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Setting up an untouchable foundation?

Aleph

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I've been playing with an idea of an end goal lately, spurred on by -what I believe- were some extremely shocking examples of gov't incompetence. Spent some time at my parents,where a news paper is available. Old habits and all...

It may be outlandish. My parents sure as hell wouldn't even want to consider it and even the 'entrepreneurs' (married dentists) I know, would probable frown on even the intention to keep what you earn.
So I'm turning to you!

As to the why of it all, you can read my intro here:
INTRO - Sick & tired of being fed up & tired of being treated like a mule

It would be a 4 part operations, consisting of a Private Foundation/Charity (Private Stichting in Dutch) and 3 LLC's spread across -probably- Europe. This would help with complying to the CFC rules, which will take effect January 2019 in B.

First step: setting up a LLC in Ireland. Ireland is within Europe, therefor "expected" as per Belgian CFC regulation, to be compliant. It's also cheap to set up an LLC and it doesn't take long. On top of that, taxes are much better than in Belgium, which would be helpful it the entire set up took longer to "save up" then anticipated.

Second & Third step: after earning and stacking within the 1st LLC, build out 2 more LLC's.
This would assist the avoidance of needing to charge VAT to customers, depending on which country would bill them.

Fourth step: establish a Private Foundation in Belgium, of which I would be the beneficiary.
A PF needs to have 3 (founding) members. Those, I would control, therefor controlling the PF.
The PF would be funded by ALL profit from the 3 LLC's in the form of donations.
Because there would be no profit left, there wouldn't be taxes to be paid. Just a few costs related to the LLC itself, which had already been covered.
Because the PF gets donations and doesn't practice any activity, it shouldn't be paying taxes and just bother with the beneficiaries of it, which would be me.

Personally, I would probably best have an income of (one of the) LLC('s), which can be low enough to not need to pay taxes on it. Supplemented by the like of an expense account, housing allowance and what not. This part isn't important yet at this point. First step is the 1st LLC.

This is, however, the gist of it. This way, I would be far faster able to travel again without having to charge my customers and arm and a leg for it, as I don't have to stack 33.99% corp taxes and up to 55% personal taxation. Or even worse, pay it all out as personal income.

Input on this draft of a possible end game would be very much appreciated!
 

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Bekit

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I don't understand. Maybe I just don't know what it takes for a freelance web developer in Belgium to legitimately (legally) get paid for work. But this seems like a huge amount of complication when your end goal is to just get some business. You'd be spending a ton of money upfront, but right now, you don't know for sure if you would ever be paid.

Why can't you just identify some local folks who have terrible (or nonexistent) websites, create a quick mockup for them, show them what you've created, and see if they'll pay you for it? Can you accept paypal?

Then, once you've gotten two or three of these up, you should have met the "experience" requirement that employers are looking for so that you can get a job with some stable income while further developing the side business (while all along, you're being paid, which validates the hypothesis that you have something that people will pay for)?
 
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Aleph

Aleph

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Hi Bekit. Nice to meet you and thank you for replying.

Maybe I just don't know what it takes for a freelance web developer in Belgium to legitimately (legally) get paid for work.
From the business owners I've talked to, it's all too clear I need to be able to write up invoices so they can deduct the site from their costs. So I would have to set up shop to get in the game...
On the other hand, especially with being unemployed, the gov't needs a layer of paperwork to be cool with me doing work on my own while not having a job. I think the local govt is one of the most schizophrenic in the world.

Why can't you just identify some local folks who have terrible (or nonexistent) websites, create a quick mockup for them, show them what you've created, and see if they'll pay you for it?
I don't even care at this very moment about payment. I thought to even do a few for free to get the experience of a real customer. But I'm hesitant with the paperwork requirements.

Can you accept paypal?
Do you think it would fly like that? Need to find out as I hadn't even thought of involving them.

It IS a lot of (paper)work to put it all together and the idea was more to "build as I earn". I'm just so fed up with politicians squandering money on themselves or F-35's while the programs they subsidize push up rents etc. Might be a pet peeve of mine.
 

Bekit

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Hi Bekit. Nice to meet you and thank you for replying.


From the business owners I've talked to, it's all too clear I need to be able to write up invoices so they can deduct the site from their costs. So I would have to set up shop to get in the game...
On the other hand, especially with being unemployed, the gov't needs a layer of paperwork to be cool with me doing work on my own while not having a job. I think the local govt is one of the most schizophrenic in the world.


I don't even care at this very moment about payment. I thought to even do a few for free to get the experience of a real customer. But I'm hesitant with the paperwork requirements.


Do you think it would fly like that? Need to find out as I hadn't even thought of involving them.

It IS a lot of (paper)work to put it all together and the idea was more to "build as I earn". I'm just so fed up with politicians squandering money on themselves or F-35's while the programs they subsidize push up rents etc. Might be a pet peeve of mine.
I definitely get that aspect of it! Crazy how paperwork creates such a giant barrier to entry, just to get started doing something simple. On the flip side of it... the people who get extraordinary results are likely the ones who put in extraordinary effort.

So is your end goal to create a structure where you can get paid and retain all of your earnings? i.e. no taxes? Could you be better served by entering an industry where the margins are high enough to allow you to earn a comfortable living despite complying with regulations, laws, paperwork, and all that stuff?

I can't comment on the viability of your 4-part operation, other than to recommend that you carefully consider the risk of being slapped with tax evasion...which could be much more costly in the long run than simply looking for a fastlane opportunity within the constraints of the current regulatory environment.

By the way, you might consider scrolling through the posts in the Asset Protection / Taxes / Legal section of the forum.
 
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Aleph

Aleph

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Seems like even PP needs to have a business name...

On the flip side of it... the people who get extraordinary results are likely the ones who put in extraordinary effort.
I agree for the most part. However, all this paperwork detracts from putting in extraordinary effort. With the words of Peter Drucker:
“Efficiency is doing the thing right. Effectiveness is doing the right thing.”
Could you be better served by entering an industry where the margins are high enough to allow you to earn a comfortable living despite complying with regulations, laws, paperwork, and all that stuff?
Don't understand what you meant here. Is it possible to do business without all the paperwork?

I can't comment on the viability of your 4-part operation, other than to recommend that you carefully consider the risk of being slapped with tax evasion...
Yes. Even the line between tax avoidance and tax evasion is constantly under attack!
Setting this structure up would be cheaper than Belgian taxes, once on a roll. And with the money I save, I could still heftily donate to animal shelters or soup kitchens or ...
Question is if it sticks, though!
 

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George Appiah

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A "kid" I'm mentoring in faraway Uganda (East Africa) has registered an Estonian virtual company (via their e-residency program) just to have a European presence... and is doing good business offering website design, development, hosting, and local SEO services for restaurants scattered throughout Europe.

Man, I think you're unnecessarily complicating matters for yourself.

If this scheme you're conjecturing offers some sort of tax advantage, I'd worry about that when the big dough starts to flow in.

At this stage, your primary preoccupation should about one thing: which group of people/businesses can you serve and how can you best serve them? How can you get them to know you, to like you, and to trust you enough to hire you?
 

Tommo

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Great thinkng about how to structure AFTER you have earned a dollar or euro. When you have a lot of Moolah, get a good accountant to set up a structure,maybe a trustee type would be simpler. But first get some sales the rest is wanking.
.
 
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Aleph

Aleph

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Thanks, guys. I do tend to overthink matters :innocent: :halo:

What your mentoree "kid" is doing is basically how I want to, in time, expand. I'll start with web dev & hosting packages to not spread myself too thin. As I pick up skills or learn who to outsource to, I'll be offering more services & value to customers.

@Tommo, I think it's a good habit to go forward with at least an idea in mind, but it didn't have to be so concrete yet. Thanks for the 'trustee' idea. I'll be checking it out in due time.
 

Kak

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I am fascinated by legal tax minimization, how it drives business strategy and intergenerational wealth preservation.

That said, I generally can take "this is how I think we should do this" to my tax team and they will make it work, or tell me why it won't. I'll need more sophisticated tax folks as my businesses get larger. I will also spend a lot of time and effort planning how to run my business from an international perspective the way say an Apple or ExxonMobil would.

Interesting discussion. Not sure about the OPs strategy though.
 
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Aleph

Aleph

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That's defo on point, @Kak. Although, for me it'd be a bit further in the future.
Still an army of one here.

Good to know you enjoy the topic as well as I do. What did you do to minimize the damage?
 
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Andy Black

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I do tend to overthink matters
“Overthinking, the art of solving problems you don’t have.” (Unknown smart dude.)
 

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Aleph

Aleph

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“Overthinking, the art of solving problems you don’t have.” (Unknown smart dude.)
Problems I would LIKE to have, though ;)
Don't like to be caught with my pants down. It's a fine line between prepping and worrying...

I'll raise your smart anonymous guy with a smart famous one driving your point home.

"I've lived a long life and endured many hardships. Some of which actually happened."
- Mark Twain
 

biophase

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How do you get your money out of the foundation?
 

Mr.C

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I'm not yet a qualified accountant, so take this perspective with a grain of salt... But I did spend 8 months this year training with a practice here in Ireland.

Based on my experience, I don't think you "donating" the profits of your Irish llc to your Belgian/Dutch foundation will be allowable for tax purposes. By this, I mean that you'll have to pay corporation tax on the profits showing up in the books of the Irish company. Charitable donations or anything of that sort are generally not deductible from your profits here (I believe that there are certain situations in which you can use them as a tax credit, which is a separate consideration). Revenue - Ireland's tax authority - has put this in place to prevent what you're talking about... You also can't use client entertainment expenses, meals etc. for tax deductions (per the letter of the law, at least).

If you end up doing this, I would recommend you talk to qualified tax professionals and see what they advise you to do.
 
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Aleph

Aleph

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How do you get your money out of the foundation?
I would be the benefactor of the foundation, so it'd (probably) be a combo of paid-for-me and allowances. I don't intend to keep living in Belgium, so I might even use the foundation as a holding corp.

I'm not yet a qualified accountant, so take this perspective with a grain of salt... But I did spend 8 months this year training with a practice here in Ireland.
That's more than the time I've already invested in the matter. And I asked to be on the safe side.

By this, I mean that you'll have to pay corporation tax on the profits showing up in the books of the Irish company.
On one hand, I'd expected something like this would be a possibility. Could you tell me: I was under the impression that for the Belgian government, European cities just "have to abide" to CFC rules. At least, that's what I 'heard'. But maybe you came across a case to put this into perspective.
It's a bit tricky to forecast, as I'm not only doing it for tax reasons, though having to pay 12.5% would be acceptable.

If you end up doing this, I would recommend you talk to qualified tax professionals and see what they advise you to do.
That is my plan for tomorrow, actually. To set up a meeting with an advisor. The way I'm counting, it should be saved within a year if everything goes well. Otherwise 2.
Not going into battle without proper prepping. In the end, the house always wins.

Maybe at this point, a better question would be how to spot a good accountant. I've been reading some horror stories on here I don't wish to copy cat.

Thanks for the pointers!
 

Mr.C

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I won't speak out of turn here. I haven't handled reappropriation of profits across EU borders... but I have dealt with inter-company trading within the country (and across the border into Northern Ireland, which is considered a separate country).

When money shifted from one company to the other, it was recorded as an inter-company trade, which were all factored in when we were preparing accounts for the parent company (as far as I remember).
Regardless, the money will be taxed somewhere... that's practically a guarantee.

It seems unlikely to me that the Revenue Commission would turn a blind eye to zero taxes being paid by an active Irish company receiving substantial revenues. If it was as easy as that, a lot of people would be doing it... and if there was so many people doing it, Revenue would crack down on it to make more money for themselves.

I doubt you could make a case for giving away all of a company's profit as donations, particularly if it's going to another company, and the first company in question is a LLC (not some sort of non-profit organisation).

I can't see there being too many issues as long as you pay corporation tax as required (12.5% on taxable profits, as you know).

There is various ways of avoiding tax on a larger scale... often employed by bigger companies like Google, Microsoft and the like. You can read more about one such strategy here if you like: Double Irish With A Dutch Sandwich

But as I said, take this with a grain of salt - I'm not yet a qualified accountant. I'm only speaking from my own experience as a trainee, based on the practices I've observed. Meeting with an experienced tax professional should help you out considerably.

Best of luck!
 
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Aleph

Aleph

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Thanks. I'm mentally entertaining different possibilities, one of them that all of this will turn out to be a big joke and I've totally misunderstood corp law & taxation. Then again, Belgium is the country that beat Kafka at his own game.

The meeting -somewhere this week?- could really go any way, also depending on how much the acc is willing to think with me. And I can keep you guys posted all the same.
 

Bekit

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Maybe at this point, a better question would be how to spot a good accountant. I've been reading some horror stories on here I don't wish to copy cat.
Just saw a really good series of suggestions for interviewing accountants on this post (copied below):

How long has your firm been in business?
Ask yourself, do you prefer a firm that has an established record or a new firm that is developing their best customer list.
Do you offer an initial consultation and is there a charge?
Many firms offer a free initial consultation and should be able to given an estimate of the fees for the services you require.
Can I contact any of your current clients for a referral?
A reputable firm will be willing to provide you with references.
What education have you recently completed in your area of expertise?
CPAs who have an active certificate to practice public accounting are required to complete a specified amount of continuing professional education. CPAs receive education credit by attending courses, writing articles or teaching.
Are you a member of a professional organization such as the American Institute of Certified Public Accountants?
CPAs who are members of their local and national associations take pride in their profession. They acknowledge that as a CPA they represent not only themselves but the profession as a whole. Professional associations provide opportunities, tools, training and the resources for CPAs.
What other certifications are held by CPAs in your office?
The importance of this question will depend on the type of services you need. Look for the following (this in not intended to be an inclusive list):
  • MBA - Masters in Business Administration
  • CFP - Certified Financial Planner
  • PFS - Personal Financial Specialist
  • ABV - Accredited Business Valuation
  • CFE - Certified Fraud Examiner
  • CBA - Certified Business Appraiser
  • MCBA - Master Certified Business Appraiser
  • MBT - Masters of Business Taxation
  • CFA - Chartered Financial Analyst
  • RIA - Registered Investment Adviser
 
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Aleph

Aleph

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@Bekit, you're an absolute gem!

[EDIT: didn't get to gif to behave as expected so cut it]
 
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Aleph

Aleph

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Alright. So for those who want it, here's an update for the Belgian situation.

I met with a legal advisor and a charity accountant together. Reasonable size accountancy firm where they combine different specialties. Which was awesome for the meeting as they could bounce off one another.

Short conclusion is this:
- Apparently, the Private Foundation route wouldn't fly. At least the way they understand the law. (It could still work, but it's either gonna be expensive or risky)

- Didn't get to the CFC rules but he didn't seem convinced if would be accepted

- Even with the willingness to pay taxes in (say) Ireland, the Belgian VAT office would see it as an EVASION of taxes and would not be happy. Legal advisor told me of a former client would got penalised by them for "an amount you can't pay back in a lifetime"

I'm doubting it'd really be an "unpayable" amount for a fastlane business, but the goal wasn't tax evasion. Tax avoidance is cool as it doesn't result in penalties or jail time, so the best way for me to go is just set up shop as a sole proprietor.
LLC and that sort of stuff can come later, after moving out.

Thanks for the pointers and feedback.
I'll keep the list for when I'm in the market for a small business accountant, @Bekit.
 

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