taxes, tax-structure, yc-how-to-start-a-startup“Tax structuring”. This is another thing. Once things are working it would be worth you spending a little bit of time thinking about how you set up the tax structure for the company. I confess I don’t know a lot about the details here ‘cause I just find it personally really boring. But like if you assign the IP to some corporation in Ireland that licensing it back to the US Corporation. You end up paying no tax. No corporate tax. But I know that you can only do that relatively early on. And this ends up being a huge issue for companies that don’t do it that compete with companies that do it you know once they’re big public companies. So that’s worth doing.
Sam Altman - Startup Class
http://youtu.be/59ZQ-rf6iIc?t=25m50s
What does Sam mean here? What are the details he missed? How can we set up a structure so we pay no corporate tax?
One of the most damaging things you can do to a business, in my experience, is to try to walk on the razor’s edge when it comes to taxation.
If you get caught (and you will), it can literally destroy your family.
It’s one thing, and perfectly legal and acceptable, to set up a Delaware-based business when operating in the US. Or in another state with either of low taxes or business-friendly courts. This, yes.
It’s a completely different one to actively seek to avoid taxation using tax-related loopholes. Particularly international loopholes.
The temptation, of course, can be to set up shop in Belize, Panama, or any number of other tax havens, and pay little to no taxes whatsoever. Or it could be to set up international shops in Ireland, Malta, Cyprus, Hong Kong or wherever – or London, for that matter – in order to reduce the tax burden.
Just don’t.
Two reasons:
It takes significant expertise in international tax laws to keep up with the constantly changing environment. You will need a very competent lawyer (commanding unfathomably high rates) at your side throughout the process, and then some.
Your taxman will have zero patience with you, and much less of a sense of humor, at the slightest hint that you’ve been messing around.
I cannot stress that last point enough, having seen it first-hand: you will get a massive, full-on, cavity-search grade probe into your company. And a rabid taxman will find a wide range of petty somethings to complain about; no ifs, no buts. Getting such a civil servant off of your back is a grueling time sink for a small business owner – time which you cannot afford to waste.
A larger corporation can field a team of lawyers and have a chance to win in court.
You cannot. You’ll end up settling with a large penalty, and will set yourself up for years on end with inquisitive taxmen knocking at your door. It is nerve-wracking and, again, can destroy your family.
There is kind of two things going on here. First he's talking about the 'Double Irish Arrangement' and second alluding to a general corporate structure where income flows out of a high corp tax state and into a lower tax one. Holland and Switzerland are good examples of the later.
What's more the Irish government are closing down this particular tax avoidance strategy, and certainly here in Britain there is increasing public concern about large multi-nationals that pay little tax in otherwise large areas of operation. In the UK and elsewhere this is being dubbed the 'Google Tax'
Irrespective of your attitude towards tax avoidance you generally need to be a large multi-national company to make this stuff work.
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