Incorporating, Banking & Payment Processing (Guide + Reviews)

Introduction​

After lots of years into several online ventures, I have gotten a good look of how stuff work regarding incorporating, banking and payment processing. Below you can find a good guide based solely on my experiences. It should not be used as legal advice but rather as a rough blueprint of what you will deal with.

Incorporating​

First, let's see how I believe you should structure your online business. Well in my opinion, if you intend on growing your business with time and doing what you plan to do seriously then you should definitely incorporate. Why? Well first of all, customers, vendors, suppliers as well as payment processors will take you more seriously. Also the fact that some of the above categories request you have a company in order to be able to register or work with them is a good reason to incorporate. In addition to that, having a company will save you lots of trouble when it grows bigger and will have taxes to pay (a lot of stuff and most importantly wages, expenses and other can be deducted and therefore taxes are smaller).

Offshore or not? My suggestion is offshore. I cannot speak for the USA (because I reside in Europe and things are a bit more lenient here than in the States) but I believe that an online business is better off through an offshore. Less hassle less taxes especially when most or all of the work is done outside of your country (for example you manage your business but all the work is outsourced in another country).

Paying less taxes should not be confused with tax evasion. Tax evasion is illegal and you should not do it but planning carefully so that you legally pay less taxes is smart.

Again choosing the correct set up (offshore or not) relies heavily on your business. Just to get an idea of how complex a business structure can be, imagine the following:

1) A trust in X country owning a holding company in Z country

2) The holding company owns several LLCs (limited liability companies) throughout different countries

3) Each LLC is completely separate from the rest and can perform a similar or completely different job

So it all comes down to what you will be doing.

Incorporating even in preferable offshore locations that you might have never heard before is really really easy and considerably cheap. Usually it takes from a minimum of 1 day to a maximum of 3 days. There are obviously some more bureaucratic places that will need 5-10 days but usually 1-2 days is the industry standard.

The cost varies on different services you might need which are added on top of the core cost for the incorporation. Usually the core costs for incorporating is between $500 and $1,000. This is for the 1st year. Then from the 2nd and onwards there is a recurring cost around as much as you paid for the core cost. So you pay $500-1,000 each year to maintain the incorporated company in your selected location. Additional services such as appointed director or shareholder, secretary, virtual office, mail forwarding and other are added on top and obviously increase your annual costs.

Advice: There are a lot of scammers out there who pose as legitimate incorporating services. Do your research before selecting a provider.

Banking​

Before even considering any payment processor you MUST set up your company's bank account. Most processors where you will register by using your company's name will obviously request your company's bank account to deposit your hard earned money. Companies that offer incorporation services usually offer banking services as well.

Now there are two things. If they can open a bank account in your selected country without you having to go to that country for signatures etc then by all means go ahead (for example most incorporating services offer a Belize company accompanied by a Belize bank account without the need for you to go there to open the account). Other countries though need you to travel there for an interview as well as signatures. If the agent tells you to pay X amount to open bank account and also requests your presence at Y country where the account will be opened then that means that you can skip your agent and go straight to that country to open the bank account on your own. That way you save the X amount. Obviously you will need to find which bank will accommodate your needs but you can easily find out by asking the agent which bank they use for the service they offer (most of the times they will display the info on their website).

Advice: Select the country VERY VERY carefully. Your bank account is the most important part of your business. The best selection would include a reputable location (e.g. Switzerland, Singapore, Hong Kong etc), a stable economy (see what happened to Cyprus recently) and a reputable institution (e.g. a good bank).

Payment Processing​

Most difficult part of all is selecting a good payment processor. All payment processors have at least one thing which is bad.

I have tried a lot of processors and the one (or more) you select depend on your business. I have found the following:

- For e-commerce, I would recommend Authorize.net.

- For online goods or services, the battle between PayPal, Google Checkout and Amazon Payments is tough but all of them are around the same fees (at least that was the case last time I checked) and my recommendation would be Google Checkout. Also if you decide to use Paypal, I urge you to take a look at 2Checkout first (in my opinion the slightly bigger fee is well worth the money as the anti-fraud protection they offer and generally the service is way ahead of PP) and they also allow you to accept PayPal as well.

- For all kinds of services, don't forget the good old Bank Wire which beats all processors. Of course, it doesn't offer protection to your customer but if you have an established relationship with your customer then it is an awesome alternative that will save you lots of money in fees. Obviously, I am talking about businesses which provide services or goods that cost a good amount of money. Bank wire (especially international) usually costs $10-50. Therefore it is useful to those offering services/goods with a price that makes it worthwhile and saves you some money in processor fees.

- Honorable mention: Skrill (formerly known as Moneybookers). Not available in the US but their service and fees are great. It is widely used in Europe.

Advice: Mix and match according to your needs. Try alternatives. Offer your customers a discount for some time if they use a specific payment processor to get them used to that processor if it leaves you a greater profit margin than another processor.

There are lots of stuff to learn and it would definitely be wise to spend some on research. Doing it in another way can decide whether your business becomes successful or not.

I hope this guide helps you even a bit with your current or future endeavors.

Good luck and happy holidays!