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For a supposedly business-friendly country, the USA certainly seems to have a bunch of fees. Tarsnap is incorporated in BC, Canada. I pay less than $50 to fil

For a supposedly business-friendly country, the USA certainly seems to have a bunch of fees. Tarsnap is incorporated in BC, Canada. I pay less than $50 to file an annual report with the government (basically just a "the company still exists and the mailing address and directors haven't changed"); there's no franchise tax; and Tarsnap's corporate income tax is easy enough for me to do by hand (it takes about 2 hours and I usually file in the first week of January). The notion of spending $1000/year just to keep a company in existence seems crazy to me.

hal9000-tng 6y ago
It's per state. For example, Texas has zero taxes due until you exceed approximately $1.1M in gross receipts, and then it maxes out at 1%, and no annual fees of any kind (unless you forget to file your usually one-page tax return and information reports, in which case it's $50 each.) Combined with an S-Corp and relatively low U.S. federal taxes, your combined tax bite can be very low indeed.
irjustin 6y ago
Way late to the party. US is a business-friendly country because it a large population, which for many products operate as one demographic, with comparably high spending power. It is NOT tax/fee friendly by any means especially for non-US based owners as the author notes. If you go the LLC route is quite cheap to own/operate an empty business for citizens. The tax code alone is beyond any one person's understanding. Even for the individual, it is far from straight forward.
simonebrunozzi 6y ago
Hey Colin! Did you write anything about your business recently? I've been following you for a while and would love to read more about Tarsnap. Edit: by the way, I knew your background was good, but didn't realize it was THIS good: [0] > Dr. Colin Percival studied mathematics at Simon Fraser University, entering at age 13 [0]: https://www.tarsnap.com/about.html https://www.tarsnap.com/about.html
- cperciva 6y ago
  I don't think I've written much about Tarsnap recently. What would you like to know?
  - simonebrunozzi 6y ago
    Sometimes I read posts like the ones from Backblaze, where they share a lot about the technical stuff they discover, etc, from their unique vintage point. It would be interesting if you could share more of your business, etc, without revealing things that you don't want to share too openly. For example: how many users use your service? How many PB of backups are you currently serving? Stuff like that.
dm03514 6y ago
Ahh, TOO Many fees :( I incorporated through Stripe Atlas for 2019 hoping to start and begin to develop the business, but dissolved the company after the first year because of these fees. Will try again when idea/product is more mature.
jmstfv 6y ago
I wish there was a service like Atlas, but for Canada. I wasn't gung ho about incorporating a business abroad, as it introduces unnecessary complexity and costs money in the early stages. But as someone who didn't have access to the modern financial infrastructure (to accept cards on the Internets), there weren't that many options available (and most of them involved traveling to foreign countries). I use Tarsnap daily!
- MarkyC4 6y ago
  https://www.ownr.co/ https://www.ownr.co/ (RBC) + Stripe might be close
- axyjo 6y ago
  Try founded.co! (I've seen good things about them; no affiliation otherwise)
- mamcx 6y ago
  Yeah, the same. We have a SAAS product in Colombia and considering if is better to incorporate abroad, but wish to be in better than USA (mostly because the litigious nature of USA system).
  - jmstfv 6y ago
    There are other options like Singapore and Estonia, but the last time I checked, you had to travel there to open a bank account.
    - def_true_false 6y ago
      IIRC Revolut Business is available in Estonia, so probably no need to travel.
      - klausjensen 6y ago
        Please do not rely exclusively on one of the new fintech "banks" as your only bank. It is a recipe for disaster. Revolut for business closed my account with very short warning and fucked up sending me my remaining balance. Lukcy for me, previous issues had meant I was loyal to the concept of having at least two banks at any given time, because one might crash/throw you out etc, so it didn't cause me too many problems. Now I have a boring, expensive local bank which is stuck in the 80s (but presumably safe) and Transferwise for all the online stuff.
dfiiubuie 6y ago
In Poland you pay 4349 USD/year (72% of net minimum wage). It's required for literally any recurrent economic activity, even selling old things on classifieds sites. That's just for basic sole-proprietor. Private limited company is much more complicated. I wouldn't dare to register it. So it doesn't exist.
- bluesign 6y ago
  Can you share any source on this, I am very curious, is it tax?
  - pzduniak 6y ago
    He's talking about a social insurance required to be self-employed. Apples to oranges.
    - jarek-foksa 6y ago
      Yeah, he is also presenting it from a perspective of someone running a side businesses with low revenue. As a sole proprietor you pay only 16255 PLN/year for your health and social insurance. This is no matter how big your income is and what your health condition is. You could be making millions while suffering from a chronic disease and you would be still paying the same minimal amount for your insurance. There are also some ways to reduce it even further, e.g. if you are starting your first business.
- deleted 6y ago
  [deleted]
- xchaotic 6y ago
  This is such FUD. I run a company in Poland and pay flat 19% on profits. You can also choose to pay 32% but you can then include a lot more expenses. If somehow you feel neither option is good enough for you, you can run your business from Estonia or Czech Republic or any other EU country.
  - 6y ago
adventured 6y ago
> The notion of spending $1000/year just to keep a company in existence seems crazy to me. That's good, because in the vast majority of US states it doesn't cost anywhere near $1,000 per year to keep a company in existence.
ntietz 6y ago
C Corps definitely have a lot of fees, and if you have a lawyer or anyone involved, it's expensive, too. The thing is that it's kind of hard to generalize about this in the US, because business formation laws vary so widely by state. I have an Ohio LLC from when I lived in Ohio, because I incorporated it and the requirements to keep it are basically nil, especially if you don't have revenue through it. Other states have different requirements, and C corps have pretty stringent requirements compared to LLCs anywhere. So you can get a similar experience in the USA where you have a simple, low-cost business that's easy to form and easy to operate. But as far as I can see that's not the target for Stripe Atlas: it seems geared toward forming C corps, not toward LLCs, which means you start with a higher level of cost.
- godzillabrennus 6y ago
  Ohio LLC’s are a powerful vehicle. Pay $99 once and never pay again. Plus Ohio is super business friendly (red state). I use a registered agent that files on my behalf so it’s $250 all in to get it done. If you know your idea will take a few years to manifest into revenue and you want to shelter the IP somewhere an Ohio LLC is the place to do it IMHO (not legal advice).
  - exclusiv 6y ago
    That's way better than most states. New Mexico is probably the best though - anonymous LLCs. $50
  - csomar 6y ago
    You don't need to file yearly taxes? I thought this is linked to the IRS rather than Ohio. Also, apart from the franchise fee, there doesn't seem to be anything else for the Delaware C-Corp.
    - stateofnounion 6y ago
      An LLC is a pass-through tax entity. All the gains and losses are reported by the owners in their personal returns. https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-2...
evanriley 6y ago
You're taking one state and applying it to all. Most states don't cost $1000/year, or anywhere close to it.
- waffle_ss 6y ago
  Exactly, and American single-owner LLCs can pay taxes very simply on their personal 1040 tax form. It's only if you elect your LLC be taxed as an S-corp or C-corp, or incorporate as a real corporation that taxes need to get complicated.
- jjeaff 6y ago
  But if you are an online company with even just customers in California or a single employee, the CA tax board will chase you to the ends of the earth to get their $800 minimum franchise tax. That is whether you make a single dollar or not. Doesn't matter if you live there, are registered there, or have offices there. If you have an employee or a minimum level of sales or even contractors in CA, they want the greater of $800 annually or a tax on the proportion of profit made from California customers.
davidwparker 6y ago
I pay $10/year to file annually in Colorado. Granted, it's not as nice for business as Delaware is, but it does the job just fine.
csomar 6y ago
I think we need more details, because the same can be applied to the Delaware C-Corp. 1- Registered agent: I'm assuming you live in BC, Canada. If that was the case in Delaware, you shouldn't need a registered agent. 2- Franchise Tax: Can be minimized to $225 according to OP blog post. But you are not specifying whether you incorporated an LLC-equivalent or a C-Corp-equivalent. 3- Filing Taxes: This is a tricky one. You are comfortable with taxes in Canada, and probably also making a balance sheet. US taxes might seem complicated (and scary!) but you probably can get comfortable with them. The additional form that the OP is submitting is related to him being non-resident. I assume Canada has also its rules about non-residents. So in total: $50 vs. $225. Seems negligible to me to care about.
- ska 6y ago
  By the language they are using, it's roughly equivalent to a C corp, the thing closest to an LLC is what they call a "sole proprietorship" in BC, unless I've missed something. Typically there you would register in the province you are doing business in, or multiply in the case you are doing business across the country. FWIW Canadian and US taxes are roughly equivalently complicated in my experience.
reaperducer 6y ago
The notion of spending $1000/year just to keep a company in existence seems crazy to me. According to my accountant, if you can't spend $1,000 a year to keep a company in existence, then it's not a business. It's a hobby. She says there's some minimum level of commercial engagement required in my jurisdiction before the tax authorities get antsy and start wondering if your company is just a way to dodge personal taxes by shifting money around. I never looked into it, so I'm not entirely sure what she's talking about. That's what I have her for. That said, the total of the yearly government burden on my small company is less than the $1,000 you quote. "The USA" is a big place with lots of different taxes. It's part of the philosophy of competition that keeps the place moving.
- jjoonathan 6y ago
  Of course an accountant would give a condescending non-answer like that. The clients who give her the most money for the least trouble are the ones for whom that's true. We shouldn't let them or her speak for new businesses, though. People trying to get into business have the clearest view of the problems they face. For an organically grown start-at-the-bottom business, $1000/year to declare a company is bad (it's much less outside of California, but still). The constant threat of the IRS deciding you aren't serious-business enough and sending you a bill for 30% of your revenue in the last 5 years is bad. Not profit, revenue. The fact that "serious business" is defined about as well as my memetic language would imply is doubly bad. We should fix this.
  - URSpider94 6y ago
    If you want to run your business as as start-at-the-bottom business, then run it as a sole proprietorship. Then the incremental annual costs outside of some initial start-up costs are near zero. You'll probably still have to apply for a business license in the place where your office resides, which might very well be your house.
    - jjoonathan 6y ago
      That's probably fine for a software business where capex and COGS are peanuts. Unfortunately for me, that's not how my sector works. I repair and resell lab equipment while I do R&D towards making my own. I have five-figure revenue, capex, and COGS. I also have a day job because the side business doesn't support me yet. Here's the rub: because of my capex and COGS, paying tax on profits is very different from paying tax on revenue. I get to pay tax on profits if I'm a business, but I have to pay tax on revenue if I'm a hobby (to put it crudely). If the IRS decides I am retroactively a hobby, my entire business goes from "growing steadily, maybe my day job soon" to "life lesson wipeout." So how do I make sure I'm a business not a hobby? The rules aren't much better than "I'll know one when I see one." They're a joke. A bad joke that keeps me up at night and stunts my business growth because I want to make sure my liquid assets could absorb the IRS dropping a bomb on the whole thing. Tax ambiguity shouldn't be this kind of threat. My accountant isn't concerned, but he's also not on the hook, so I don't take much comfort in that.
jayess 6y ago
Depends on the state. Some are more business friendly than others. Michigan's LLC annual fee is $25. Arizona has a one-time LLC formation fee of $50 and no annual fees or filings. Each state is different.
searchableguy 6y ago
In India, it's around $150 + some other charges and requirements annually for popular options afaik. Although, there are cheaper and more friendly option to individuals such as OPC (one person company) limited to single ownership. The turnover limit is decent and much less paper work. It costs around $99 + some other charges annually.
eloff 6y ago
How do you file the income tax, do you use a program for that? I have a BC company and it cost me $450 last year to file a non operating tax of $0. I'd love to know how to do it myself.
- cperciva 6y ago
  I download fillable PDFs. As long as your income (or was it revenues?) is under $1M/year you're allowed to file on paper. Corporate tax forms change very little from one year to the next, so you can complete 99% of next year's tax return by "look at last year's return and put numbers in the same places". When all the numbers are zeroes, it's even easier.
- ska 6y ago
  You can do corporate taxes with the usual programs like ufile or turbotax, there may be other options. These are different versions than the personal one, so you have to pick the right option based on your business type. If you are incorporated it might force you into the more expensive option, but last time I did that I think it was about $99. On the other hand you can always do it by hand for free. If you are just keeping an entity alive, it's probably pretty simple; more complicated if you are using it for deductions etc. I imagine once you have done 1 year, the next are almost cut and paste.
zaroth 6y ago
The federal government charges nothing for an EIN to establish your corporate entity. It's the individual states which have turned corporate filings into an archaic profit center. The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by their definition usually includes selling your product to anyone living in the state, even if the sale is done online. However, I personally don't know of any small startups that actually do this, and accounting costs of filing that many state tax returns would be absurd.
- lmeyerov 6y ago
  IMO one of the biggest impediments to remote work is this -- as soon as you have a remote employee, there is a good chance you need to register locally. That means time, money, and potentially fines for weird steps (tech platforms like gusto are insufficient in practice here.) 10-20 remote employees at 10-20 diff states, and more if they ever move, is such a PITA relative to small team size.
- mguerville 6y ago
  When I did startup M&A (for a larger corp) we found out the hard way that many profitable startups would not be if they actually paid the right taxes. They didn’t know and were too small (sub $10m in revenue) for the tax authorities to care but we walked away from deals because the cost of bringing them to compliance would kill the deal returns and we were too big to get away with it
- koolba 6y ago
  > The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by their definition usually includes selling your product to anyone living in the state, even if the sale is done online. However, I personally don't know of any small startups that actually do this, and accounting costs of filing that many state tax returns would be absurd. That’s not how it works at all. You pay taxes based on where you have a nexus, such as an office. Having customers in other States does not mandate you pay corporate tax for their States. That would violate the interstate commerce clause. It’s even more of a stretch than trying to claim sales tax from out of State merchants.
dawnerd 6y ago
My LLC in Oregon is only 100/yr. It's kind of ridiculous how much some other states charge.
Nextgrid 6y ago
In the UK the company registration fee is 12£ and then you pay another ~12£ yearly for the "confirmation statement" to keep the company on the register. Beyond that, the taxes depend on your profits and the documentation is fairly straightforward (I can bitch all day about the amount of tax I'm paying, but at least they are very good at helping you figure out what you have to pay and why) and is very impressive for a government website. I do have an accountant, but after a year of talking to them and using the provided accounting software (FreeAgent) I would be comfortable in doing all of it myself. The only reason I keep them is because the license for the software is included in their fees and because I'd feel bad dropping them as they are amazing, but if you are a smaller operation and have more time on your hands it's definitely possible to do everything yourself from the start and just pay for the software (or even use something free like GNUCash).
novok 6y ago
Wait until you hear that the marginal income tax rate is about the same BC Canada as it is in California and you don't have a +$500/month health insurance payment to make yourself or through your employer. The bad deal that american's get for their taxes is really sad.
- refurb 6y ago
  Just for clarity on marginal rates ($250k income, single filer, no deductions). Yes, I just arbitrarily picked $250k. No I ignored SSI+OAIS (US) because it phases out at $137,000. CA: 35% (fed) + 9.3% (state) + 1.45% (Medicare) = 45.75% BC: 33% (fed) + 20.5% (province) = 53.5%
- natcombs 6y ago
  +500/month health insurance payment? I heard it was more like $1400-2000 for CA startup founders and their families
  - adanto6840 6y ago
    Can confirm. I'm a healthy 30-something that's married with two kids in Nevada. No state income tax here, but we pay ~$1.6k/mo for what is considered mediocre-to-poor health insurance coverage. My youngest (2.5 year old) is at the ER with my wife right now getting an x-ray (insurance & the pediatric urgent-cares all referred us to ER, no one else would x-ray <3yr olds) -- I'd guess it'll cost us at least $2-3k, assuming they say it's "not broken". Substantially more if it "is broken". Yay USA.
- some_guy_there 6y ago
  From what I can find online[1,2], for a dual-income family earning 250k CAD/ 250k USD, tax in BC Canada[1,2] is 33% Federal + 16.80 % State = 49.8%. For California it is 24% Federal + 9.3% State = 33.3%. Is there a big difference in other taxes (like Payroll/Social Security) between California and BC that makes the overall marginal tax same? [1] https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#federal https://www.canada.ca/en/revenue-agency/services/tax/individ... [2] https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/tax-rates https://www2.gov.bc.ca/gov/content/taxes/income-taxes/person...
ponker 6y ago
If you’re doing corporate taxes by hand you’re probably paying more than an accountant could have you get away with.

hal9000-tng 6y ago

It's per state. For example, Texas has zero taxes due until you exceed approximately $1.1M in gross receipts, and then it maxes out at 1%, and no annual fees of any kind (unless you forget to file your usually one-page tax return and information reports, in which case it's $50 each.) Combined with an S-Corp and relatively low U.S. federal taxes, your combined tax bite can be very low indeed.

irjustin 6y ago

Way late to the party. US is a business-friendly country because it a large population, which for many products operate as one demographic, with comparably high spending power. It is NOT tax/fee friendly by any means especially for non-US based owners as the author notes. If you go the LLC route is quite cheap to own/operate an empty business for citizens. The tax code alone is beyond any one person's understanding. Even for the individual, it is far from straight forward.

simonebrunozzi 6y ago

Hey Colin! Did you write anything about your business recently? I've been following you for a while and would love to read more about Tarsnap. Edit: by the way, I knew your background was good, but didn't realize it was THIS good: [0] > Dr. Colin Percival studied mathematics at Simon Fraser University, entering at age 13 [0]: https://www.tarsnap.com/about.html https://www.tarsnap.com/about.html

cperciva 6y ago
I don't think I've written much about Tarsnap recently. What would you like to know?
- simonebrunozzi 6y ago
  Sometimes I read posts like the ones from Backblaze, where they share a lot about the technical stuff they discover, etc, from their unique vintage point. It would be interesting if you could share more of your business, etc, without revealing things that you don't want to share too openly. For example: how many users use your service? How many PB of backups are you currently serving? Stuff like that.

dm03514 6y ago

Ahh, TOO Many fees :( I incorporated through Stripe Atlas for 2019 hoping to start and begin to develop the business, but dissolved the company after the first year because of these fees. Will try again when idea/product is more mature.

jmstfv 6y ago

I wish there was a service like Atlas, but for Canada. I wasn't gung ho about incorporating a business abroad, as it introduces unnecessary complexity and costs money in the early stages. But as someone who didn't have access to the modern financial infrastructure (to accept cards on the Internets), there weren't that many options available (and most of them involved traveling to foreign countries). I use Tarsnap daily!

MarkyC4 6y ago
https://www.ownr.co/ https://www.ownr.co/ (RBC) + Stripe might be close
axyjo 6y ago
Try founded.co! (I've seen good things about them; no affiliation otherwise)
mamcx 6y ago
Yeah, the same. We have a SAAS product in Colombia and considering if is better to incorporate abroad, but wish to be in better than USA (mostly because the litigious nature of USA system).
- jmstfv 6y ago
  There are other options like Singapore and Estonia, but the last time I checked, you had to travel there to open a bank account.
  - def_true_false 6y ago
    IIRC Revolut Business is available in Estonia, so probably no need to travel.
    - klausjensen 6y ago
      Please do not rely exclusively on one of the new fintech "banks" as your only bank. It is a recipe for disaster. Revolut for business closed my account with very short warning and fucked up sending me my remaining balance. Lukcy for me, previous issues had meant I was loyal to the concept of having at least two banks at any given time, because one might crash/throw you out etc, so it didn't cause me too many problems. Now I have a boring, expensive local bank which is stuck in the 80s (but presumably safe) and Transferwise for all the online stuff.

dfiiubuie 6y ago

In Poland you pay 4349 USD/year (72% of net minimum wage). It's required for literally any recurrent economic activity, even selling old things on classifieds sites. That's just for basic sole-proprietor. Private limited company is much more complicated. I wouldn't dare to register it. So it doesn't exist.

bluesign 6y ago
Can you share any source on this, I am very curious, is it tax?
- pzduniak 6y ago
  He's talking about a social insurance required to be self-employed. Apples to oranges.
  - jarek-foksa 6y ago
    Yeah, he is also presenting it from a perspective of someone running a side businesses with low revenue. As a sole proprietor you pay only 16255 PLN/year for your health and social insurance. This is no matter how big your income is and what your health condition is. You could be making millions while suffering from a chronic disease and you would be still paying the same minimal amount for your insurance. There are also some ways to reduce it even further, e.g. if you are starting your first business.
deleted 6y ago
[deleted]
xchaotic 6y ago
This is such FUD. I run a company in Poland and pay flat 19% on profits. You can also choose to pay 32% but you can then include a lot more expenses. If somehow you feel neither option is good enough for you, you can run your business from Estonia or Czech Republic or any other EU country.
- 6y ago

adventured 6y ago

> The notion of spending $1000/year just to keep a company in existence seems crazy to me. That's good, because in the vast majority of US states it doesn't cost anywhere near $1,000 per year to keep a company in existence.

ntietz 6y ago

C Corps definitely have a lot of fees, and if you have a lawyer or anyone involved, it's expensive, too. The thing is that it's kind of hard to generalize about this in the US, because business formation laws vary so widely by state. I have an Ohio LLC from when I lived in Ohio, because I incorporated it and the requirements to keep it are basically nil, especially if you don't have revenue through it. Other states have different requirements, and C corps have pretty stringent requirements compared to LLCs anywhere. So you can get a similar experience in the USA where you have a simple, low-cost business that's easy to form and easy to operate. But as far as I can see that's not the target for Stripe Atlas: it seems geared toward forming C corps, not toward LLCs, which means you start with a higher level of cost.

godzillabrennus 6y ago
Ohio LLC’s are a powerful vehicle. Pay $99 once and never pay again. Plus Ohio is super business friendly (red state). I use a registered agent that files on my behalf so it’s $250 all in to get it done. If you know your idea will take a few years to manifest into revenue and you want to shelter the IP somewhere an Ohio LLC is the place to do it IMHO (not legal advice).
- exclusiv 6y ago
  That's way better than most states. New Mexico is probably the best though - anonymous LLCs. $50
- csomar 6y ago
  You don't need to file yearly taxes? I thought this is linked to the IRS rather than Ohio. Also, apart from the franchise fee, there doesn't seem to be anything else for the Delaware C-Corp.
  - stateofnounion 6y ago
    An LLC is a pass-through tax entity. All the gains and losses are reported by the owners in their personal returns. https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html https://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-2...

evanriley 6y ago

You're taking one state and applying it to all. Most states don't cost $1000/year, or anywhere close to it.

waffle_ss 6y ago
Exactly, and American single-owner LLCs can pay taxes very simply on their personal 1040 tax form. It's only if you elect your LLC be taxed as an S-corp or C-corp, or incorporate as a real corporation that taxes need to get complicated.
jjeaff 6y ago
But if you are an online company with even just customers in California or a single employee, the CA tax board will chase you to the ends of the earth to get their $800 minimum franchise tax. That is whether you make a single dollar or not. Doesn't matter if you live there, are registered there, or have offices there. If you have an employee or a minimum level of sales or even contractors in CA, they want the greater of $800 annually or a tax on the proportion of profit made from California customers.

davidwparker 6y ago

I pay $10/year to file annually in Colorado. Granted, it's not as nice for business as Delaware is, but it does the job just fine.

csomar 6y ago

I think we need more details, because the same can be applied to the Delaware C-Corp. 1- Registered agent: I'm assuming you live in BC, Canada. If that was the case in Delaware, you shouldn't need a registered agent. 2- Franchise Tax: Can be minimized to $225 according to OP blog post. But you are not specifying whether you incorporated an LLC-equivalent or a C-Corp-equivalent. 3- Filing Taxes: This is a tricky one. You are comfortable with taxes in Canada, and probably also making a balance sheet. US taxes might seem complicated (and scary!) but you probably can get comfortable with them. The additional form that the OP is submitting is related to him being non-resident. I assume Canada has also its rules about non-residents. So in total: $50 vs. $225. Seems negligible to me to care about.

ska 6y ago
By the language they are using, it's roughly equivalent to a C corp, the thing closest to an LLC is what they call a "sole proprietorship" in BC, unless I've missed something. Typically there you would register in the province you are doing business in, or multiply in the case you are doing business across the country. FWIW Canadian and US taxes are roughly equivalently complicated in my experience.

reaperducer 6y ago

The notion of spending $1000/year just to keep a company in existence seems crazy to me. According to my accountant, if you can't spend $1,000 a year to keep a company in existence, then it's not a business. It's a hobby. She says there's some minimum level of commercial engagement required in my jurisdiction before the tax authorities get antsy and start wondering if your company is just a way to dodge personal taxes by shifting money around. I never looked into it, so I'm not entirely sure what she's talking about. That's what I have her for. That said, the total of the yearly government burden on my small company is less than the $1,000 you quote. "The USA" is a big place with lots of different taxes. It's part of the philosophy of competition that keeps the place moving.

jjoonathan 6y ago
Of course an accountant would give a condescending non-answer like that. The clients who give her the most money for the least trouble are the ones for whom that's true. We shouldn't let them or her speak for new businesses, though. People trying to get into business have the clearest view of the problems they face. For an organically grown start-at-the-bottom business, $1000/year to declare a company is bad (it's much less outside of California, but still). The constant threat of the IRS deciding you aren't serious-business enough and sending you a bill for 30% of your revenue in the last 5 years is bad. Not profit, revenue. The fact that "serious business" is defined about as well as my memetic language would imply is doubly bad. We should fix this.
- URSpider94 6y ago
  If you want to run your business as as start-at-the-bottom business, then run it as a sole proprietorship. Then the incremental annual costs outside of some initial start-up costs are near zero. You'll probably still have to apply for a business license in the place where your office resides, which might very well be your house.
  - jjoonathan 6y ago
    That's probably fine for a software business where capex and COGS are peanuts. Unfortunately for me, that's not how my sector works. I repair and resell lab equipment while I do R&D towards making my own. I have five-figure revenue, capex, and COGS. I also have a day job because the side business doesn't support me yet. Here's the rub: because of my capex and COGS, paying tax on profits is very different from paying tax on revenue. I get to pay tax on profits if I'm a business, but I have to pay tax on revenue if I'm a hobby (to put it crudely). If the IRS decides I am retroactively a hobby, my entire business goes from "growing steadily, maybe my day job soon" to "life lesson wipeout." So how do I make sure I'm a business not a hobby? The rules aren't much better than "I'll know one when I see one." They're a joke. A bad joke that keeps me up at night and stunts my business growth because I want to make sure my liquid assets could absorb the IRS dropping a bomb on the whole thing. Tax ambiguity shouldn't be this kind of threat. My accountant isn't concerned, but he's also not on the hook, so I don't take much comfort in that.

jayess 6y ago

Depends on the state. Some are more business friendly than others. Michigan's LLC annual fee is $25. Arizona has a one-time LLC formation fee of $50 and no annual fees or filings. Each state is different.

searchableguy 6y ago

In India, it's around $150 + some other charges and requirements annually for popular options afaik. Although, there are cheaper and more friendly option to individuals such as OPC (one person company) limited to single ownership. The turnover limit is decent and much less paper work. It costs around $99 + some other charges annually.

eloff 6y ago

How do you file the income tax, do you use a program for that? I have a BC company and it cost me $450 last year to file a non operating tax of $0. I'd love to know how to do it myself.

cperciva 6y ago
I download fillable PDFs. As long as your income (or was it revenues?) is under $1M/year you're allowed to file on paper. Corporate tax forms change very little from one year to the next, so you can complete 99% of next year's tax return by "look at last year's return and put numbers in the same places". When all the numbers are zeroes, it's even easier.
ska 6y ago
You can do corporate taxes with the usual programs like ufile or turbotax, there may be other options. These are different versions than the personal one, so you have to pick the right option based on your business type. If you are incorporated it might force you into the more expensive option, but last time I did that I think it was about $99. On the other hand you can always do it by hand for free. If you are just keeping an entity alive, it's probably pretty simple; more complicated if you are using it for deductions etc. I imagine once you have done 1 year, the next are almost cut and paste.

zaroth 6y ago

The federal government charges nothing for an EIN to establish your corporate entity. It's the individual states which have turned corporate filings into an archaic profit center. The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by their definition usually includes selling your product to anyone living in the state, even if the sale is done online. However, I personally don't know of any small startups that actually do this, and accounting costs of filing that many state tax returns would be absurd.

lmeyerov 6y ago
IMO one of the biggest impediments to remote work is this -- as soon as you have a remote employee, there is a good chance you need to register locally. That means time, money, and potentially fines for weird steps (tech platforms like gusto are insufficient in practice here.) 10-20 remote employees at 10-20 diff states, and more if they ever move, is such a PITA relative to small team size.
mguerville 6y ago
When I did startup M&A (for a larger corp) we found out the hard way that many profitable startups would not be if they actually paid the right taxes. They didn’t know and were too small (sub $10m in revenue) for the tax authorities to care but we walked away from deals because the cost of bringing them to compliance would kill the deal returns and we were too big to get away with it
koolba 6y ago
> The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by their definition usually includes selling your product to anyone living in the state, even if the sale is done online. However, I personally don't know of any small startups that actually do this, and accounting costs of filing that many state tax returns would be absurd. That’s not how it works at all. You pay taxes based on where you have a nexus, such as an office. Having customers in other States does not mandate you pay corporate tax for their States. That would violate the interstate commerce clause. It’s even more of a stretch than trying to claim sales tax from out of State merchants.

dawnerd 6y ago

My LLC in Oregon is only 100/yr. It's kind of ridiculous how much some other states charge.

Nextgrid 6y ago

In the UK the company registration fee is 12£ and then you pay another ~12£ yearly for the "confirmation statement" to keep the company on the register. Beyond that, the taxes depend on your profits and the documentation is fairly straightforward (I can bitch all day about the amount of tax I'm paying, but at least they are very good at helping you figure out what you have to pay and why) and is very impressive for a government website. I do have an accountant, but after a year of talking to them and using the provided accounting software (FreeAgent) I would be comfortable in doing all of it myself. The only reason I keep them is because the license for the software is included in their fees and because I'd feel bad dropping them as they are amazing, but if you are a smaller operation and have more time on your hands it's definitely possible to do everything yourself from the start and just pay for the software (or even use something free like GNUCash).

novok 6y ago

Wait until you hear that the marginal income tax rate is about the same BC Canada as it is in California and you don't have a +$500/month health insurance payment to make yourself or through your employer. The bad deal that american's get for their taxes is really sad.

refurb 6y ago
Just for clarity on marginal rates ($250k income, single filer, no deductions). Yes, I just arbitrarily picked $250k. No I ignored SSI+OAIS (US) because it phases out at $137,000. CA: 35% (fed) + 9.3% (state) + 1.45% (Medicare) = 45.75% BC: 33% (fed) + 20.5% (province) = 53.5%
natcombs 6y ago
+500/month health insurance payment? I heard it was more like $1400-2000 for CA startup founders and their families
- adanto6840 6y ago
  Can confirm. I'm a healthy 30-something that's married with two kids in Nevada. No state income tax here, but we pay ~$1.6k/mo for what is considered mediocre-to-poor health insurance coverage. My youngest (2.5 year old) is at the ER with my wife right now getting an x-ray (insurance & the pediatric urgent-cares all referred us to ER, no one else would x-ray <3yr olds) -- I'd guess it'll cost us at least $2-3k, assuming they say it's "not broken". Substantially more if it "is broken". Yay USA.
some_guy_there 6y ago
From what I can find online[1,2], for a dual-income family earning 250k CAD/ 250k USD, tax in BC Canada[1,2] is 33% Federal + 16.80 % State = 49.8%. For California it is 24% Federal + 9.3% State = 33.3%. Is there a big difference in other taxes (like Payroll/Social Security) between California and BC that makes the overall marginal tax same? [1] https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#federal https://www.canada.ca/en/revenue-agency/services/tax/individ... [2] https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/tax-rates https://www2.gov.bc.ca/gov/content/taxes/income-taxes/person...

ponker 6y ago

If you’re doing corporate taxes by hand you’re probably paying more than an accountant could have you get away with.