The mustachian company?

[oozoo]

I didn’t find many references to that but maybe one of you has some insights:

What do you think is the most mustachian way to found a company with the following setting?

Currently I am fully employed so this is only a side business for me. I am a professional software developer. As a “hobby” I develop “Add Ons” for popular enterprise software. I am planning on putting them up for sale this year. For this, I need some kind of “vehicle” to a) limit risk and b) separate my personal income.

The way to go seems to be the swiss “GmbH” with all the red tape and costs involved. Bank account, Handelsregister, Notar etc. If I do everything by myself and not have someone do the paperwork, this should come out to 1500chf in total (maybe more, just a rough guess). Otherwise I will be looking at 2500+

Now a UK Ltd or Irish Ltd seem cheaper but way more hassle to set up. Since I am unfamiliar with the system in the UK I would probably have everything done by one of those full service companies. But I recon down the road it will cost me more due to complications with bank accounts, local tax offices, ongoing costs for the upkeep in the UK etc.

Any other ideas? I looked into freelancing but since my marginal tax rate is not great and I want to limit the risk of liabilities, I dont think this is for me.

[ma0]

Interesting hobby. Is it time consuming?
Anyway have a look at startups.ch. It might help you.

[omen]

Well, I was also thinking about the same thing. One option I am looking into is Estonia. You can get the e-residency for a 100 EUR, and then you can do almost everything online including taxes. I think the minimal capital is 2500K euros, but you can postpone this and pay it after the company generates some revenue.

From the tax perspective, you have to choices you can payout a dividend which means the company first pays the corporate tax rate in Estonia and then you will be taxed with your marginal tax rate in Switzerland.

The other option is to give your self a salary form the Estonian company. This is a bit more complicated but more efficient. From what I understand since you don’t have a tax liability as a non-resident you only pay taxes to Switzerland. So just declare it as a secondary income. The only part on which you have to pay Estonian tax is the part of the salary you get as a board member. While you can claim that you run to the company for 1 EUR compensation as a board member, the Estonian Taxman will not like that. A good rule of thumb I found is to take 80% as normal income and 20% as management income. So only on 20% of the income, you will be double taxed. (In theory, you should be able to offset the Estonian taxes against your Swiss taxes, but things might get complicated).

Finally, you can use the corporate card for legitimate business expense, like a new laptop or a new phone and this is money basically tax-free.

[Karol]

Sorry, but it will not work.

If the company is managed from Switzerland (or any other country in EEA+Switzerland) the local tax office might and will consider such a company Swiss, German, French, depending on the place where the company management is done from.

The e-Residency won’t help in this case much.

It might not be noticed right away, but it will be noticed by the tax office of your personal residence.

e-Residency might work for countries like Ukraine with different OECD rules considering corporate tax residency, but it will not let you “choose” to pay taxes according to Estonian rules and rates

http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/

Switzerland:
“If an entity is incorporated outside Switzerland, it may nevertheless be a Swiss resident entity for tax
purposes if its place of effective management is in Switzerland. The place where important decisions are
taken is determinative. Whether an entity is subject to corporate income tax and capital tax is based on the
respective evidence regarding the effective management in each individual circumstance. Therefore, if the
manager of a company resides in the country in which the company has its legal domicile, but in fact merely
follows the instructions of a Swiss shareholder, the Swiss tax authorities may consider the company to be
a Swiss resident.”

I am also looking into the options, so I’m happy to discuss any ideas

[omen]

You have a good point about that

But look the idea to do a company is not to evade Swiss taxes, but to provide some liability protection. I suggested Estonia with the e-residency because I think it offers this with very low overhead costs.
Also if you give yourself income from the business there will be little profit at the end of the year to tax. And I assume even if you have to pay corporate taxes to Switzerland you can probably offset the tax already paid to Estonia and since Swiss corporate taxes tend to be on the low side, I don’t think this will increase your tax liability by a lot. The only problem is that it will make your accounting and reporting more complicated so you might need to get some professional help.

[oozoo]

It is most time consuming in the beginning when you have to learn a lot of things, then it gets easier. However I struggle to make progress when my job takes center stage, so I will be starting out slowly.