Which country to incorporate web startup in?
If we have a web startup originally targetting users from country A, but the majority of users end up to be from America, is it sufficient to have the company incorporated in country A?
Additionally if the startup is providing paid services and has to receive money from the customers, what will be the best way to setup a receiving gateway? Should the merchant account be setup in country A or in America?
Getting Started Incorporation Legal Tax USA
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Why not what's cheaper and more convinient? – Littleadv 12 years ago
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Its more convenient and cheaper in country A. Do I have to worry about being a company incorporated in country A and doing business with users in America? Is this legal? – Nyxynyx 12 years ago
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What does "doing business" mean? Do you have an office there? – Littleadv 12 years ago
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There is no office. Money transactions are purely online, the only thing users interact with is the website. – Nyxynyx 12 years ago
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but you said you're doing business in the US. what does it mean? Having Americans shop at your web site is **not** doing business in the US. – Littleadv 12 years ago
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Great! So I can stick to incorporating in country A. What definition of "doing business" will require me to incorporate in America? – Nyxynyx 12 years ago
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generally you're doing business if you have physical presence: office, employees, sales personnel, support personnel etc. – Littleadv 12 years ago
1 Answer
It depends on what you mean by "sufficient." It's certainly legal. You might be liable for certain sales taxes in the United States or have to pay franchise fees with certain states, but those are more complicated tax questions that deserve a tax attorney's expertise.
As for payment gateways, PayPal is international-friendly, but the problem you might face is the added skepticism US banks and credit card companies place on transactions with overseas merchants. The advantage to having a US-based merchant account is avoiding those red flags, automatically-declined charges, and suspicions of fraud. A US-based incorporated entity is one option for setting up a US bank account (consider Delaware as a domicile state), and some banks with an international presence might be able to help (JP Morgan Chase, BMO Harris, Bank of America, et cetera).
