 387,000 limited companies formed [1] in the USA in 2015 in q3 there were 240,000 (so about 960 annually). As the USA is 80% larger, population wise, you'd expect that number to be higher. [2] > There is much more social status associated to being a higher level employee than to being an owner of a small to medium sized company. I'd contest that. There is much more status in being posh, rich, attractive, than having a good job. being a manager at a no-name company is good, being an owner of a cool company is much better. [1] https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf https://researchbriefings.files.parliament.uk/documents/SN06... [2] https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf https://www.sba.gov/sites/default/files/advocacy/2018-Small-...

denton-scratch 7y ago

"asked nowadays to have their own limited responsibility company" Freelancers (in the UK at least) are required to pass their pay through a limited company, and subject it to payroll tax. It's not to help them set up a later online enterprise; it's to make it trivially easy for the tax authorities to extract their pound of flesh. (Before this was introduced, many freelancers didn't bother to pay tax on their income. When they flitted, the bill fell either on their employer or on the government)

matthewheath 7y ago
> Freelancers (in the UK at least) are required to pass their pay through a limited company, and subject it to payroll tax I don't believe they are _required_ to do this. Of course, there are certain tax incentives to running a limited company (as well as commercial pressures as a lot of clients will only deal with limited companies) but you can certainly still be a sole trader (I'm one) — you just file your standard self assessment return every year and pay accordingly.
- vfc1 7y ago
  I don't think it's mandatory, but I had clients asking me this otherwise they would not hire. The reason is, if you work without a company, after a few years they could be forced to convert the freelancer to an employee, which usually neither wants.
  - Roark66 7y ago
    You do have to have a limited company, but no one forces you to pass the earnings as a salary subject to payroll. You can simply take the earnings out as dividend, but then you would be taxed twice on those earnings. So there is tax incentive to pay yourself a salary and not to report any company profit at the year's end, but it is not compulsory.
    - vfc1 7y ago
      Taking the whole earnings as a dividend is not advisable, because this means that you would have no salary and therefore no retirement pension at all. Governments usually incentivize entrepreneurs to have a reasonable salary, and to not take a lot out of the company as dividends, by providing beneficial profit tax brackets if these conditions are met. This incentivizes the entrepreneur to have a pension, which means less people living in poverty over time as they hit the retirement age. It also means that more money will stay in the company, incentivizing investing in the company via equipment and employees for example.

CalRobert 7y ago

I don't _want_ to like this, but it definitely rings true for the place I moved to (Ireland). In my circle of friends I don't think the idea of starting a business has even come up - except for other Americans like myself, weirdly. So far as I can tell it just isn't that appealing since (for the moment) there are decent jobs and it's less hassle. I don't know about other places in Europe but Tall Poppy Syndrome, "Notions", etc. is a big thing here - people should know their station, evidently.

rb808 7y ago

Absolutely its cultural. There is a huge difference in attitudes to success and wealth. In America everyone is working hard and the more money you make you more "successful" you are. In Europe people would rather be a well educated regular middle class secure job than work 80+ hours a week and buy a huge house. You probably can't even buy a huge house because planning regulations prohibit it. Europeans would rather be a broke well-educated artist than a rich hardworking entrepreneur. TBH with good holidays and secure safety net I'd probably do the same.

vfc1 7y ago
I'm pretty sure it's mostly cultural, and has a lot to do with the American Dream whatever it means. I think its this general idea that anyone can make it if they work hard, I don't think there is an equivalent notion in most European countries, at least the ones I have contact with due to having family all over the place.