Okay, so you’re considering starting your own business?

Great news. From gaining financial independence to working flexible hours, this is a world where the risks and rewards are controlled by your own appetite as you become the captain of your own ship.

While there’s a variety of stories of how entrepreneurs end up becoming entrepreneurs, here’s a pretty useful logic to follow when you’re starting yours: 

Step 1. Research and evaluation 

Step 2. Write a business plan 

Step 3. Figure out the legal requirements 

Step 4. Choose your jurisdiction 

Step 5. Understand your taxing 

Step 6. Register your Smart Company 

Step 7. Apply for licenses and permits

Step 8. Open a bank account 

Step 9. Address funding 

Step 10. Start running, hiring, promoting and developing your business 

 

Let’s dive in. 

 

Step 1. Research and evaluation 

It all starts from here. Basically, this answers the question ‘what’s the problem you’re trying to solve and how?’. Whether it’s building something you’ve always dreamed of or you’ve just stumbled upon an idea you want to test out, you’ll need to figure out how to make it a business. In other words, how do you get paid users. 

Evaluate the market you want to be in, find out if your business already exists and get your early thoughts out there for real-world feedback. 

It also helps if your business idea aligns with your personal values and skills. There’s a reason why they say scratching your own itch is one of the easiest ways of getting your first 1000 clients. It can give you the direction in solving something you, and many people like you, are experiencing. Just remember to be honest with yourself: What do you often catch yourself doing that could be much easier, cheaper, faster, safer? In what kinds of moments do you find yourself the happiest, why? How would your friends and colleagues describe your strengths? 

 

2. Write a business plan 

We hate to be this cliche but this part really is important. Everything you see around you today was once just a plan. You’ll need a well-documented plan for potential investors, early team members and often in opening a business bank account. 

Here are a few tips to help you for starters: 

  • What is your idea in a nutshell? 
  • How would it work and what’s the business model? 
  • What’s the market you want to be in and what does it look like? 
  • Explain your product or service in detail 
  • What would your daily operations look like? 
  • Do you need a team? If so, how many and doing what? 
  • How will people find out about your services and what do they pay you for? 
  • Plan your finances: budgets, costs, revenue projections 

If you’re feeling stuck, our partner HubSpot is offering a template we’ve downloaded for you to open right here. Heads up – it’s a 15 page document. So pour yourself a cup of coffee, make a copy for yourself and good luck typing! 

Okay – enough of the creative work. It’s time for the legal requirements to kick in. 

 

Step 3. Figure out the legal requirements

Because this article is a step by step-guide for setting up a Smart Company, we won’t be going through the full spectrum of all the possible entity types out there. That said, do your homework and understand the difference between different legal structures. If you want to take a step back at this point and just want to explore what’s out there, we’ll be sharing a few of our favorite resources at the bottom of this page that we find useful! 

If you’re new to our site, Smart Company is a blockchain-enabled entity model that runs 100% paperless for both you (the user) and us (the back office). Legally speaking, these are recognized as private limited companies, no different from the ones types that exist today.

What makes Smart Companies stand out from anything else we’ve ever seen however, is the way we use the technology to automate things.

The ‘smartness’ of a Smart Company offers you a trackable, traceable and secure way of managing your business – the opposite of today’s alternative, which is a paperwork and bureaucracy-heavy process. 

We’ve written about this pretty extensively before: about the difference between Smart Companies vs. traditional companies, how Smart Company shares are tokenized into a digital form and it can help you save time and money.  

 

Step 4. Choose your jurisdiction 

First thing to keep in mind is that where your company is registered vs. where your actual business operates are two different things, although they don’t have to be. So, your company can be legally in Wyoming with all business happening in Europe, for instance. 

Second, every jurisdiction has their different rules and requirements. 

Today, Smart Companies are available across 3 continents in 5 jurisdictions

  • Seychelles 
  • Panama
  • Wyoming, U.S 
  • St. Vincent and the Grenadines 
  • Singapore 

Below, we’ll run a quick description of the main legal requirements in all our jurisdictions.

Seychelles legal requirements

  • You need only one shareholder and director to start a non-resident Seychelles company. This can be the same person. 
  • No requirements for a local director.
  • Light-weight entity structure: no mandatory auditing or tax filing as long as the company keeps its accounting records. 
  • No minimum paid-up capital required. 
  • Seychelles Smart Company is an entity type that is legally recognized as International Business Company or IBC. 

Learn more about Seychelles Smart Companies

Panama legal requirements

  • Minimum 3 Directors required to start a non-resident Panama company. Any nationality and residents in any part of the world are accepted. 
  • No requirements for a local director.
  • Light-weight entity structure: no mandatory auditing or tax filing as long as the company keeps its accounting records, Minutes and a Register Book.
  • No minimum paid-up capital required. 
  • Panama Smart Company is an entity type that is legally recognized as an International Business Company or IBC. 

Learn more about Panama Smart Companies

Wyoming, U.S legal requirements

  • You need only one shareholder and director to start a Wyoming company. This can be the same person. 
  • No requirements for a local, resident director. 
  • Flexible with limited liability: offers legal protection while light-weight in annual reporting on state level. Please note however that being in the US there’s always state + federal regulations to consider e.g. IRS (Internal Revenue Service). 
  • No minimum paid-up capital required. 
  • Wyoming Smart Company as an entity type is legally recognized as an Limited Liability Company LLC, S Corporation, C Corporation or Limited Partnership LP. You can choose the most suitable for you. 

Learn more about Wyoming Smart Companies.

St. Vincent legal requirements

  • You need only one shareholder and director to start a non-resident St. Vincent company. This can be the same person. 
  • No requirements for a local director. 
  • Light-weight entity structure: no mandatory auditing or tax filing as long as the company keeps its accounting records. 
  • No minimum paid-up capital required
  • This entity type is legally recognized either as International Business Company IBC or Limited Liability Company LLC. You can choose yourself.

Please note that there’s been heavy changes in the IBC law recently. Therefore if you’re considering this jurisdiction -> make sure to read this

Singapore legal requirements

  • One shareholder, one resident director and one company secretary required. Shareholder and director can be the same person, secretary not. Between 1-50 shareholders allowed.
  • No local or foreign shareholding requirements: regardless of if you’re resident/non-resident, you can own 100% of the shares.
  • Minimum paid-up capital S$1 for Singapore company registration.
  • Annual reporting is required: Annual Returns filing, Corporate Tax and Accounting.
  • This entity type is legally recognized as Private Limited Company or Pte Ltd. 

Learn more about Singapore Smart Companies.

 

Step 5. Understand your taxing 

If you’ve done your business plan (step 2) well, you already know what’s the big picture for your cost structure and funding. Corporate taxing is one of essential things to consider as well as how you are planning to get paid yourself. 

We aren’t your official tax advisor so ALWAYS talk to your local tax advisor about your specific situation. However, we are able to simplify things per jurisdiction so you can compare Smart Companies to suit you the best. 

Seychelles 

0% corporate income tax on foreign sourced income. This means all business income that is NOT generated within the borders of Seychelles is considered foreign profit. 

Panama

0% corporate income tax on foreign sourced income. Same as above. 

Wyoming, U.S

0% corporate state tax on foreign sourced income. This means all business income that is NOT generated within the borders of the state of Wyoming is considered foreign profit. This is state tax. Please note that federal tax may still occur. 

St. Vincent and the Grenadines

International Business Company (IBC)

This entity type has recently undergone some heavy changes. IBCs used to be subject to 0% corporate income tax on foreign sourced income, but since early 2019, IBCs are taxed at a 30% rate on all corporate income. Another change in the IBC law made the directors and shareholders register, which used to be private, public to all. 

Limited Liability Company (LLC)

Due to the changes in law, St. Vincent LLC is now the new IBC. 0% corporate income tax on foreign sourced income. This means all business income that is NOT generated within the borders of St. Vincent is considered foreign profit. 

Singapore

Territorial tax regime and tax incentives + exemptions based on your tax-residency. Also avoidance of Double Taxation, which means you are eligible for tax exemption if your corporate income is already being taxed in the foreign country and vice versa.

Territorial Tax regime

  • Companies and individuals are mainly taxed on Singapore-sourced income. Foreign-sourced income is subject to tax only when it’s remitted in Singapore.

Flat corporate tax

  • Singapore corporate tax is capped at 17% on chargeable income. Single-tier corporate tax is being followed, therefore dividends, capital gain etc. are not subject to tax.

Tax-resident company incentives

  • Tax exemptions on foreign dividends, foreign branch profits and service income. These exemptions are applicable if the foreign country has a corporate tax of 15% or above. 
  • 100% Tax exemption on the first 3 years of the company’s first S$100,000, above and rest with progression. 

Double Tax Treaty

  • Your company is eligible for tax exemption or reduction on any income that has already been taxed in foreign country. Also vice versa. 

 

Step 6. Register your Smart Company 

This is your easiest step in this handbook. We’ve included all the mandatory requirements into our incorporation package, so all you have to worry about is filling in your information and submitting.

To set up a Smart Company in your chosen jurisdiction:

  • Send us your needs and preferences at future@korporatio.com
  • We will send you an incorporation form to fill 
  • Once the payment comes through – we deploy your company to a digital dashboard and transfer ownership to you. 

Under normal circumstances, we do all of this under 48 hours. Voilà and done. 

 

Step 7. Apply for licenses and permit

Depending on your business, you might need to apply for licenses and permits. And this is certainly one of those areas you don’t want to neglect so do your homework. If you’ve set up a company in the US, for instance, the first thing you might apply is the EIN number (federal and state tax identification number). General business licenses, sales tax, occupational licenses and construction permits..and so on. We’ll do our best to help you out on these so don’t hesitate to reach out. 

 

Step 8. Open a bank account

Important. While we’ve listed this as step 8, we recommend looking into this earlier already. After setting up your Smart Company, you’re now able to apply for a business bank account. This account will be housing all your funds as well as act as the vessel handling all your payments in the future. It’s also important because it’ll keep your private and business finances separate from the get go. 

We will assist you in opening an e-bank account for your Smart Company free of charge. You’ll be able to send and receive all major currencies, which is a big deal considering many of our clients are very international. If you’d like to open a traditional, brick and mortar bank account in our available jurisdictions, we’re happy to help with that as well. We’ve written more about this, especially for borderless entrepreneurs, here

 

Step 9. Address funding 

There’s a variety of ways of doing this. Here, we’ve collected some of the more popular ways of funding a new business.

Self funding  

Your own money. Pretty straightforward: your personal savings or you bootstrap profit from day one. This is not nearly possible for everyone but if it is, this is certainly the easiest and most independent option of all. 

Debt financing 

In other words, a business loan. This is often a bank, an institution or development organization that weighs your likelihood of success in order to grant you this borrowed money. You’ll need to prove the lender that your business plan is solid and in some cases, you might need to provide collateral.

Depending on where your business will be registered and where your operations will be, a few debt financing options to consider are term loans, equipment financing, invoice financing and business lines of credit, for instance. Most lenders in this category don’t ask for equity. Instead, you’ll need to pay back the principal + interest.

Friends & Family 

This is actually a surprisingly big source of funding for new entrepreneurs so don’t underestimate this as an option. We’ve seen this happen in the form of investment (equity), loan (pay back with/without interest) and a variety of hybrids such as royalty percentage of your sales or a slice of your future earning potential. 

The good side of this? Trust. The bad side of this? Losing trust. Our advice is to keep things professional and as transparent as you can. 

Accelerator

This may not be your main go-to source of funding but you shouldn’t outrule it either! Many huge brands today started their journey from these incubators, getting access to a seed equity investment, mentoring, exposure and a platform to pitch a network of investors. 

Just to give you some reference, Y Combinator usually gives you $150,000 in exchange for 7% of equity, 500 Startups follows with $150,000 for 6% of equity, Upwest from Silicon Valley gives $17,500 equity free and ProSiebenSat.1 from Germany offers EUR1.5 million in advertising (multimedia campaigns) for a negotiable amount of equity. A pretty solid list of accelerators and their figures per country can be found here

Angel investors 

Angels are individuals who invest. Often post-exit entrepreneurs, executives, high net worths either individually or several people forming syndicates. A typical angel comes in during the more critical moments in your early days, helping not only with funding but also expertise and their network. The easiest way to find angels is through angel groups, startup conferences or simply networking. 

Venture Capital 

A form of private equity funding usually for startups in need of larger amounts of capital. From pre-revenue to rising market leaders, this a funding option for those with typically high scalability and therefore massive potential for profit in the future. Highly competitive, structured and organized form of funding. 

Crowdfunding 

Whether you’re seeking funding for your entire business, one product line or just testing market interest, platforms like Kickstarter or IndieGoGo can be great sources of funding in exchange for goods or services. What makes this option different from everything else here is their large reach of a global audience – you’re in it for funding, extra visibility and testing your validation all at the same time.

Going public with security tokens

Smart Company shares are tokenized by default into ERC-20 tokens modified for security laws. This is possible because in our model, your shares registry is a smart contract. 

Translation: your corporate shares are now digital, and they are legally recognized as securities. You can think of them as real-time digital assets that operate within a legal framework. 

This means, if your company owns an asset like real estate, you are able to trade ownership of that in the asset class of securities, with accredited investors. At its very essence, a security token is an investment contract and as the blockchain-enabled space of governing matures, there will be increasingly more models for incentivizing, trading and liquifying assets like these. 

 

Step 10. Start running, hiring, promoting and developing your business 

So this is where the fun begins. Basically, everything we talk about from Step 1-9 is just setting the legal grounding to enable what you actually want to do. We always say that incorporating a new company is just that, incorporation – it’s everything that happens after that truly matters. 

As the new owner of a Smart Company, you now have full access to your company dashboard. Think of it as a digital platform where everything you need to do to manage your governance is in one place. Some examples what you can now operate by yourself, without agents or service providers, whenever and wherever you want:

  • Manage your public/private company profile
  • Manage company finances
  • Buy, sell, trade and transfer shares
  • Automate tracking of in/out transactions to your cryptocurrency wallet
  • Manage treasury wallet
  • Voting and decision making
  • Smart escrow system
  • Automatic generation, e-signing, uploading and storing of documents following each corporate event for immediate legal effect
  • Communication channel for all shareholders

Now, congrats! It’s a wrap for this step-to-step guide. If you read this whole thing, you need to seriously drop us a line at future@korporatio.com and see how we can help you in getting started. 

Until next month, our friends! 

 

Useful resources that might help you: