If you’ve ever chatted with us on our website, there’s a good chance you’ve talked to Stefano, your friendly customer service representative (in real life Korporatio founder) who will answer all your questions from a to z on Smart Companies.

However, since many of you are asking similar questions, we wanted to gather the most popular questions in one place: right here. This is also an attempt to give our Stefano a quick coffee break as it’s likely that whatever is puzzling you has already been on the minds of a few others too 😉 

These are all real questions from you guys on our chat. We chose 10 most common ones, ranked in no particular order.  

Ready? Let’s go. 

 

1. “What does it really mean to have a blockchain entity? How does my company connect to blockchain?”

When we say that Smart Companies are blockchain-powered companies, we mean three things: 

  1. It is an entity that “runs” on Ethereum blockchain i.e. has a digital dashboard for all company governance related actions that you control directly as the owner / shareholder 
  2. Smart Company shares are tokenized automatically 
  3. Jurisdictions we operate in see Smart Companies as are private limited companies. There is no difference between a Smart Company and a “traditional” private limited company from a legal standpoint 

How is this different from traditional companies?

Firstly, traditional companies do most of their company governance actions via their agents and physical documentation: changes in shareholding structure, board voting, signing and filing documents and so on. In short, you need agents to do such tasks who typically charge per item and only operate during office hours.

Secondly, traditional company shares are “normal” company shares. Tokenizing these in Smart Companies means your shares have a digital representation on the blockchain, which open the doors for things such as real-time shares transfers and trades, fundraising and basically digitizing anything your company owns as an asset. 

2. “Is this completely legal?”

Yes. The Smart Company model is 100% legal because in corporate law, they are considered private limited companies. If you are thinking DAOs (Decentralized Autonomous Organization), you’d be right to question this as their legal status is unclear and not defined to date, but Smart Companies are different. Think of them as legal DAOs. 

Rule of thumb: we don’t touch anything that isn’t compliant in the jurisdictions we operate in. 

 

3. “What does it mean to have tokenized company shares?”

Smart Company shares are automatically tokenized. In other words, proof of your ownership of the company is now a digital, cryptographic representation.  

These tokenized shares are ERC-20 tokens modified to comply with securities law i.e. security tokens. In the Smart Company model, one company share is represented by one security token, so if you set up a company issuing 1,000,000 shares, your Smart Company will have the same amount of security tokens. 

What is a security token? To put simply, it is a cryptographic representation of tangible real-world assets. If you’re new to this space, read our earlier post about this topic here. 

 

4. “What happens if your company goes bust?”

Ha, love the trust guys!

Jokes aside, this is a legit question and deserves full understanding. Because Smart Companies are legally recognized as private limited companies and they are registered through a licensed incorporation agent, the worst case scenario for you (if we go out of business) is that you would run your company in a “traditional way”. 

By traditional here we mean the way you would incorporate your private limited entity anyways – with the bonus of having a digital dashboard attached to it, regardless of what happens. The only thing worth noting here is that the dashboard wouldn’t have any new features if there’s no team to update it, that’s all. 

 

5. “What’s the pricing and what’s included in the package?” 

We incorporate Smart Companies and we charge per annum. Our pricing varies per jurisdiction and depends on the services you need. Go to ‘jurisdictions’ and click “incorporate now” which will take you into our form. Page #3 has pricing based on your selected needs. Please note that the price includes Smart Company incorporation and its first year’s annual fee. The following years (i.e as long as you want to keep your company alive) are also charged once a year, slightly lower prices than the original setup, again depending on your needs. 

Our standard packages include the full set up of a new Smart Company: incorporation, registered agent services, business address, digital mail forwarding, Smart Company deployment, digital dashboard etc. Details of what each package includes vary between jurisdictions but the basic rule is that they include all the mandatory requirements to get you up and running. 

Here’s a standard list of what we include per incorporation package. Select one of the following jurisdictions and scroll all the way down of the page:

 

6. “Is banking included?” 

Nope. We are not a bank and unfortunately cannot open corporate bank accounts for you. What we can do, however, is introduce you and help you apply to suitable banks, traditional or neo, but at the end of the day, it is always up to the bank whether or not they’ll service you or not. 

Will we do this free of charge? Yes. 

 

7. “Which online bank would you recommend?”

Depends on your needs and the purpose of your business. Each jurisdiction we offer has plenty of options so we’d need to understand your situation better to make any recommendations. We use Transferwise ourselves as our operations are global and Transferwise has both Swift and IBAN. We’ve also written about business banking specifically for location-independent entrepreneurs. 


“I need crypto banking, can you help?”

Blockchain, yes. Crypto, nope – sorry. Can’t do much here, not up to us. If you deal with crypto, we suggest a dual model holding and a subsidiary to get better chances on banking. 

 

8. “How are you different from all the other incorporation providers?” 

We operate at the intersection of blockchain x corporate governance x corporate law. And as far as we know, we are the only ones in the world doing what we do today: 100% compliant companies that run on the chain with tokenized shares. 

 

9. “Tax residency: I am a citizen of country X, my co-founder of country Y. We are both based in country Z, our business is online with clients all over the world and would like to hire international employees. How do we do this?” 

And you thought you were the only one, didn’t you. 

We hate to be vague here but the only right answer is: it depends. All our jurisdictions and the Smart Company model itself supports your location-independent lifestyle, just make sure to separate these and address them one by one: 
a) your personal tax residency
b) your corporate tax residency and
c) your employees’ tax residency and respective employment law 

Disclaimer: always, always do your homework. We are not tax advisors. 

A. Your personal tax residency

This is typically where you have your permanent address. In general, your permanent address is defined as the place where you stay for more than 6 months of the year, but this also depends as increasingly more countries are taking into account more than just absolute days spent abroad. If you’re a U.S citizen, for example, your worldwide income is subject to U.S income tax, regardless of where you live, with some exceptions. 

If you’re completely nomadic with no permanent address, you might be exempt from tax residency but do note that you are also likely to face challenges with certain setups: Smart Company setups will ask for proof of address and most banks will prefer not to have clients hopping from one country to another. 

B. Your corporate tax residency

What usually determines this is the country of incorporation and/or its central management and control. Management and control = where strategic and central business decisions are being made.

Most of our clients are non-resident companies, also referred to as offshore companies (i.e. business management and source of income do not happen within the borders of the country of incorporation), therefore you might be subject to 0% of corporate tax in the country of incorporation but please note that this doesn’t mean your company is off the hook from where you and your co-founders are controlling the key business decisions. 

C. Your international employees 

Unless you’re planning to expand your business with legal setups into the countries where you are planning on employing talent, you might want to hire independent contractors. We just wrote about this, learn more here. 

 

10. “How can I try your demo?”

Our demo works on ETH main net but because current gas prices are going wild, we recommend testing things here on Rinkeby.

Psst – if you’re new to our community please note that we are in the middle of migrating to xDai as we speak! Layer 2 of Ethereum will provide more stability so stay tuned as we will be launching very soon. 

 

That’s it folks! The top 10 of most commonly asked questions in our chat.

Still have unanswered questions? Please drop us a line at future@korporatio.com and we’ll get back to you in no time. Until next month, my friends! 

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We are team Korporatio. Learn more about Smart Companies or drop us a hello on Discord!

Smart Companies