[3 minute read]
Have you heard of Stripe Atlas yet? It’s a service offered by Stripe, a well-known payment processing platform.
Stripe is so popular because it offers a more integrated and user-friendly solution than, for example, PayPal. So, it makes sense that they would come up with another product to monetize on their huge customer base.
Stripe Atlas is a good idea. Not revolutionary, but good. The problem with it, is that it’s not for everyone.
Digital nomads, in particular, will find that Stripe Atlas is too rigid and doesn’t offer them the best solution for company formation.
This article will explain why in detail and provide an alternative solution.
What is Stripe Atlas?
Stripe Atlas is said to be the ‘startup in a box’ for entrepreneurs.
The service basically offers fast and remote company formation.
Those that form their company with Stripe Atlas can receive some additional discounts for chosen services like Amazon Web Services.
While Stripe Atlas is marketed pretty well, when stripped down to its core, it’s just a company formation service, but restricted to a single company structure.
Stripe Atlas only lets you form a corporation in Delaware.
This is disappointing because there are more suitable company structures, and 50 states to choose from.
Stripe Atlas for Digital Nomads
Let’s look at the main reasons why Stripe Atlas might not be the best solution for you if you’re a digital nomad.
Corporations are complicated to run and more expensive to maintain than other business structures.
While they are useful for certain business types, they have a lot of downsides.
The truth is that you probably don’t need to form a Corporation. For most people, a Limited Liability Company (LLC) is more than enough.
Corporations require that you hold regular board meetings, you appoint a bunch of people as the directors, and generally speaking, you have to do a lot to maintain your corporation status.
All of this costs time and money.
Stripe Atlas only gives you the option to form a corporation, sentencing you to lengthy and unnecessary paperwork.
Here’s a biggie—when you form a corporation with Stripe Atlas, you (your corporation) will have to pay 21% tax to the U.S.
The tax for corporations is a flat 21% rate which, unlike personal tax rates, doesn’t regularly change to account for inflation. The flat rate can only change as the result of the Congress passing an amendment.
Before the tax reforms of 2017, introduced by Trump, the corporation tax rate was 35%.
Going back to the LLC, it utilizes a different taxation method. An LLC is a pass-through entity which means that the LLC’s profits and losses are taxed at your personal level.
If you have business partners, you just divide the profits and losses among you, and each pays tax at their personal level.
The U.S. doesn’t tax non-resident aliens, so if you’re not living in the U.S. you’ll be paying in your country of residency.
The 21% tax your corporation pays is separate from the tax you’ll pay as an individual on the salary/ dividends you receive from your business.
In other words; a corporation is a legal entity that has to pay tax. Whatever the corporation makes is taxed at the 21% rate. Then, the corporation will pay you, either a salary or dividends, and you have to pay tax on those earnings.
The money will be taxed twice.
Of course, you can try to avoid this by paying yourself very little so that you don’t cross certain thresholds, but it’s unnecessary and a headache.
An LLC is also seen as a legal entity but it passes the profits directly to the members and doesn’t have to pay tax. It’s an easy solution to double taxation.
Corporations are high maintenance. There are so many rules and procedures that you have to follow. On top of that, the annual filing fees can cost a small fortune.
This is why most small to medium businesses choose to incorporate an LLC. They’re easier and more friendly.
Stripe Atlas chose to only offer company formation in Delaware.
While Delaware can be a great state for digital nomads to form a company in, there are also others that are worth considering.
You can opt in for a state that offers you more privacy or doesn’t require annual filing.
Stripe Atlas Alternative
If you don’t care about issuing stocks and attracting outside investors, then there isn’t a reason for you to use Stripe Atlas. Unless you’re into over paying taxes and complicating your life…
Assuming that you’re not into that—there’s a simpler solution.
Why Form an LLC?
We mentioned the benefits of an LLC over a corporation throughout the article, but let’s go into more detail.
Just like with a corporation, an LLC is also a separate legal entity. It has its own bank account, it can own assets like property, employ people, and give you liability protection.
The difference is that it doesn’t burden you with as much paperwork and tax.
The maintenance of an LLC is much more straightforward. There are no special requirements to maintain the LLC status apart from the annual filing. However, some states don’t even require that you complete your annual return.
Another big benefit of forming an LLC is the flexibility it offers and how easy it is to implement changes.
You can change an LLC to a Corporation at any point. You can amend the operating agreement. You can add and remove members. Everything is simple.
Form an LLC Today
Fill in a short form and let us take care of the paperwork.