Where to incorporate?

I’m starting a business. It’s a purely online business. We’re going to manage WordPress sites. Customers will be global. A grandma in Detroit, a professional blogger in Sydney, or a teenager in Bangkok. As the principal owner of the business, I will be nomadic for a few more years. I’m trying to decide where to incorporate said business.

  • I might eventually sell the business, most likely in the USA.
  • I don’t mind paying tax, but I want to stay “international”.
  • We’ll most likely take payment by PayPal.
  • I believe in transparency, the ownership structure will be visible for all the world to see.

I’ve considered a few options:

  • Incorporate in Vanuatu. Tax haven, minimal red tape. Can I get PayPal linked to my Vanuatian bank account?
  • Incorporate in Vanuatu, establish subsidiary in Scotland. Gives me long term international ownership. Might add legal complexity.
  • Incorporate in Scotland. Administration of the business has a cost. Would I need a director physically in Scotland?
  • Incorporate in the USA. Not sure how to do that from overseas. Is it costly? Worth the effort? Bureaucratic red tape?

What do you think? Can you share any experience? Do you know any experts in this area I could speak to?

Here’s a picture from Jennoit on flickr which came up on a search for incorporate!

Incorporate...

7 thoughts on “Where to incorporate?”

  1. There are so many factors in this decision. I looked at setting up a business in Jersey but because all of the customer service and finance was going to be mostly based in the UK, I couldn’t really say that the business was truly managed off-shore.

    Having a business in Vanuatu would expose you to currency risk and the Vatu has been jumping around a bit (http://finance.yahoo.com/currency/convert?amt=1&from=GBP&to=VUV&submit=Convert) – as has the dollar.

    If I were doing this, I’d just incorporate in Scotland.

  2. @Hank: There are a lot of factors, that’s for sure.

    As I am genuinely off-shore, I think I can make that argument pretty well. So that issue probably doesn’t apply to me yet.

    I’d keep my money in USD or GBP or Euros even if I banked in Vanuatu. I wouldn’t have to be exposed to the Vanuatian dollar.

  3. Callum, you are, what’s known in legal circles (where I now fly) as a Perpetual traveller or a PT for short.

    In general PT’s can, by moving between countries on a regular basis — be able to legally reduce or eliminate their tax burden. (if it’s big enough and worth it!)

    Other PT’s and itinerants may adopt this lifestyle for primarily self-ownership reasons, seeking to be free from government authority, interference and “The System”.

    Five Flag Theory:

    Perpetual travelers should attempt to organise their affairs around the “Five Flags” theory, arranging for different facets of their lives to fall under the jurisdiction of separate countries, or flags. (This is an extension of W.G. Hill’s original “Three Flags” approach.)

    Whether to minimize government interference (via taxes or otherwise), or to maximize your privacy, the theory proposes that you arrange for each of the following to be in a separate country:

    1. Passport and Citizenship – in a country that does not tax money earned outside the country – Ireland for example
    2. Legal Residence – in a tax haven
    3. Business Base – where you earn your money, ideally somewhere with low Corporate tax rates
    4. Asset Haven – where you keep your money, ideally somewhere with low taxation of savings interest and capital gains
    5. Playgrounds – where you spend your money, ideally somewhere with low consumption tax and VAT

    The Five Flag Theory although meaningful, can almost be overkill with respect to the way the world really works

    Many Caribbean nations and South Pacific Forum states (such as Vanuatu) are (so called) tropical resort nations. These nations historically have had such weak currencies (vs the AUD, CAD, EUR and USD) that the VAT argument holds little meaning. These nations have been playgrounds for the wealthy for the past 50 years.

    Asset and residence havens can be the same, if you can afford to live there: The Cayman Islands or Bermuda for example.

    Only a fool would put all their assets and investments in a single tax haven. Use of multiple tax and havens (usually just 2 or 3) has been standard procedure for the past 40 years.

    Ideally, you ought to have 4 currency accounts. Dollar, Euro, GB Pound and one of the country you are working in…Australia or Thailand or wherever.

    You also ought to have as many legitimate passports as you can. Ireland and virtually anywhere else is a good combo.

    You could have French and UK for example.

    Another good idea is to have a package of money ($1,000) and documents that can be Fed-exed to you in 24 hrs in case of emergency. You could leave these with a trusted relative or lawyer in a sealed package only to be delivered after you quote a “secret squirrel” password.

    That way, if you’re ever held on a trumped up charge in a banana republic and they take away your passport, you can get away. (“Honest your honour, I didn’t know she was a man…and your son as well”!)

    There’s more, but as you know I now charge Β£150 per hour, so if you want to do some bartering on legal advice versus oh..I don’t know…getting 3MP up and running…let’s talk.

    Keep having fun.

    Cheers

    Raymondo

  4. @Kasper Souren: Funny you should say that, I’m looking at Delaware. My front runners right now are Delaware versus Panama.

    Delaware seems to be tax free if you’re an overseas national and incorporate as an LLC. It would make getting a US bank account easy, and trade within the US would be easy. But, it puts the business under the jurisdiction of the US government, and means your business is tied to the US dollar. I’m not sure I want those links to the US.

    More research is required before I make my final decision I think. πŸ™‚

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