EU–INC – A new pan-European legal entity
eu-inc.org679 points by tilt 12 hours ago
679 points by tilt 12 hours ago
Speech: https://ec.europa.eu/commission/presscorner/detail/da/speech...
It's inordinately difficult and expensive to start an LLC or SA in some EU countries. It's even difficult and expensive to _stop_ an LLC and dissolve it. Huge amount of risk and cost on founders and a huge distraction from running a business. I think that EU-Inc _could_ be an improvement, but it needs to avoid the committee laundry list of ideas/requirements/form fields that plagues the EU startup ecosystem. My worry is that the end result will require notarized declarations of honour, financial plans stretching decades into the future, 30 page business plan documents, reams of corporate governance documents, and tons of other nonsense to protect against the perceived risk that someone who failed at starting a business once fails a second time. There needs to be UX requirements on the process from day one against which the end result is judged. (E.g. "a company should be able to register in x days", "a complete application should be no longer than y pages", "application costs should be less than z euros"). > a company should be able to register in x days Which EU bureaucrats will fully pass by treating this as "a company should be able to register in x days once the full set of documents has been collected". Companies are treated like persons legally and while I'm sure there is too much bureaucracy in many places, I'm also sure that there are important documents that should be required. For example to make sure that a company can be held responsible when it breaks the law. There are already enough loopholes to disconnect legal responsibility from profit-taking, and not every company is benign. Sure, if the documents cannot be acquired in X days for other reasons, that would undermine the tagline. But I don't think that's the main risk. Let's not forget that some requirements make sense. In Germany, the government recently decided that some minor applications to local governments must be answered within X days or else are automatically approved. But "minor" is important here... great for a small business that applies for a permit to renovate there outdoor seatings or whatever. I wouldn't want for company foundings to be auto-approved without submitting the legally required documents. > For example to make sure that a company can be held responsible when it breaks the law. In general this has nothing to do with incorporation documents. If a company unintentionally causes a large amount of damages, the company is going to get wiped out, but then you're just having the judge order the bank to transfer the company's assets to the victims. The owners of the company aren't particularly relevant except insofar as they now own a company whose value has been zeroed out, and they might be the ones to show up in court to argue against that being what should happen. If the people at a company intentionally cause a large amount of damages, the corporation is irrelevant. If your "corporation" is in the business of stealing catalytic converters and the police come to arrest you, the person with the sawzall in their hands is going to jail, and if that person was hired to do it they're going to be offered a deal to testify against the person who hired them etc. Pointing to your articles of incorporation at that point isn't going to save you. That isn't what LLCs do, actual criminal enterprises will frequently have not listed the true principals on the documents anyway, and the government is going to try to prosecute the perpetrators rather than the patsies on the documents. There is no real point in making this a burden for honest people. If they're honest then it doesn't matter. If they're not honest then you'd be a fool to trust what they wrote on a form anyway. > For example to make sure that a company can be held responsible when it breaks the law. This is the reason Germany hates small companies. Germany wants you to be a sole trader with no liability shield. Some people hack the system by registering a company in another EU state such as Lithuania. That's not a hack, if you operate the entity from Germany, it must be registered in Germany. It's often touted as a tax loophole, but it's not. Tax authorities do not care about you unless you actually make money, then they will come after you. Would the liability shield not generally apply to a foreign entity registered in Germany? Sure there may be special rules for non-compliance with specific tax obligations, but I'm talking about for general liability for other purposes, like a contract signed by the entity where no personal guarantee was given, or a harm caused by the corporation where the owner was not personally involved or negligent in causing the harm. Which law says it must be registered in Germany? It must be seated where the business happens for compliance with tax laws. But you may have a French S.a.r.l. in Germany and thus fall under their company law (with impact on publication responsibilities, company governance etc.) While for some cases there is room for abuse (like Amazon Kindle eBooks are sold to Germany by a company situated in Luxembourg, while only selling via amazon.de to audience with German residency) However my employer is a Dutch B.V. with headquarters in Germany, thus they avoid having to form a board with works council representatives as a German GmbH (or AG) of comparable size would require. It's not that easy if you want European integration and support the idea of "freedom of settlement" also for companies, which to me makes sense and it is known that some countries try to pull companies to register in their legislation with sometimes improper means. I would prefer to focus on Irish taxation, which extracts value produced elsewhere to Irish benefit. Workers rights are being unified, but that's a long complex process, as work cultures vary a lot and most companies fear German-style code termination, while it's an uphill battle to weaken it in Germany, thus it remains in national law's responsibility. And to be clear: a) works council exists with all normal rights, only they don't have board seats, which can be quite powerful, especially in public companies where one might form alliances with independent share holders. In the case here it's a 100% subsidiary of an American corporation, so they get their will one way or the other, board members may only delay b) I am somewhat priviligedge as I am no simply replicable conveyor belt worker, but somewhat specialized engineer c) I'm currently on garden leave period after 18 years in the company (incl acquisitions) due to a reduction, where works council produced a quite nice exit for me, so the only time I needed it, it worked well. But then I am somewhat privileged over others, making it hard to generalize. Specifically, it must be seated where the principal management of the business occurs. So if the executives and board meetings and books and records are strategically located in one country and most of the business operations are in a second, it's valid and probably even required for the business to have its tax residence in the first country rather than the second. It may very well have a permanent establishment and therefore some tax obligations in the second country, but that's different from the second country being the primary tax residence. There is a huge spectrum between "require impossible documentation" and "require none". Germany and EU are heading towards the former. German here. That's not true. What crazy documentation do you require? An ID, proof of residence, and a business plan?
(edit: you don't even need a business plan) That being said, everything about the process is annoying and you always have the feeling that you're doing something wrong or forgetting something. Together with some ridiculously slow processing times, it's the perfect combination to frustrate you and I'm sure it ultimately reduces innovation. But in reality, getting all the paperwork together is probably a couple of hours of work. You can buy services that do it for you for a couple of hundred Euros. > ... and a business plan? Why would the government need a business plan? It's none of their business what you want to do with your company besides a general description as "software development" or "consulting services" or whatever. > It's none of their business what you want to do with your company There are plenty of European member states that want the ability to control very precisely what you do with "your company". You want to call yourself "a software engineer"? Ooops... In the EU it seems particularly the German-speaking countries are borderline obsessed with a) titles, and b) whom may use those titles. See, for instance, https://news.ycombinator.com/item?id=34096464 Actually I think I might be mistaken that you are even required to make a business plan. It's listed as one of the steps on the states portal about founding. But it goes on to say that it's not technically required, just highlights its importance. https://www.existenzgruendungsportal.de/Navigation/DE/So-geh... Several sectors of economic activities have the potential for atrocious externalities and it's absolutely the government's business to know about these and make sure that you're following regulation to minimize these externalities. When you make your employees the neighbours sick (or straight up kill them) it's an enormous failure on the part of government. It's easy to be oblivious to that when you only think about software. Exhibit A: https://www.ctvnews.ca/montreal/article/battery-facility-acc... Except it seems that it's often large companies - typically those with lots of lawyers - who seem to get away with what I can only describe as "corporate misdeads" most regularly. "Following regulation" sounds great until it's revealed that corporate lobbyists have been helping (co-)write regulations to make sure that fair competition is quashed. It’s interesting how people can apply thinking like “there are problems, it’s not perfect, better not to try” to government, but also be pro starting businesses I don't know much about corporations, but why business plans are needed at all? I mean, for EU citizens. bank (loans), immigration and investors can be interested, but their interests are not covering every corporation out there. There’s absolutely no need to have a business plan to start a company in Germany. You articles of incorporation and they state a company purpose, but this can be something as simple as “do IT consulting”. Obviously, having a credible plan helps if you try to convince banks to loan you money or any such thing, but the act of registering a company requires no such thing. It's basically a proof of "most basic effort" that you're serious. You could probably note down some stuff on a single A4 and get it approved, it doesn't have to be a 40 page dossier. Kind of like fizzbuzz, just something really simple and most basic to get rid of the "easy scams" and so on. Edit: So "easy scams" are probably the wrong word, I initially wrote "riffraff" because in my mothertoungue that isn't so... disparaging, but what I meant was that it's used as "bare minimum filter" basically. That doesn't really sound like a barrier to the easy scams at all. It just sounds like something someone once thought would be a good idea and now everyone has to do it because that's the process. ChatGPT, give me a convincing sounding business plans for starting a bussiness in Germany. Done. > business plan This is the problem. Let me pivot. Let me fail. Let my investors (including myself) lose time and money in bad ideas. All the bureaucracy in the world didn’t stop Wirecard, but it sure as heck demotivated people from trying something new in Germany. Literally the whole effort this submission, is about is moving a tiny step towards "require none" but not go all the way, compared to how it is today. You chose the wrong submission to comment that on, in any "new regulation in EU" submission that might have been appropriate, but this move is quite the opposite of what you say is happening. > this move My point is that this move will not happen. I don't believe EU can overcome a huge and extremely motivated army of bureaucrats. This isn't an EU move, is it? > This isn't an EU move, is it? What, exactly, do you mean with "EU move"? I guess technically it's a "European Commission" move, but overall it's a European and EU move, unless "move" has some specific meaning to you. > In Germany, the government recently decided that some minor applications to local governments must be answered within X days or else are automatically approved. I believe it was just a crazy idea that was submitted recently. The closest real thing is 75 VwGO which requires a decision in 3 months. The immigration office has been failing to meet that requirement for years with few consequences, because enforcing that right is expensive and takes even longer. In most (all?) US states, you can just start a company. You file a form, usually online, with the state, and you ask the IRS, online, for an ID number called an EIN. Technically you have a valid company after just step 1, but good luck getting any sort of bank account without doing step 2. If you want to employ people, you need to file gratuitously obnoxious paperwork, but it’s still automatic. What’s the actual problem? Why should it be harder? Some states like California dislike small businesses in that they charge $800/year. But that’s pretty much it. In the USA California, Texas, Delaware etc all have different company registration and compliance processes. This has not damaged the business environment. It should be left to each EU country to decide how to manage their company compliance processes. Those companies can then easily trade all over the EU. You can easily set up a company in Ireland. The EU does not to over reach with one-size-fits-all regulations. That will eventually lead to it's dissolution. It needs to concentrate on maintaining a free trade area. Well yes and no. Yes you can form a company in Ireland while living in France. But you cannot get an Irish VAT number without a physical presence in Ireland. And if – for example – France learns that you are running an Irish company from France (i.e. you have a 'permanent establishment' in France), they'll want you to file and pay French corporation tax. Which is likely sufficiently annoying that you may as well have formed a French company in the first place. Its almost impossible for a fund from Germany to invest in a company from France and vice-versa. It is a significant problem! That sounds like a significant problem ... for either the Germans or the French to resolve. The only thing stopping foreign investors is law enforcement officers telling them to stop. The Germans can, literally, just not do anything except enforce basic property laws and foreign investment would pour money in. I'm put in mind of US citizens who seem to be the lepers of international finance, often when I see prospectuses they have a lot of text on the the front saying "don't show this to anyone from the US" because they don't want to deal with the compliance costs of US law. In that case it is the US's problem and the US has an easy solution. When people talk about larger regulatory frameworks they see the problem as the more permissive side is giving people options and want that shut down immediately. If the US started talking about global regulation to ease investment, for example, that means they don't intend to make it any easier but they do want everyone to adhere to US compliance ideas whether or not they do business in the US. It is a way for people with bad ideas to make the world worse. I'd assume the situation in Europe turns out similarly. Each of those places (besides Delaware, kinda) has economies larger than a large chunk of the EU. Yeah, we've realized that, that's why we keep iterating on the union :) Has it been effective though? The EU used to have a bigger GDP than the USA in 2008 now the USA is over 50% larger. Member nations are still dragging their feet on doing much of anything in the Draghi report and it's unclear if that will ever change. > Has it been effective though? At what specifically? At preventing another European war? Up until very recently, pretty good. No more world wars as of yet, but 80 years has past since the last, everyone with memories of how horrible it was, are almost gone, so I guess we're building up to another one. I'm hoping that at least Europe sticks together if it gets down to it. I'm not sure why GDP is such an important indicator to you, it's just the value of goods and services, what purpose is that supposed to serve? USA keeps getting a larger GDP you say, yet the population at large seems to be getting poorer, education and health care gets worse, and people finding it harder and harder to find somewhere to live. So what good does a high GDP actually give you in the world today? > USA keeps getting a larger GDP you say, yet the population at large seems to be getting poorer People in the US may be many things but poor is not one of them. The median household income is ~$85k and the median household lives somewhere pretty inexpensive. The amount of money Americans can afford to waste on things they don't need is unmatched. "Poor" isn't just "doesn't have N USD", purchasing power as just one example, matters so much more. But maybe it was a poor choice of words on my part, sorry. This is a commonly cited stat but it is mostly an exchange rate phenomenon that disappears when you adjust for purchase power. If you go by comparing GDP in dollars the EU recovered almost half this gap last year simply from the dollar dropping in value. My point is rather than almost anything can be made smooth if you have enough $$ pointed at making it so. One of the biggest issues with small economies is that they don’t have the capital spent to make it easy to do things yet; which is friction that helps keep them small. This is so ridiculously contrary to a Northern European existence that it's just funny. US is ridiculously more bureaucratic with lots of back office papers shuffled around by humans. US tax filing is hard to even describe to someone who never lived there. Official procedures can be made smooth by valuing them being smooth. You just pay. All the problems are known and have workarounds, it just involves money. That’s my point. It doesn’t have to be nice or clean or smooth, if there is a known solution which someone can just throw money at, at scale. The harder problem with these smaller countries and economies, is people haven’t figured out how to do that yet. So you end up having to track down x or y random lawyer, then hope they don’t screw you, etc. That's a very American approach. Just enable a grift economy existing purely because the original thing was bad. The Nordic approach is to make the original thing better. The end result is less wasteful. Also smaller. The ‘waste’ also counts towards GDP, as long as the money keeps moving. Lots of people have built homes and families off it. What really slows an economy down is when money stops moving.
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Damn, that's a pretty sleazy business practice. How do you feel about it? That would be a nice loophole to close. > However my employer is a Dutch B.V. with headquarters in Germany, thus they avoid having to form a board with works council representatives as a German GmbH (or AG) of comparable size would require.
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