Setting up a remote business: complete checklist
Let’s talk about some not-so-fun stuff
You decided to become a digital nomad. Yay!
You’re ready to embrace a lifestyle full of adventure and fun, BUT there’s one thing you need to do before you embark on this adventure: set up a remote business!
Oh. What. Fun. NOT!
It’s the most boring step that drains your energy and kills your mood.
More often than not, it takes a long time to complete and it’s kinda mandatory. I mean, if you don’t have a business, how are you supposed to run it?
Luckily, I have compiled a checklist of the steps you need to follow, in order to set up your remote business, swiftly and painlessly.
But before we continue to that checklist, let’s get one thing straight…
Do you really need to set up a remote business?
There are 2 types of digital nomads:
- those whose employer happens to be a really nice person, who lets them travel the world while being on a payroll
- those who need to setup a remote business and work as freelancers with one or more clients (not employers)
That 2nd type is the most common one – let’s face it, how many employers would be kind enough to let you work full-time from a different country in a different time zone?
I must admit, there are some and we’ll talk about those, too.
However, the rule is that if you want to work remotely, even on a permanent full-time basis, you’ll need to be legally considered a remote business.
When you go freelance and have to deal with various clients, you’re considered an external consultant.
Since your client can be based anywhere, it is necessary to find a legal ground that makes your collaboration legit.
If you want to be taken seriously and establish a good client base, you need to form a brand that reflects your intentions.
You’re not a person, but a company
Yes, you represent a brand and you happen to be the Director of that brand. In your early stages, you’re most likely the only employee of your business, unless you’re required by law to employ certain staff.
For example, in businesses based in Singapore and Hong Kong, it’s mandatory to have a company Secretary. Also, in Singapore there should be at least one Director who is a legal resident in Singapore, so if you’re not one, you need to hire one (i.e. a Nominee Director, who will not have any actual duties).
As a digital nomad, you must make sure that your job has a legal standing and doesn’t break any laws. The fact that you are a professional who happens to travel the world doesn’t mean that you are not obliged to pay taxes and follow certain rules.
Also, the awesome thing about being a digital nomad is that you can set up a remote business in almost any place of the world, without being required to be physically present there, in order to run your business.
However, different countries have different legislations on how to do business. That means you need to consider your options, do your research and choose the ideal country carefully.
So, how do you start?
Step #1: Find a name
Important and necessary. The name of your remote business could be one word or phrase that describes it or it could be your actual name.
Many digital nomads set up a legal entity using their own name, to directly link themselves to their business.
However, that’s not always optimal. Giving your name to your business automatically makes it a business asset and yourself liable for any reputation damage you may inadvertently do.
If you go with this option, then you need to make sure your reputation is not hurt in any way. Google yourself and go through all the first page results to check what’s visible out there that may hurt you.
If you decide to separate your name from your brand, then you’ll need to do some extra work and find the perfect name that will represent your remote business. It needs to be:
- Catchy — you want to grab your potential clients attention right away
- Memorable — if the client remembers you, they’ll reach out to you
- Credible and trustworthy — any word that implies something illegal or unprofessional is a big NO
- Easy to pronounce — if you can’t say it, ditch it (that’s why I abandoned the idea of using my own name)
- Not taken by anyone else — there is a way to find out when you start the incorporation process, but before even getting to that step, you can simply google the name and check whether other businesses use it already
Step #2: Find the most suitable country to incorporate your remote business
Luckily, there’s an incredibly wide range of countries you can choose from. One of the good things globalization brought is the fact that foreigners can form businesses in strange lands in a perfectly legal context.
Now you need to establish some of the criteria that determine what the best option is. Some common ones are:
- The taxation
- The non-residency status of the director
- The nature of your remote business
- The formation fees
- The annual fees and filings
- The currency of transactions
The taxes, including VAT and Corporation Tax, are the top reason why some digital nomads choose countries with a very business-friendly legislation.
You may have heard the term Offshore Company Incorporation before
For those of you who haven’t (and probably live under a rock), here’s a high-level definition of what it is:
An Offshore Company refers a corporation, LLC or similar class of entity formed in a foreign country to that of the principals of the organization or one that can only operate outside of its country of formation. Offshore means located or situated beyond one’s national boundaries.
Essentially, it’s a type of business that provides many money-saving perks to the entrepreneur who forms it. One of those perks is the low taxation. That is not necessarily a good thing, though. A quick google search for “Panama Papers” will give you an idea why. In some cases, forming an Offshore Company is considered untrustworthy, due to its link to money laundering. In some other cases, it is just unethical.
For the purposes of this post, let’s assume that you have the best of intentions and forming an Offshore Company is a good option for your remote business.
Not all countries can host such a company; in fact, there’s a list of countries that do. Among those, you’ll find Panama (duh!), Seychelles, Hong Kong, Cyprus, Malta, Cayman Islands, Gibraltar, Mauritius, Anguilla, Belize and many more. In each of these, you can find a variety of extremely attractive business packages and form a very profitable remote business, due to the mere fact that you won’t have to pay a lot of taxes.
It really depends on the nature of your business, your currency and how much you’re willing to spend, in order to set it up. Oh, yes my friend. The tax havens have significant incorporation fees, that are usually $5,000+.
Attractive locations for digital nomads
Depending on your business, you might consider these countries that present a variety of benefits:
- Singapore — tech business benefits, zero taxation for revenue below $150,000 for the first 3 years and very low after 3 years
- Estonia — easy to get citizenship and no double taxation of dividend income
- United Arab Emirates — not in the tax haven blacklist, up to 100% tax exemption, no VAT, no income tax
- Delaware, US — corporation flexibility combined with well-established, unbeatable legislation that offers many benefits to entrepreneurs
- Malta — it doesn’t have to be an offshore type, 35% tax, but the 30% is refundable, so it’s essentially 5%
Step #3: Hire an incorporation firm to draft all the paperwork
Once you’ve picked the country that will host your remote business, the next step is to find a local firm to help you with that.
Chances are you’ll want to incorporate remotely and at the same time, so partnering with a local expert always helps.
In addition to that, I bet you’re completely clueless about the basic laws and rules of incorporating in your country of choice, so why don’t you just invest a little bit of money in a knowledgable individual or company who can do the dirty work for you?
An expert can educate you on what your options are and is definitely the best person to recommend the ideal business setup for you.
There’s a variety of business types, depending on nature of business, liability of Directors and all that jazz. Choosing the right one will make or break your remote business, so leave it to the pros.
A few firms that come highly recommended (and haven’t paid me for advertising – I genuinely think they’re good):
- Incorporate in Malta (Malta)
- Rikvin, FastCorp (Singapore)
- Bridges Executive Centre, Accoplus, CompanySec (Hong Kong)
- Privacy Management Group (Cyprus)
Step #4: Get a business bank account
The ugliest part of setting up a remote business (or any kind of business) is opening a business bank account. Don’t even consider using a personal bank account for your business affairs – keep business and personal matters separate at all costs.
In some cases, your business account has to be opened at a bank that’s located in the same country as your business. That makes the process of auditing and annual filing a lot easier and more transparent.
In other cases, you can open an account in a country different from the country of incorporation and country of trading (or where you reside).
Countless banks across the world support overseas customers who are constantly on the go and transact from virtually anywhere in the world. Those banks offer excellent packages with some very attractive benefits, such as travel or equipment insurance and tempting interest rates.
Generally speaking though, most banks require your physical presence to open an account. If you don’t show up, chances are you’ll be rejected.
The process of opening the account is pretty much standard, with some exceptions. You show up and go through an interview with a banker, who will assess whether you’re a good candidate for business or not.
You’ll go through a series of questions about the nature of your business, your client list and your personal background (that’s the scary part where you’ll need to confess everything about that one time you got arrested).
If you get the all clear, the bank will open your shiny account within a few days and you’ll receive your fancy card and check book. Congrats!
Step #5: Set up a simple accounting/invoicing system
Clearly, you also need a good online invoicing system for your clients. An incredibly good option is FreshBooks, which I use and highly recommend. It’s an excellent online tool that helps you build your own invoices, brand them accordingly and even send them through their platform.
All this process can take between 1 week and 6 months
Depending on where you choose to incorporate and how credible a Director you are, that’s how it goes. It’s a process that gives plenty of headaches, but if done right from the get-go, it will save you a lot of sleepless nights later on. Good luck!
Disclaimer: all the external links in this post are NOT affiliate links. I do not benefit in any way from your clicks on them. The only reason I added those in was to express my opinion and give some context to it. You may or may not click on them — I assure you they’re not spam. I hate spam.