4 ms·

> Structure larger exits through international holding companies (complex and expensive) Setting up an LLC in a low-regulation US state is simple and inexpensi

by unmole 2y ago

> Structure larger exits through international holding companies (complex and expensive) Setting up an LLC in a low-regulation US state is simple and inexpensive.

vincent_s 2y ago
True, creating a Delaware LLC is simple, but that doesn't solve the tax problem. Management decisions from Germany mean German tax liability, regardless of where the company is registered. The only way to benefit from US tax rates would be physically moving there - just having a US company adds complexity without fixing anything.
- unmole 2y ago
  > but that doesn't solve the tax problem It solves the tax problem that TFA is talking about i.e. it makes selling the SaaS a share deal instead of an asset deal. If you mean taxes in Germany are generally too high, that is an entirely separate discussion. Fun fact: Before Trump's tax cuts, the US corporate income tax rate was higher than in Germany.
herbst 2y ago
Being an US business makes things complicated in Europe. Especially banking is very eager to understand every single US associated transaction to your account.
- unmole 2y ago
  I guess my comment was not clear without the context from TFA. I was specifically talking about the dual company structure i.e. the GmbH owns the LLC.
sofixa 2y ago
For a German business, setting up a holding company in Estonia would be much better. Still in the EU, no onerous American reporting requirements, everything is fully online and cheap, and taxes aren't super high (20% capital gains, up to 7% on dividends if I'm reading things correctly).
- unmole 2y ago
  > no onerous American reporting requirements I'm sorry but US LLC reporting requirements are not onerous in any sense. Hell, some states like Arizona have no annual reporting requirements at all.
  - sofixa 2y ago
    When opening a bank account in the EU, you get asked if you're an American fiscal resident in some sense (citizenship, US-based LLC). If you are, either they refuse you entirely, or they ask you to jump through extra hoops because they are forced to report to the American tax authority (IRS) everything about you due to American regulations.
    - unmole 2y ago
      I misunderstood your comment, you meant FATCA compliance. But why would the US LLC need to open a non-US bank account? Also, a US LLC wholly owned by a foreign company is a disregarded entity for income tax purposes. It is not considered a US fiscal resident.
anonzzzies 2y ago
This is not as easy as it sounds, either way really. You very quickly get into tax evasion, whether you know this or not (which is not an excuse). A lot of people I know (I know almost only entrepreneurs in my friend circles) have companies elsewhere (outside the EU) for this reason; most of them are <<1m$ / year companies and those companies almost exclusively are not legal here IF someone would find out. You cannot open an offshore (US/Belize/HK/SG/whatever), pay legal taxes there and that's it; if the gravity (decision power) is in an EU country, you are running a defacto local company for the taxes and you need to pay the taxes you would pay on a German company if in Germany and then figure out how to fix the US taxes with that, creating a huge mess. Of course they usually won't find out (no-one is going to check for a few 100ks/year), but it's not legal. To do it properly, you need multiple people as shareholders who do not live in your country and who have the decision power, or at least you definitely don't have it alone. So if you have someone in Mexico, someone in Thailand and you in Germany, and decision power/shares is 1/3rd for all, you'd be fine. But you in Germany with 100% ownership of a Delaware company is not something you can do unless you pay GmbH taxes, in which case, what's the use? Well, I guess if you are looking for US VC money, that might be a use case for it even though you pay defacto GmbH taxes.
- unmole 2y ago
  > You very quickly get into tax evasion, whether you know this or not I don't understand where you got tax evasion from my comment? US LLC's are pass through entities by default. All income from the LLC directly flows to the GmbH which pays the normal tax rate in Germany. When the time comes to sell, transfer of the LLC is a share deal which avoids the downsides of the asset deal which TFA describes.
  - anonzzzies 2y ago
    > I don't understand where you got tax evasion from my comment? I didn't say you did, I said that many people (as I see from experience every day) think it's fine to just easily and cheaply open a company somewhere (as you did say) else and then follow their tax rules and that's it. And that's not true. You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore' which I was responding to. Also, depending on the ownership / structure of this xmas tree, you might still not quite benefit from this as you think. It's complex matter and many people just do it without giving it too much thought. Which works if things stay small-ish.

by unmole 2y ago

> Structure larger exits through international holding companies (complex and expensive) Setting up an LLC in a low-regulation US state is simple and inexpensive.

vincent_s 2y ago

True, creating a Delaware LLC is simple, but that doesn't solve the tax problem. Management decisions from Germany mean German tax liability, regardless of where the company is registered. The only way to benefit from US tax rates would be physically moving there - just having a US company adds complexity without fixing anything.

unmole 2y ago
> but that doesn't solve the tax problem It solves the tax problem that TFA is talking about i.e. it makes selling the SaaS a share deal instead of an asset deal. If you mean taxes in Germany are generally too high, that is an entirely separate discussion. Fun fact: Before Trump's tax cuts, the US corporate income tax rate was higher than in Germany.

herbst 2y ago

Being an US business makes things complicated in Europe. Especially banking is very eager to understand every single US associated transaction to your account.

unmole 2y ago
I guess my comment was not clear without the context from TFA. I was specifically talking about the dual company structure i.e. the GmbH owns the LLC.

sofixa 2y ago

For a German business, setting up a holding company in Estonia would be much better. Still in the EU, no onerous American reporting requirements, everything is fully online and cheap, and taxes aren't super high (20% capital gains, up to 7% on dividends if I'm reading things correctly).

unmole 2y ago
> no onerous American reporting requirements I'm sorry but US LLC reporting requirements are not onerous in any sense. Hell, some states like Arizona have no annual reporting requirements at all.
- sofixa 2y ago
  When opening a bank account in the EU, you get asked if you're an American fiscal resident in some sense (citizenship, US-based LLC). If you are, either they refuse you entirely, or they ask you to jump through extra hoops because they are forced to report to the American tax authority (IRS) everything about you due to American regulations.
  - unmole 2y ago
    I misunderstood your comment, you meant FATCA compliance. But why would the US LLC need to open a non-US bank account? Also, a US LLC wholly owned by a foreign company is a disregarded entity for income tax purposes. It is not considered a US fiscal resident.

anonzzzies 2y ago

This is not as easy as it sounds, either way really. You very quickly get into tax evasion, whether you know this or not (which is not an excuse). A lot of people I know (I know almost only entrepreneurs in my friend circles) have companies elsewhere (outside the EU) for this reason; most of them are <<1m$ / year companies and those companies almost exclusively are not legal here IF someone would find out. You cannot open an offshore (US/Belize/HK/SG/whatever), pay legal taxes there and that's it; if the gravity (decision power) is in an EU country, you are running a defacto local company for the taxes and you need to pay the taxes you would pay on a German company if in Germany and then figure out how to fix the US taxes with that, creating a huge mess. Of course they usually won't find out (no-one is going to check for a few 100ks/year), but it's not legal. To do it properly, you need multiple people as shareholders who do not live in your country and who have the decision power, or at least you definitely don't have it alone. So if you have someone in Mexico, someone in Thailand and you in Germany, and decision power/shares is 1/3rd for all, you'd be fine. But you in Germany with 100% ownership of a Delaware company is not something you can do unless you pay GmbH taxes, in which case, what's the use? Well, I guess if you are looking for US VC money, that might be a use case for it even though you pay defacto GmbH taxes.

unmole 2y ago
> You very quickly get into tax evasion, whether you know this or not I don't understand where you got tax evasion from my comment? US LLC's are pass through entities by default. All income from the LLC directly flows to the GmbH which pays the normal tax rate in Germany. When the time comes to sell, transfer of the LLC is a share deal which avoids the downsides of the asset deal which TFA describes.
- anonzzzies 2y ago
  > I don't understand where you got tax evasion from my comment? I didn't say you did, I said that many people (as I see from experience every day) think it's fine to just easily and cheaply open a company somewhere (as you did say) else and then follow their tax rules and that's it. And that's not true. You didn't quite mention you intended this in conjunction with a GmbH, so it sounded like 'quick and easy offshore' which I was responding to. Also, depending on the ownership / structure of this xmas tree, you might still not quite benefit from this as you think. It's complex matter and many people just do it without giving it too much thought. Which works if things stay small-ish.