Are the C-Corp in Delaware with Stripe Atlas as interesting as it seems?
If you are in the world of online business you will surely have heard of Stripe Atlas, a solution that allows you to have a company in the US with your bank and stripe account.
It never ceases to amaze me how sometimes the advantages of mediocre solutions are exaggerated so I have decided to analyze this for you.
As we said, Stripe Atlas promises to allow online entrepreneurs to easily register their companies in the United States, obtain a bank account and, through Stripe, process payments online. All this is done at a very attractive price of only $ 500, here is the program.
I have seen this revolutionary service out there, in my opinion, it does not amount to much, but it can be very interesting in certain cases.
I want it to be clear that I have nothing against Stripe itself. The company is a good and important payment service provider and a much-needed competition for giants like Paypal.
However, his Stripe Atlas program does not convince me at all. It is true that this program can be interesting for a certain group of entrepreneurs, but there are many more options for digital nomads that can be more interesting. Why I explain it in the following paragraphs.
What are the advantages of Stripe Atlas?
Stripe Atlas has been devised to provide a way to start a business on the Internet from anywhere. For example, you can register a corporation in the United States through Stripe Atlas and then open a bank account linked to Stripe.
Stripe takes over the foundation of the company in Delaware and helps with the opening of accounts.
The most distinctive feature of Stripe Atlas is the opportunity to open an account with Silicon Valley Bank from abroad. Generally, in the United States, a remote opening is not possible, you have to present yourself in person, so from this point of view, the program itself is offering us something unique.
On the other hand, the account is directly linked to Stripe, which can save you a lot of time in the verification process.
In addition to the company registration, the bank account and the payment gateway, Stripe Atlas also promises tax advice.
This kind of advice would be quite interesting if you pay your taxes in the US. UU and you have to contact the SII (US Internal Revenue Service). However, the promise stays with that, no matter how many big companies like the Orrick lawyers and the PwC consultancy.
In the end, the only thing they give you is a brochure with tips that you can also find by searching the internet. The program includes a brief consultation with an expert, but this is limited to very basic concepts.
If you want more in-depth advice, you will have to scratch your pocket enough to hire PwC consultants, who charge large amounts. The advice of Librestado in comparison does not cost anything.
However, as I said, it can be a good integral solution for a specific group of entrepreneurs.
The $ 500 is a more or less acceptable amount in exchange for what they give you, although if you rode the company by your side it would be cheaper (surely it would also take you more time). But before we continue talking about this, we will look more closely at the company in Delaware and the account they offer you.
Atlas Stripe currently offers a single type of company constitution. According to the information published on their website, they also intend to offer registration in other jurisdictions, but at the moment you have to settle for a C Corporation in Delaware.
Now comes the big question, is Delaware the best state for the constitution of a company? And, is a C Corporation the appropriate legal form for most cases?
The election of Delaware as the state in which to register the Stripe Atlas company is well founded.
Delaware is undoubtedly the most well-known tax haven in the United States and the place of residence of more than 60% of the Fortune 500 companies. This is not only due to tax benefits, but also to the extensive history of Delaware in law. corporate and its special court (Court of Chancery).
Thanks to the many legal precedents that can be used, the founders find there greater legal security in many aspects. This makes Delaware a particularly valuable state for startups looking to go public in the medium term.
In Delaware, for example, it is possible to involve the employees themselves in the company (convert them into investors) and easily get investors from any country.
However, this has a price, the rates of legal assistance and representation are very high, more than in other US states. UU in which you can get the same services for a fraction of the price.
In other aspects, Delaware also has competitors within the United States. Wyoming and New Mexico are particularly notable. In fact, Wyoming is the state where the German version of Librestado had its business in the beginning. find the Librestado limited liability company.
Wyoming offers lower costs, greater flexibility and greater anonymity.
Generally, taxes on companies that Delaware collects at the federal level are less important. These only apply to companies doing business in Delaware, not to international companies that sell online.
The franchise tax in Delaware is also not important in the case of small entrepreneurs and digital nomads. Anyway, in Wyoming you can save some of the annual costs you have in other states, since the minimum tax rate is $ 175.
Wyoming is also superior to Delaware in terms of annual rates: in Wyoming it is $ 50 and in Delaware $ 300.
To this we can add the fact that in Wyoming no royalties are charged, certificates of participation are not required and has lower costs for Registered Agents.
That is, in the end, it might seem that for most entrepreneurs it is preferable to register your business at the beginning in Wyoming, instead of in Delaware.
I say it might seem because it turns out that Delaware has a special feature. It is the only State in the US that offers you the possibility of not paying taxes with your Corporation as long as you do not have employees, offices or national income.
Why a C Corporation?
Whether it’s in Delaware or Wyoming, what’s even more important is the legal form you register when you sign Stripe Atlas. The C Corporation are very LLC, a form of company that sometimes allows you to avoid all types of taxes.
The American corporations are comparable to the Spanish capital companies, the LLC, on the other hand, are fiscally transparent. Both types of company limit liability, but in legal-fiscal terms, the LLC is not considered a company, but an association.
This means that the LLC as a fiscally transparent company is not taxed at the corporate level, it is transparent in terms of taxes, which means that the partners are subject to the income tax of the place where they reside.
For perpetual tourists and people residing in countries without taxes or territorial taxation, they offer a good solution to avoid tax in a totally legal manner. This is so as long as there is no income in the United States.
The LLC is considered “disregarded” as long as it meets certain characteristics.
Given the characteristics of LLCs and the difficulty in obtaining bank accounts in the US, non-resident LLCs only make sense when payments to the company can be managed through private accounts or with alternative payment methods such as Bitcoin, PayPal or even Stripe.
But let’s go back to the type C corporations that are included with Stripe Atlas.
In the case of these Corporations, it is possible to open a bank account on your own.
US corporations are subject to strict accounting regulations and have less flexibility than LLCs, you must pay taxes for worldwide corporate sales in the United States unless you have no employees, office or national income.
If you have national income, with a Corporation in the US you will pay your taxes there. With the seat in Delaware, only federal US taxes will apply. As already mentioned, Delaware only charges corporate taxes on the profits obtained in Delaware. The most detailed tax rules depend on the classification of the company by the tax authorities (S or C Corp), something that I will not analyze here.
Federal corporate taxes for the US range from 15 to 39%. 15% tax up to a $ 50,000 bill can be quite attractive, especially for smaller projects and can be an interesting alternative if the advantages offered by Stripe Atlas are important to you.
Another advantage of the US is that it is not officially considered a country of low tax pressure, so you will generally have no problems when it comes to recognizing your residence.
Even if there are CFC rules in your country of residence, as in the case of most European countries, the gains may be taxed in the United States as long as there is an active establishment there.
Through profit transfer agreements with companies in third countries, such as a Scottish LLC, a portion of pre-tax profits could be transferred. In any case, it is important to take into account the high tax retention (30%) in the distribution of dividends from US companies.
The recognition of invoices issued by US companies is rarely a problem given that the companies there enjoy a good reputation throughout the world.
In short, the C Corporation in Delaware through Stripe Atlas is a good solution for foreign technology startups that hope to go public, also for residents in countries without taxes or territorial taxation. For others there are better alternatives, especially if you reside in a country with CFC rules.
Stripe Atlas is undoubtedly a great idea, but could be improved even more. I especially like that you are promoting the idea that, as a digital company, you do not have to tie yourself geographically to your country of origin.
To be more interesting, Stripe Atlas could expand its services to more countries and legal forms, as they apparently have planned.
That is, if they gave the option to register an LLC in Delaware or Wyoming with a US bank account, that would multiply the benefit of Stripe Atlas, since the company bank accounts for non-resident US LLC are currently impossible to achieve.
Another way to make the service more interesting would be to offer the possibility of registering companies in other countries, for example the digital residence in Estonia could be very interesting.
Companies in Estonia are an excellent choice as a reputable European company, especially if you need a European VAT identifier.
And this has been all for today. Now I hope you can evaluate better if Stripe Atlas is a good option for you or not.
If you want more free information on tax optimization and international structures, you can sign up here for our free information or if you prefer, you can request a consultation.
Also published on Medium.