How do you handle co-founders in different countries?
My partner and I are starting a project, but are both respectively from and living in different countries (UK and USA), so I'm curious how other people have handled similar situations?
Main things I'm interested in are:
- Legal set up. e.g. Do you register in one or both countries?
- Financial. e.g. How do you handle money? In one country or both?
- Drawbacks for multinational indie projects
Plus any other comments I might not have thought of
edit: For context, I'd be automating something I do to run a small product business. I have a small amount of income from this, looking to increase this by automating what I do.
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I'd just register a company via Stripe Atlas in the US and deal with everything there.
Expenses can be covered from multiple sources.
Have you heard about a LLC from a state like Wyoming? Been hearing that's a better option than a Delaware LLC/C-Corp (what Stripe offers).
There is a couple of difference between Wyoming and Delaware companies.
Delaware franchise tax is $300, and Wyoming annual report fee is $62 every year.
Delaware doesn't require a business address and member address when registering your LLC. Registered agents require this information.
Your business address is publicly listed on the secretary of state's website in Wyoming. If you register your company with a registered agent, your member address and name are not listed on the state's website.
So there is a little privacy difference between Wyoming and Delaware.
Currently, LLC companies in Delaware are formed in 60 days. Wyoming LLCs formed in 2 days.
Get 10 paying users with Flurly first, then worry about the rest. If you're starting a new indie project, be prepared to have no salary for a year from it.
THIS !
Whilst I'm not expecting a salary exactly, we have validated the idea and it's something that'd have a lot of manual work at first. It's also not a digital product.
I appreciate that my post wasn't very specific.
It's based on a small physical product business I already make money from (UK), the project part of this would be automating a good amount of that business, and being able to offer that as a SaaS. I already have a handful of paying customers who I offer this to, but I do it manually currently, so my scope is heavily limited since I also work a full time job. I guess our financial concerns are more around expensing things like software/apis/hardware needed and whether to store money in both countries.
Try doing a prelaunch presale or something like that. That will not only force you to actually finish the product faster, but it will give you a clear goal and true validation.
But regarding the money/bank, US based companies usually have better chance if you want to sell them or raise funding, so there is that. But there are also different things that can complicate things, like, since you have a founder within the US, that's a nexus, so taxes can become a bit more of a headache (that is just based on what I remember from reading a ton of articles on opening a US company as a non us resident).
And also the trust factor, if you do trust this person, then it shouldn't be a problem. But if sh!t goes south and "legal" issues happen, you will have to travel there to solve those issues.
Everything has its pros and cons. It's just about how much risk you are willing to take.
Hello Danielle,
Mandatory disclaimer: I am not a lawyer, this isn't legal advice.
Question 1: no, not exactly. There's going to be one entity that accrues equity value. This is the entity that owns all the IP, the contracts with the customers, runs the operations. I would put this entity in Delaware if I intended to raise money, otherwise wherever it's more convenient. Be aware that corporate taxes in the UK are higher than in the US.
The co-founders would own part of that company and maybe have a vesting schedule. Whatever deal you make with your co-founders. This company may be able to hire one of the co-founder, but not both. It's possible it can't hire any if you open it in Bahamas for example. The way you solve this is by using an Employment of Record. Employment of Record are companies that are registered all over the world and act as the employer for a fee.
In your case, you might register the startup in Delaware, it hires the US co-founder, and it hires an EOR. The EOR has a company in the UK, that is the one that employs the co-founder and the EOR invoices the the US company monthly for the salary of the UK co-founder plus a fee. Note that working for the startup and vesting shares can be independent of being a legal employee.
If you grow enough, you open a UK company that is a subsidiary of the US one, possible with the help of a PEO. But I wouldn't do this until you have 10 employees in the UK.
I cover this in more detail in my book: https://pablofernandez.tech/bmdt
Question 2: The country in which you open the company, you'll also open bank accounts that belong to that company, and that's where the money will reside. You don't store money in any other country until you can have subsidiaries that can open bank accounts over there.
Question 3: There are a few, like timezones. If you are too far away and don't have enough overlapping time, you'll move quite slowly because your communication will be slow. Whiteboarding can be hard, although I have workarounds for that. It can feel lonely and isolating, there's an energy that you get from being in the same room with your co-founder excited about something. In my opinion all of the drawbacks are not enough because the pros of creating a company with the right person and building distributed teams is just so high (otherwise I wouldn't be writing a book about building and managing those kind of teams/companies).
We have a similar situation - US & DK. Here is my take on the situation:
Start by considering where you are planning to raise money (if you are going the VC route). Being headquartered in that country, will make it easier to attract funds.
Consider where you will be selling your services. It should be easy for customers to make a purchase! This also ties into the financial situation: what currency will they be paying in? How does that affect your business?
Consider the cost (i.e., legal, administrative, registration, etc.) and workload of operating two companies. From my perspective, one of the main advantage of having a company in each country is for employment purposes and grants. If you are only planning to employ yourself (for now), you can go with a global payroll provider instead (some offer 1 year free services, where you only have to pay the salary). You can always open a branch or subsidiary later!
Hope that helps :)
We've got a similar situation between Aus and US. Our setup involved the primary entity being set up in Aus and a wholly-owned subsidiary in the US. Something like this could work for you depending on whether you both need to be employed by the business, not just owners/directors. I'm not an expert though, we ended up with this setup by talking to an advisor.
One thing to ask your tax advisor is whether there are reporting requirements for owning a controlling interest in a foreign business. Usually, it's not a big deal but it's still something to look into.