If Atlas is implemented as promised (probably a safe assumption given the Stripe team), it will afford founders throughout the world a pain-free entry point into the world's most advanced economy, opening the way for key financing, for seamless payments processing, for ease of banking transactions to get people paid and to move funds easily, and for access to advice and guidance from people in the know to address a whole host of other problems and challenges that are faced by budding ventures who have had initial success in their home countries but need help in breaking out from there to gain potential international success.
This is no small feat.
I can't tell you how often in my many years of working with startups I have had foreign founders reach out to me in bewilderment over how to solve even the most basic problems as they sought to grow internationally and to gain a U.S. presence. It is not that the challenges are daunting or insurmountable. Many companies have dealt with them before. But they have had to do so in the context of having to grope around in the dark until they could figure things out. This cost them time. It cost them money. And it often meant they made mistakes that could set them back.
With a platform such as Atlas, they will now have a turnkey solution to this traditional problem. The solution is standardized and this means it has its limits. In solving the "step one" problem efficiently and at what appears to be low cost, however, it represents a major advance over current solutions and is very impressive indeed. For foreign founders doing amazing things on the talent side but needing to gain greater exposure and take next steps, it is basically a platform for greater credibility. You gain a U.S. presence. You expand your money handling capabilities. You position for greater funding. And you connect with experts who can be there to guide as needed.
The legal piece on this is vital but almost in tow, as it were. A standard Delaware C corp is the only option, which is adequate for a start but will clearly not meet the needs of a potentially huge number of founding teams that may have differing circumstances. It seems that this range of choices will be broadened on the Atlas platform over time. For now (and over time), founders are told to link up with legal counsel (either their own or a default provider) to sort through these issues. This, along with good CPA support, is vital to make sure the right tax and other decisions are made along the way. The platform simplifies the process enormously but significant complexities remain in the substance of what needs to be done. What Atlas does in this regard is to give founders a foundation from which they are well positioned to "take it from there." In this sense, it is a tool, not a legal or CPA resource as such (as it should be).
Stripe appears to have sought out a way to expand demand for its payments processing services and has come up, in effect, with a way of creating a sort of virtual Silicon Valley for the world's startup entrepreneurs. This will not be for everyone but it looks like it will be a great solution for many.
One can say kudos for that but that would almost seem to be a form of understatement. I look forward to seeing how it will continue to develop.
Sounds like a great concept even for a U.S. entrepreneur.
If you are someone new to the business world, figuring out how to take step 1 is a very scary process. At least having a default set of options pre-selected for you sounds like a great starting point. And of course, Stripe could also be in the business of connecting potential entrepreneurs to pre-vetted legal and accounting services.
And Stripe's incentives are perfectly aligned, more businesses using their payment services. Anything putting these businesses into legal or accounting jeopardy is also bad for Stripe.
All in all, this seems like an obvious-in-retrospect, brilliant idea.
> The legal piece on this is vital but almost in tow, as it were. A standard Delaware C corp is the only option, which is adequate for a start but will clearly not meet the needs of a potentially huge number of founding teams that may have differing circumstances.
I know a C corp is the bay area standard, but at least in the midwest many startups still begin as LLCs for simplicity. I hope the Atlas team considers this for future work.
does stripe support personal bank accounts? I have a U.S personal bank account but I don't live in the U.S. nor do I'm a U.S. citizen, in my country there isn't anything as awesome as Stripe, the bank infrastructure here is pretty bad and non existent for online payment processing of credit cards. All my clients will reside outside the U.S. but I want to use U.S/Stripe as a proxy for getting paid.
While we include a new bank account when you incorporate through Atlas, you can update your Stripe account to use a different bank account—like your personal account—if you prefer. That said, using a checking account over a personal bank account might make more sense for your business; you'd want to get advice on this to decide the best setup for you.
Make sure to consider exchange rates and costs for wire transfers if you want to go that route. I think Stripe charges an additional 2% for transactions in foreign currecies, and US banks will charge another 3% (or more) when you transfer that money to a foreign curreny. And there are lots of hidden fees for international wire transfers -- on a recent tranfer that I received, around 7% was missing and I had no clue where it had gone. Additionally, fluctuating exchange rates might eat a lot of money.
I'm still a little confused on whether or not this is better than incorporating in your own country. Is this more geared to accelerator startups who are thinking of moving to the US? Certainly US incorporation is not required (or even all that helpful?) in establishing a US presence?
Great question! I've learned a lot about this as I've gotten to hear from entrepreneurs that tried to setup in their own country, but ultimately came to the US. The video on our site gives some glimpse into the problems these entrepreneurs run into: https://stripe.com/atlas#stories
The gist is that certain countries have a better business and banking infrastructure than others for entrepreneurs looking to establish a global company. This isn't necessarily specific to the US—and we'll be expanding Atlas to more countries—but the US is a solid starting point, based on what many entrepreneurs in emerging markets already do.
For example, incorporating in a place like Delaware allows companies to issue stock to employees, makes it easy to raise money from global investors, and provides the stability of clear corporate rules and case law. (Most Fortune 500 companies are established in Delaware). Getting started with a US incorporation also makes many more services accessible to you, that might not be available if you incorporated in your own country with less support for new businesses.
It's a personal decision, for sure, but if you're in a country where you're finding your business constrained by the lack of particular banking infrastructure or access to business services, we think Atlas can help.
This only really works for people that aren't already setup as a company though.
You can't just open a new company in another country and expect to start moving your revenue to it, it just doesn't work like that. For instance, I'm registered in the UK and would have a tough time telling HMRC 'oh that's my US company, nothing to do with you'. It's a completely different problem if you already run a business and want to open a US branch. That's the same for pretty much anyone in the EU.
I think that needs to be made more clear in the schpiel.
>You can't just open a new company in another country and expect to start moving your revenue to it, it just doesn't work like that.
It kind of does work like that? Granted, it depends on how you structure it.
I confess I'm not privy to how taxes work in the UK, and that further I'm not an accountant but: I too am responsible for a US and non US corp. You may have to declare your US corp as an asset in the UK, for all I know.
That said, if you have a US legal entity that is booking revenue then HMRC doesn't have any jurisdiction. That USCorp pays US corporate taxes just like any other.
If you move any of the US income to your UKCorp or your UK resident person then the Crown will happily takes its cut.
Aha, that's fair. Judging by the site it seems you'll have to take care to demonstrate that you're not shifting UK derived profits; but either way you'll want to chat up an accountant.
In my jurisdiction, to my knowledge and experience, they're considerably more lax.
If it was just about registering a company somewhere else and your home tax authorities had no jurisdiction, every company in the world, small or big would be incorporated in tax havens like the British Virgin Islands only.
If a company is controlled from the UK, you can bet your bottom dollar that the UK tax authorities have jurisdiction. Only a very small minority, mostly less well-developed countries allow you to incorporate elsewhere without having to pay tax and report where you are.
Corporate tax residence internationally tends not to be a matter of where a company is registered, but from where it is effectively controlled. This is a matter of fact, not a matter of paperwork, so you can't get around it by just appointing a buddy to sign papers who lives in the right country.
Not only that, incorporating elsewhere opens a world of complexity, pain and double taxation.
A simple example:
A US LLC with more than one owner is usually taxed as a partnership - eg, US tax is due at individual marginal rates.
The UK on the other hand treats US LLCs as "opaque", which means they'd want to tax it as a corporation (there are legal cases to this fact).
So a UK resident LLC owner could end up having to pay up to 39.6% tax in the US, then 20% AGAIN on the very same income in the UK, before having extracted a single cent from the company.
Then if they extract money from it, there's an additional up to 38.1% dividend tax, for a whopping 90% marginal tax rate.
Now, double taxation treaties _may_ come to the rescue, but I wouldn't bet on it being without a fight through the courts to prove they apply.
Yeah, LLCs don't appear to be the best method unless you can prove to the gov't how things were taxed (or not). That said, I'm not entirely sure things get that bad. First off, it's not a 90% rate, by those (worst case) numbers, it's a 70.08% rate. Still absolutely terrible, but... I'd take advantage of any advice you can find, both on local and US perspectives before committing to any course of action involving this product. Particularly looking forward to additional blog posts and resources on this, along with stories of best practices that are country-specific :)
Check chrisdew's answer above. It just doesn't work like that in the UK, or most places in the EU. If it was a totally different company, doing a totally different type of business, then you could argue the case that it was nothing to do with it. You would still have to pay income tax on any money you remitted into the UK though from your US or other earnings abroad.
In much the same way as the US treasury want's a piece of US citizens worldwide earnings, I believe.
You really do not want to mess with HMRC in the UK. They will chew you up and spit you out without a care in the world if you don't play by the rules.
Why SVB and not WF? Seems odd that the sponsor bank for your payfac distribution, that has more resources than SVB, won't equally house the account for this new vertical. Any particular reason?
Having used SVB at two startups now, they just get startups in a way that the big banks don't. They're not a huge multinational behemoth with its own corporate culture, but rather they specialize completely in the SV business/tech/startup world, it's their DNA. That little intangible is worth a lot.
That's anecdotal testimony really isn't it? and it's not true for fintech startups, SVB doesn't even bank Stripe's core payfac business. Other than the namesake, most fintech payment companies use WF, Fifth Third, Chase, Comerica or Cross-River.
reviseddamage: You were questioning why Atlas went with SVB and noted that SVB doesn't bank fin-tech in general.
There's no reason Stripe's selection of a payfac provider should (strongly) influence it's selection of a corporate/startup banking bizdev partner. Atlas is linking companies up to regular corporate banking services.
That is also not what I was implying. Banking shell companies is a very high risk activity frowned upon by the OCC as most of the time they are mismanaged. Only larger banks have the flexibility and the bandwidth, and the contingency to manage them. It would seem only likely the the bank that is already banking Stripe, would be the likely one to also bank the shell co's that would be processing through Stripe. Easier on the bank to have oversight and line of sight of the business activities. SVB on the other hand without having other oversight on Stripe, really no vested interest in Stripe's success, and much smaller bandwidth and risk management resources is the banking partner for the shell co's, that is strange, which is what I noted. It is not a normal and natural event, hence my original question.
I run an independent business in India and all my clients are in USA. I would rather setup a US based company where the regulatory certainty is much better in India. Keep and invest money within US to the extent taxation is not a problem.
I am pretty sure there are many more people like me.
Ease of payment processing alone might be worth setting up a US corporation.
In a lot of countries where Stripe et al. are not available, PayPal (shudder!) is the only way to collect payment from customers all over the world, and even PayPal isn't available all the time.
For example, in my country of citizenship, I can use PayPal to collect payment from foreigners but not from people in the same country, so I would be forced to maintain two payment processing systems (a domestic-only gateway as well as PayPal for the rest of the world) and add a lot of friction to the sign-up process if I incorporated there.
It's not so much about entering the US market imo as it is about being investor standard ready. This is essentially the step 0 to standard investment contracts
Come on, we can do without the rah-rah. US banking and law is extremely backward. Everything I can do in the US, I can do here in China, and we have massive mobile payment penetration. Most of Europe is far more advanced. Even East Timor has the IBAN. You guys are still stuck with bank backend systems mailing "checks", and multi-day ACH. The only reason the rest of us find it hard to get payments is because the credit card monopoly is tantamount to a global protectionist racket and is supported as such by US politics for intelligence purposes, just as SWIFT is.
I can see a marginal convenience factor but I'm struggling to see anything beyond that. Is it that hard to incorporate and set up a bank account in the US? Incorporation in the UK is a 10 buck 10 minute online process already and opening a business account is only harder really due to money laundering regs which I don't think would be solved by 3rd party automation.
> Is it that hard to incorporate and set up a bank account in the US?
Yes. Yes it is.
Let me put it this way: Setting up a corporation is trivial.
Setting up a bank account can be a literally insurmountable hurdle for a business that is not based in the US.
Banks can choose to let individuals and businesses open new accounts purely within their discretion, and as often as not they want the business owners to be physically present with their identification in order to open accounts.
This is a regulatory requirement, part of the "Know Your Customer" doctrine. In plain words, banks are required to know who is the client who has opened an account.
Most banks will be risk averse and will not open an account to anyone applying online from abroad. Even for US persons applying online, they will ask quite a bit of documentation.
Some banks (but not all) will open an account for a non-US person, when the non-US person physically visits a US branch, with proper identification (typically a passport) and documentation on why they want the account. But even in such cases, it is up to the discretion of the bank employee to decide whether the risk of opening an account for a non-US person is worth the benefit. So, the same bank may give different replies to the same inquiry, depending on the branch asked.
As a concrete example, TD Ameritrade will open easily an account for a foreigner in the Chinatown branch in NYC, but will not open an account when the same customer visits a branch in midtown in NYC.
I live hundreds of miles away from my bank's brick and mortar, and when I call, I think I'm still a bit of a novelty to them. "This customer doesn't actually walk into the building ever? Fun, I want to talk to the mystery person on the phone!"
This sounds about right as the US would have hit market maturity much earlier in the tech cycle. Same with mobile networks, which are also backwards compared to those in Europe which came later and leapfrogged due to advances in tech and incremental improvements. And now we start to see the same effect in Asia, which is beginning to make Europe look like a backwater.
This is no small feat.
I can't tell you how often in my many years of working with startups I have had foreign founders reach out to me in bewilderment over how to solve even the most basic problems as they sought to grow internationally and to gain a U.S. presence. It is not that the challenges are daunting or insurmountable. Many companies have dealt with them before. But they have had to do so in the context of having to grope around in the dark until they could figure things out. This cost them time. It cost them money. And it often meant they made mistakes that could set them back.
With a platform such as Atlas, they will now have a turnkey solution to this traditional problem. The solution is standardized and this means it has its limits. In solving the "step one" problem efficiently and at what appears to be low cost, however, it represents a major advance over current solutions and is very impressive indeed. For foreign founders doing amazing things on the talent side but needing to gain greater exposure and take next steps, it is basically a platform for greater credibility. You gain a U.S. presence. You expand your money handling capabilities. You position for greater funding. And you connect with experts who can be there to guide as needed.
The legal piece on this is vital but almost in tow, as it were. A standard Delaware C corp is the only option, which is adequate for a start but will clearly not meet the needs of a potentially huge number of founding teams that may have differing circumstances. It seems that this range of choices will be broadened on the Atlas platform over time. For now (and over time), founders are told to link up with legal counsel (either their own or a default provider) to sort through these issues. This, along with good CPA support, is vital to make sure the right tax and other decisions are made along the way. The platform simplifies the process enormously but significant complexities remain in the substance of what needs to be done. What Atlas does in this regard is to give founders a foundation from which they are well positioned to "take it from there." In this sense, it is a tool, not a legal or CPA resource as such (as it should be).
Stripe appears to have sought out a way to expand demand for its payments processing services and has come up, in effect, with a way of creating a sort of virtual Silicon Valley for the world's startup entrepreneurs. This will not be for everyone but it looks like it will be a great solution for many.
One can say kudos for that but that would almost seem to be a form of understatement. I look forward to seeing how it will continue to develop.