[paulbaumgart]

Was it ever in doubt that the USA is the best place to start a business? You have an English-speaking domestic market that accounts for 30% of the planet's GDP, huge talent pools, easy access to capital, a culture that encourages entrepreneurship, significantly above-average rule of law, strong corporate veils, and a mostly tolerable tax burden. It ain't perfect, but you can't do better anywhere else in this solar system.

[workhere-io]

Was it ever in doubt that the USA is the best place to start a business?

America is no. 14 on the list of best countries to start a business in. http://www.forbes.com/best-countries-for-business/list/

[tptacek]

You need to be a little careful with these rankings, because they're subjective. Forbes, for instance, drastically prioritizes taxes for its rankings. The corporate tax rate in the US is higher than that of Ireland, and (as Forbes summary straightforwardly admits) that pushes the US down in the rankings.

For a startup, there are significantly more important factors to consider than the corporate tax rate, not least because most startups are managed to avoid taxable profits for the first several years of their existence (sometimes all the way up until IPO). For instance:

* The US offers at-will employment. Ireland, at the top of the list, has an Unfair Dismissal act that allows employees with a year of tenure to file claims not only if they're dismissed, but if they're "constructively" dismissed --- that is to say, if their role in the company is substantially altered in a way that allows them to claim that they're being "managed out" of the company. Constructive dismissal is a standard market clause for executives and acquirees in the US, but is certainly not a day-to-day feature of employment law.

* The World Bank Ease-of-doing-business index dings Ireland, putting them far below the US, for (among other things) the difficulty of enforcing contracts in Ireland; my tea-leaf-reading from the index's abstracted data is that you have a good certainty of enforcing a contract base in Ireland, but that the process is more time-consuming and expensive than in the US, which is ranked 50 places higher than Ireland (at #11 overall).

* Similarly, the World Bank dings Denmark (putting them 2 places below the US overall) because (among other things) it's significantly more difficult to incorporate in Denmark than in the US (where you can do it approximately as easily as ordering a non-one-click-compatible book from Amazon). Denmark also has mandatory severance of up to 6 months wages depending on tenure. 6 months wages isn't a big deal to any big company, but for a startup, it could change the calculus of when the company will need to shutter during a downswing to meet its legal obligations to employees; in the US, so long as you can make good on any current wages owed employees, you can run up until the last minute.

* Sweden, which Forbes ranks higher than the US, has intricate employment law rules that require not only a legally defensible just cause for termination, but also a good faith effort on the part of an employer to find another job for an employee even if just cause exists to fire them. Sweden also allows shareholders to personally sue directors in a variety of situations. There is no way Forbes actually believes Sweden is a better place to start a company than the US.

Here is a combination of factors that makes the US a good place to start a business:

* Extremely well-tested corporation law that makes the formation of a company, distribution of equity, resolution of disputes, and enforcement of ownership relatively predictable.

* Virtually no government interference with the formation of companies themselves, so that you could practically form a new LLC for every individual Github project you started, pay less for that than you would for hosting costs, and stand a very good chance of having those LLCs defend your interests in disputes.

* Multiple classes of corporation, convertible between each other, with some optimized for "click a button on a web page and create an LLC for my Github project", and others, not that much more expensive, that allow for multiple classes of shareholder, with the laws for those corporate forms predictable enough that hundreds of thousands of dollars of venture funding have become a standardized packaged product for promising startups (this is mind-boggling when you look at the societal infrastructure that enables it).

* A system of at-will employment that (for the most part) makes employment of workers almost risk free, so long as you don't play fast and loose with owed salary or tax withholdings.

* A tax system that is reasonably simple, not disastrously onerous, and in many ways optimized for entrepreneurs (for instance, the differing taxation schemes offered for salary versus distributions, or the ease of deducting business expenses).

* Extremely well-tested employment law that, among other things, makes it straightforward to retain 1099 contractors for one-off projects without risking their conversion into full-time employees with severance rights.

* One of the world's largest single borderless markets, such that you can start a company in Oregon and, with almost total certainty, be able to straightforwardly collect money for services (other than direct financial services, insurance, pharmaceuticals, and agriculture) from people in Florida.

* The host of the world's largest equities markets, so that investors in startups can plow money into companies knowing that if that company is the 1 in 20 that is going to go public, the most lucrative place for it to go public is the country of its origin.

The US is probably not the best place in the world to start a company. Forbes and the World Bank agree that Hong Kong and New Zealand are better. But running a company in New Zealand also requires you to domicile in New Zealand, which can complicate hiring, marketing, and (if you sell anything physical) channel delivery.

If we had single-payer health coverage, I think we'd be the best country to do business in.

[beagle3]

I agree with most of your points, but:

> A tax system that is reasonably simple, not disastrously onerous, and in many ways optimized for entrepreneurs (for instance, the differing taxation schemes offered for salary versus distributions, or the ease of deducting business expenses).

Is objectively wrong. The US tax code was over 71,000 pages last I checked (in 2009 or so), and that's just the federal part. I have dealt with taxes in several jurisdictions, personal and business - and the US is by far the most onerous, most complicated among them. The business part is a little simpler than the personal part, but both are batsh*t crazy when compared to a lot of other places.

The differing taxation scheme seem to be quite universal these days (I don't know if historically this wasn't the case). The rates are effectively higher in the US, though it seems if you are big enough you can use loopholes to counter that.

The VAT common in Europe is onerous at the personal level (roughly comparable to state/city sales tax, although usually higher), but is almost invisible at the business level - "VAT" stands for "Value Added Tax" - it only gets paid on the added value. If my business buys laptops and supplies them to a customer, that customer pays VAT but I do not (whereas US style sales tax gets collected twice in this case). Expenses seem to be just as easily deductible, if not easier.

Furthermore, the US is actively hostile towards anyone who does anything financially outside the US. Got a bank account outside the US? You have a lot of onerous reporting to do (FBAR/FATCA) with very steep penalties for non compliance. Your company has such an account, and you have signing rights? You are still personally liable with the same steep penalties. Onerous does not begin to describe this.

If you're already a US Tax Payer living in the US (by being a citizen or a permanent resident), the US is probably the best place for you to do business in. If you are not yet subject to the craziness that is the US Tax Code, you should factor a few tens of thousands of USD per year for proper reporting, which might make it a less desirable place.

[tptacek]

Consider businesses with a run rate of between 2-10MM USD as a group, first in the US and then in, say, Denmark or (to make it even simpler) Ireland.

Does the Danish or Ireland cohort tend to operate without the advice of tax accountants? My impression is that they do in fact tend to retain tax advisors.

The argument that the US tax system is particularly onerous is, I think, compelling only if you can demonstrate that it creates a de facto requirement for outside advisors that doesn't exist in other locales.

Otherwise, the complexity of the system (which is not what I was talking about) isn't much of an issue.

I have some experience with tax advisors, obviously, and they are not one of my big business expenditures. :)

[beagle3]

> I think, compelling only if you can demonstrate that it creates a de facto requirement for outside advisors that doesn't exist in other locales.

Optimization of taxes is a constantly changing, narrow field of expertise - and the complexity of even "simple" tax systems is such that even a cheap, mediocre tax professional will usually save you more in taxes (compared to a "layman understanding" of taxes) than they cost. In this sense, no country is simple enough to operate without a tax advisor. In fact, in Israel where I now reside, it is effectively a requirement to have a CPA prepare and sign off your tax papers, even if your business did not have a single transaction that year. However, the reporting is simple (compared to the US, anyway) such that even if you had quite a bit of transactions, your advisor can finish it in an hour.

For similar complexity, I ended up paying my US tax advisor approximately twenty times as much as my Israeli one. I pay for quality in both places, and the hourly rate of the US CPA is approximately twice as much as the Israeli one (that's true in general comparing both markets). The US one just has about ten times as much work to do.

> Otherwise, the complexity of the system (which is not what I was talking about) isn't much of an issue.

I guess a tl;dr of my point would be: In most of the world, a reasonable course of action is to make plans for business purposes and then adjust them according to tax considerations, whereas in the US the reasonable course of action is to make plans based on legal&tax considerations and then adjust them for business purposes.

I agree that looking at the bottom line, it's just another business expense - I was just disagreeing with your assertion of a reasonable tax code. It is the case in the US (much more so than in Europe and other modern countries, in my experience) that where and how you incorporate, how you assign your IP, and how you time your transactions (short term/long term capital gains) can have a huge impact on your bottom line. Makes it much harder to reason about your actions, which is a non trivial (and hard to quantify) cost.

[ThomPete]

No accountants are very important also in Denmark. Danish company tax system is very very complicated. So you are correct.

[jeffasinger]

In my state (New York), there is a sales tax exemption on all goods that are intended for resale, so in your case, only the customer would pay sales tax, and you would not.

However, you have to register with the state to collect sales tax in order to be allowed to buy things without paying tax.

[paulbaumgart]

To add to your point on equities markets: Baidu went public on the NASDAQ[0], and Alibaba is considering doing the same[1].

0. http://ir.baidu.com/phoenix.zhtml?c=188488&p=irol-faq_pf#261...

1. http://www.nasdaq.com/article/alibaba-considers-ipo-in-us-an...

[001sky]

The US is probably not the best place in the world to start a company. Forbes and the World Bank agree that Hong Kong and New Zealand are better.

What's (also) interesting about this short-list is a strong historical British influence.

[paulbaumgart]

Ooh, another one: as the world's reserve currency, the USD gets a purchasing power boost, so it's easier to expand US->rest of world than the other direction.

[paulbaumgart]

So say some journalists. The results speak for themselves.

Edit: In case it wasn't apparent, my "ever any doubt" question was rhetorical hyperbole. Any statement, no matter how self-evident, will have some people contradicting it.

Edit2: See mtrimpe's comment below; Forbes is probably optimizing for small business in their analysis instead of startups with potential for high scalability.

[workhere-io]

In case it wasn't apparent, my "ever any doubt" question was rhetorical hyperbole. Any statement, no matter how self-evident, will have some people contradicting it.

Your argument that the US is the best place to start a business is not in any way "self-evident", and you have provided no source or proof.

So say some journalists.

Their methodology seems sound.

"We determined the Best Countries for Business by looking at 11 different factors for 134 countries. We considered property rights, innovation, taxes, technology, corruption, freedom (personal, trade and monetary), red tape, investor protection and stock market performance. Forbes leaned on research and published reports from the Central Intelligence Agency, Freedom House, Heritage Foundation, Property Rights Alliance, Transparency International, the World Bank and World Economic Forum to compile the rankings."

http://www.forbes.com/sites/kurtbadenhausen/2011/10/03/the-b...

[tptacek]

Did you actually find their methodology? I couldn't. I read the summary of the most recent rankings, which explained why the US was so far down the list (taxes), but not the scheme by which they consolidates all the sources they used and created a rating.

Given Forbes' own editorial slant, I don't think it's entirely unreasonable to look at these rankings as a simple coatrack for Forbes argument that the US corporate tax rate should be lowered.

If you could find the methodology document for Forbes ranking --- anything similar to the World Bank's ranking, which is itself not totally great, would be helpful --- I'd be grateful. This topic comes up a lot on HN.

[paulbaumgart]

They left out "size and wealth of domestic market" and "access to capital," which I suspect are the most important factors beyond a minimal level of market fairness.

It's really not self-evident that the vast majority of successful companies are started in the US?

[insuffi]

As proven time and time again, most popular does not mean "the best".(especially, considering how many people there are in the US compared to any EU nation. That'd certainly explain the "number of successful businesses".)

Do you think those people starting companies would do any worse, if we placed them in, say, Denmark?

EDIT:Or maybe Israel, which has the highest density of start ups worldwide? I'd be curious to see the per capita numbers of countries.

[paulbaumgart]

> Do you think those people starting companies would do any worse, if we placed them in, say, Denmark?

Yes. Facebook, Apple, Google, Tesla, etc. would never have happened in Denmark. I'm really glad my parents did the annoying work of immigrating to the SF Bay Area from Germany when I was a kid. Otherwise I would have wasted years of my life doing it myself.

Did you watch the Elon Musk interview posted here the other day? He said more-or-less the same thing: it was really obvious, growing up in South Africa, that California was the place to be to make things happen.

Edit: I don't know much about Israel. They seem to be doing a pretty good job, based on what little I do know. It doesn't sound like they're at SF Bay Area levels yet, but making progress: http://aleph.vc/the-israel-venture-capital-index/

[rwallace]

One could argue those two factors are very important if you want to take a shot at creating the next Google or Facebook (which an unusually high percentage of people here might aspire to) and less important if you're aiming for a lifestyle business (perhaps more typical).

[paulbaumgart]

Yeah, that seems to be the underlying mismatch in assumptions that started this debate in the first place. Glad we've figured that out :)

[tormeh]

I think "size and wealth of domestic market" and "access to capital" are the two most important ones as well. China and maybe India are going to test this hypothesis sometime within my life expectancy, I believe. Exciting times.

[ThomPete]

Denmark is considered one of the best places to start a company, but that is based on the bureaucratic burden of starting a company.

It is a very different thing to actually scale that company to any significant size there.

The metrics used to measure these things are fundamentally flawed as they look at the institutional side of things not on the reality that is running a business and growing a company.

[workhere-io]

It is a very different thing to actually scale that company to any significant size there.

Yet, Danish companies like Lego, Carlsberg and Maersk (whose subunit Maersk Line in itself is the largest company of its kind in the world) seem to be doing fine.

[ThomPete]

they are old companies, we are talking getting it of the ground not old industries made in very different times

[NicoJuicy]

I can't believe Belgium is better for starting a business..

Paperwork takes forever (unless you earn less then 15.000 €/ year). Taxes are insanely high (highest of the world) Employees are the most expensive in the world

This list ain't correct, that's easy to see as a Belgian... Or it should be very irritating to start a business in United States.

I do believe one of the beste places is Ireland though

[for_i_in_range]

Taxes are the thing holding it back. With Obamacare, if you're in business in California making over $250k/year personally, you'll pay 53% in taxes (38% Federal, 12% State, 3% Obama).

If you're a small business owner that owns 100%, you really own 47%. You're a minority shareholder in your own company.

[danmaz74]

"30% of the planet's GDP" more like 20% actually, 25% tops

[paulbaumgart]

You're right, apologies. My number is outdated.