Don’t launch your startup in USA | Before reading
We have been working for a long time on our project. During this period we had to make serious decisions and faced many difficulties. I will share some “don’t forget”s and “must-do” depending on real experiences. Hope it helps to new entrepreneurs — Specially for SAAS startups who have a limited budget.
I will not talk about startup ideas and strategies. If you are serious on your project and would like to realize it you will need some cash. Although a good plan and keeping things simple will minimise your costs you will face many unpredictable issues. So let’s start with the ones we know:
Why a company in USA? Risk or opportunity?
Yes, you can set up your comany in USA even though you don’t live there. Before deciding this I just kindly offer you to prepes a pros and cons list according to your personal case considering below items:
- Do you know enough about tax issues? If you heard about the tax-heaven stories for some states — just double check and compare with your local tax-regulations. USA has default 21% corporate tax rate + variable federal tax rates (ie. 8.7% for DE).
- Let’s assume you run some money? How will you transfer it? If you do not have a work-permit in USA you cannot pay salaries to yourself . Here your company type is also very important. Non-resident aliens could only setup LLC or C-Corporation. Both have different tax obligations. For C-Corps you must pay 30% tax on dividends (which is the only legal way to take your money) in addition to annual corporate tax which is called double taxation. So just tax a legal advise from a CPA or lawyer.
- Do you really need an US address? Actually this is the key title for your decision. If you really need in terms of company strategy it worths getting all risks and make some additional expenses. Otherwise it’s better to run your business in a well-known environment like your own country.
- When to set-up? If possible building company in the beginning of the year might be a good idea to avoid some annual taxes.
- Number of shares? 10,000,000 looks good, right? However don’t forget that number of shares can effect your tax expenses (franchise taxes or filling taxes). Take a look at delaware.gov for a corporation in Delaware for instance.
- Share Capital: US has no minimum value for share capital. You can setup without investing any cent. But you cannot survive without equity in terms of finance. Here another term comes in to play:
- Par value: Please take a professional advice before deciding par value per share which you will invest as share capital. This is determined in “Certificate of Incorporation” and during stock issuance if you would like to pay more you may face with additional tax charges.
- Registered agents. As a nonresident alien you cannot register your company by yourself. Therefore you must take this service from a “registered agent”. Average annual fees are around $100–150. But these will not provide you all you need.
- Legal agreements, board decisions, stock issuance and more.. You will have to handle many legal issues. Actually it is hard and risky to do all yourself. So my only advice would be choosing your registered agent carefully and ensuring all steps and agreements are included in the fee. Almost all of them provide fixed agreement templates. Arrangements might be due to additional charges. Also don’t forget to ask about post-registration actions like stock issuance certificates and vesting-schedules etc.
- Physical mail address/Virtual mailboxes. Probably your registed agent will only inform you when a legal issue happens w/ government etc. Therefore you will need to purchase a virtual mailbox and scan/post service. By the way you can register your address to Google Business and use on your invoices.
- US Telephone/Fax number. Anyway you will need to purchase a telephone service/sms/fax service with a US number. There are some great companies providing AI-supported programmable voice and sms services which you can also use for double- authentication etc.
- E-mail services: costs from well-known secure companies around 3–6 per e-mail addresses. But you will need at least 5 of them: admin, sales, support, privacy, security etc. Instead, you can try using ALIASes for free.
- Marketing and transactional e-mails: You also need to pay around min £15–50 per month for a great service.
- EU Market: If your company and servers are located in USA you will have to fulfill some additional obligations to serve EU market due to privacy and data-transfer acts. This will cost min $350–400 annually including a EU representative. Don’t forget UK-EU issues which might burden additional costs in future.
- US Sanctions: Due to OFAC regulations you cannot do business with any restricted country or customers (entity or individuals). This might have serious results and you have the obligation to screen potential activities. Don’t forget that banks might ask many questions like “how will you prevent” those ones to use your system. You might need to purchase a firewall or sanctions screening service.
Looks long, right? But it’s just a starting point which help you planning your budget and road-map. We will share detailed blogs for each (and more) items. Follow wremia.com for future posts.
Non of above is legal or financial advice. Please work with professional US lawyers and CPAs.