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My question concerns a new business: I belong to a team or software developers. Up until now, we've each done our "own thing", as self-employed workers. Altogether, our business takes place in the US and mainly in several European countries.

We would like to form a company, but are wondering about where to do so. Some of our future Directors live in the US, some in Austria and some in France (and so do our current customers, but given the demand, we might soon work with British, Spanish and German customers as well).

What would be the easiest solution, tax- and business-wise? Would it be to set up a mother company in the US with subsidiaries in one European country, or the opposite? Or, would it be enough to form one company in Europe or the US, while still being able to easily do business all around the world?

I understand that taxes must be filed in the country where the company is located. However, what happens when some members of the board of directors reside abroad (they wouldn't be earning a salary right at the beginning)?

I'll be happy to provide you with further information if my question isn't clear enough. I am trying to avoid writing too long a post.

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3 Answers

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You need to talk to many people in many different countries to have this thing set up. And I don't mean the futures directors. I am referring to the tax professionals for each country where your directors reside. Reasoning is this:

  • Since your directors will be drawing a salary from the new company so the company technically is going to be doing business in the country where the director resides and hence will have to file tax information for the salary they will be drawing.
  • Establishing where the new company is doing business if the directors don't draw salary is necessary as well since based on laws in a particular country by an foreign entity may be considered income earned in the country and hence taxable.

So get your directors to ask the same question locally of lawyers and accountants.

Having said all that I would probably establish a C corporation as a holding company in the US or in a completely separate country altogether and issue shares to the directors with $0 salary and only pay dividends on profits. But that's just one dilettante's opinion.

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I think you want to incorporate in multiple countries. You will be doing business in multiple countries and having one company with branches seems painful.

I think you'll find the taxes to be lower in EU, iff you avoid France.

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As user23 said, having branches is painful. Start with 2 companies with no links between them:

  • one in the US that will bill your US customers in dollars - in Delaware, it is easy to create a company even remotely for non citizen non resident individuals,
  • one in Europe for European customers - even in France. Not sure taxes are lower in Italy or even Germany - might be lower in Ireland though. Anyway pick a country where one of you live so it's easier to set up and to manage.

Though, you'll have accountant, lawyer, bank accounts in both countries.

After some time, you'll see which company is more successful and with a tax lawyer specialized in this kind of matter, you'll see which one can buy the other one or other options that will optimize the relationship between the 2 entities.

In the US, taxes on companies depends on the kind of entity you form. Generally, companies will have to pay taxes in the country they've been incorporated while the directors will have to pay taxes (or fill taxes form if they don't make money) in the country they reside.

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