3 ms·

Thank you for taking the time to answer questions here. Reading all the information you have posted so far makes me glad to be apart of this thing we call the i

Thank you for taking the time to answer questions here. Reading all the information you have posted so far makes me glad to be apart of this thing we call the internet. Now my question: - Me and a friend started a company in the US two years ago (both US citizens), and we run a consumer web app and in the near future will also provide SaaS. We just started to generate revenue 2 months ago and I was wondering how difficult it would be to incorporate again but in a more friendly place tax wise - What are our options to that?

philiphodgen 13y ago
It is easy to form a new company in a friendlier tax jurisdiction. Singapore. Hong Kong. Etc. You--because you are a US citizen--will have a metric shit-ton of paperwork to file every year. E.g., if you don't file Form 5471, it is an automatic $10,000 penalty, then you shovel snow uphill in Hell in the summertime to see of you can get the penalty removed. The second--and bigger--problem is that when you transfer ownership of IP from your US corporation to the new foreign corporation, that is treated as a sale and you pay tax on it. So. You wrote some software all by yourself. Now you're up and operating and generating revenue. What's the software worth? (Well, who the F knows, right?) Hire an appraiser to get a random person's opinion, just to keep the IRS mollified. That person's random opinion is that your software is worth $2,000,000. Guess what? You "bought" that IP at $0 and just "sold" it at $2,000,000 and have to pay tax on that profit. Internal Revenue Code Section 367(a). That's why in these circumstances it is better (for tax purposes) to start an IP-heavy company outside the US and license the right to use the IP in the USA to a US corporation. Don't do a startup in the USA then expand outwards.

3 ms·

Thank you for taking the time to answer questions here. Reading all the information you have posted so far makes me glad to be apart of this thing we call the i

by cinquemb 13y ago

philiphodgen 13y ago
It is easy to form a new company in a friendlier tax jurisdiction. Singapore. Hong Kong. Etc. You--because you are a US citizen--will have a metric shit-ton of paperwork to file every year. E.g., if you don't file Form 5471, it is an automatic $10,000 penalty, then you shovel snow uphill in Hell in the summertime to see of you can get the penalty removed. The second--and bigger--problem is that when you transfer ownership of IP from your US corporation to the new foreign corporation, that is treated as a sale and you pay tax on it. So. You wrote some software all by yourself. Now you're up and operating and generating revenue. What's the software worth? (Well, who the F knows, right?) Hire an appraiser to get a random person's opinion, just to keep the IRS mollified. That person's random opinion is that your software is worth $2,000,000. Guess what? You "bought" that IP at $0 and just "sold" it at $2,000,000 and have to pay tax on that profit. Internal Revenue Code Section 367(a). That's why in these circumstances it is better (for tax purposes) to start an IP-heavy company outside the US and license the right to use the IP in the USA to a US corporation. Don't do a startup in the USA then expand outwards.