Do Not Rent or Buy an Office Space
Why? In most places, a definite, fixed business location means you will be taxed and regulated. Probably you’ll be pressured to get a business license of some sort. Even in tax havens. You can and will be sued. Your mobility will be limited from the start.
Alternative? Work from wherever you happen to be. Get the smallest lightest-weight portable computer you can find. It can be set up in a hotel room. With a portable hard disk or flash memory, or cloud storage you can store computer software, files, mailing lists, form letters, and more information than you’ll ever have time to read or use.
You needn’t spend anything on rent or a secretary. Email and Skype/Zoom can take care of most communication needs. You can receive hard copies c/o local hotels as an expected guest with a reservation that you can cancel later. If you will be in the same town for a while, maildrops cost between $10 and $30 per month, depending upon the level of service and the location.
For a simple mailing address use a cheap mail-drop service. Lists of these services in various parts of the world are to be found online. These small often franchised businesses like Swiss Post or Mail Boxes etc. can do more than just take messages and receive mail. They can handle your banking (by depositing in-coming checks). They can fill orders by preparing mailing labels, logging incoming charges on Visa or Mastercharge, sending out your product, or instructing someone else (such as a manufacturer or freight forwarder) to do so.
This process is called “drop shipping”. If you have several mail/message services and something goes wrong in one country, you simply divert future business to another mail-drop in another country.
If you do not wish your personal whereabouts known, your mail-drop can re-mail letters for you. Your correspondents will get letters and packages postmarked from an exotic location far from where you may actually be living.
Some mail-drop services also provide conference rooms and an office setting if you actually wish to meet clients at the address they write to. Five-star Hotel lobbies are perfect for meeting new clients too.
Clients won’t be put off by the fact that you do not have a conventional office. Generally, we will schedule appointments & meet clients in lobbies of expensive hotels where we are not actually staying. Not only are we not known to the hotel, but we also don’t even live in that neighborhood! By reducing overhead to a tiny fraction of rent on a normal office lease, if a business venture doesn’t work out, very little is lost.
If things do work out, your profitable operations are still better off being kept portable and judgment proof. If your “office” is ever robbed, there is going to be little or nothing in the way of files, products, customer records, or money for intruders to seize.
Do Not Hire Permanent Employees
(or any employees if you can possibly do without them)
Why? In general, once you have even one regular employee, you must spend too much time and money to comply with local laws. Typically, these include withholding taxes and social-benefit payments, plus mandatory pension plans and insurance of various types. This tends to be the case even in tax havens where there is a maze of regulations to “protect” the workers. Your employees in many places will get paid for fictional sick days a few holidays every month, and eight-week vacations.
In some countries, including France or Italy, you can’t just fire someone. He may be legally entitled to five or ten years of severance pay, maternity/paternity leave, sick leave, and other paid leaves-of-absence. In many places, an employee cannot be fired even for stealing or being lazy but must receive notice, severance pay, and other costly benefits.
A dismissed, disgruntled employee with time on his hands can, and probably will sue you for sexual harassment, discrimination, providing an unhealthy environment with second-hand cigarette smoke, and a million other clever things. In many countries, the government or the legal system will provide them with free lawyers and a no-risk situation encouraging ex-employees to have a go at their ex-employers.
One of our clients recently was bankrupted because he had to pay a small fortune out to a female employee (secretary). She “proved” in court that she was just as qualified as a male salesman who earned 50 times as much as she did on commissions. Because she asked for and was not given the opportunity to sell insurance.
This was deemed discrimination. Forget that he needed a secretary and the salesmen were already selling more policies than he could cope with! By court order, she became entitled to 10 years worth of “wrongfully denied compensation” at the rate of the top salesman.
Hire Independent Contractors
Besides suing, an employee may betray you or blackmail you. It is amazing to us that everyone does not use “independent contractors” for everything.
These people are small-scale entrepreneurs who will do whatever you need on a one-time (or many time) negotiated fee basis.
The other side of the coin is that if you are looking for a job, you can sell your services better by being employed as a rep of your own corporation which you have set up to do any such jobs. You do the work but are employed by your own corporation. Presto. You pay no tax. The employer has no withholding taxes, no social benefit payments, no mandatory pension plans, and no unemployment insurance.
Big Brother is not in bed with you or your employers. It is a win-win situation. The employer avoids having to cope with employees or renting a fixed establishment. He avoids the problems of having permanent staff.
Do Not Keep Serious Money Invested in Inventories
When choosing the business or profession you will engage in, be sure that you do not have to keep any expensive products in stock at your own expense.
This does not mean that you can’t sell expensive products. It is just that you should make a deal in advance with a manufacturer that your orders are to be filled by them. It’s best you will have a certain time (usually 30 to 60 days) to pay. If you are selling information, this information (whether books, pamphlets, or pictures) can be printed up in small quantities as dictated by orders.
The ideal product is computer software. It is nothing more than electronic impulses stored on your server or disk. You duplicate the product as needed by sending it out over the Internet. Orders and payments come encrypted usually on a credit card. Your website is user friendly and is set up to automatically check the credit card for validity and to deliver the product. Payment can be deposited in a bank account on the other side of the world from where you are. If your product is software, written material, or any personal services (like consulting), you have no problem with inventories.
What If the Inventory is Expensive?
If you are selling classic cars, gemstones, or expensive artworks for instance – it is best to do it on consignment. Consignment is an arrangement where the owner lends you the object to be sold. Or even better, just provides a picture or specifications of the “thing.”
If you sell it, the owner delivers to the customer and you get an agreed sum. You keep it. If you fail to sell something given to you on consignment, after an agreed period of time, you return it to the owner. The arrangement can be structured in any way the parties agree upon.
Thus if you have a good reputation for selling Picasso paintings, the owner may be willing to pay you a non-refundable advance for expenses.
Auction houses may get paid for putting a hard-to-sell item into their upcoming sale catalog. If a prestigious old or modern masterpiece is to be sold, the auctioneers may guarantee that the seller will get a minimum price. In rare cases, they may pay in advance for the privilege of selling a high profile item or collection. Any deal is possible. You bring somebody what they want (like a sale) and they will give you what you want (like a commission).
Besides the obvious advantage of having nothing to spoil, burn, be stolen, or go out of date, by not owning things you have no inventory targeted to be taxed, lien-ed, or otherwise attached by any government agents. Most places have an “inventory tax”.
This is like a wealth tax. A percentage of the value of goods held for disposition in any trade or business must (often) be paid whether the owner sells the goods or not. The very popular “free port” arrangements offered in many regions are designed to allow the storage, trans-shipment, or processing of goods in a designated area without much regulation or any tax consequences. The advantage to the country is that a free port brings in employers, commerce, and know-how.
If you don’t have to pay for and hold any inventory in the first place, your money can be deposited or invested to earn interest or dividends. Warehouse rent, insurance, and taxes of various types can and should be avoided.
Why do some people and corporations inventory raw materials and then inventory finished products? Simple. Most major businesses – such as multi-nationals are producing a product from raw materials.
Corporations, Office, Staff and the Rest
Think of Volkswagen. Because of the very nature of their business, they usually can’t operate from mail drops and without any employees. If you are going to mine gold, or build cars, you need “fixed assets” and an office. You need expensive equipment. You are stuck with high visibility, employees, strikes & unions. You face hundreds of different taxes, lawyers, accountants, environmentalists, do-gooders, and the whole bureaucratic mess that you want to avoid.
Why do they (the big corporations) do it? Because the guys running them are “employees” who don’t know any better. We can assure you that the small independent entrepreneur often is wealthier and enjoys a more flexible lifestyle than many a CEO of a major corporation.
The typical corporate business, even with all its expenses and taxes may be able to (for instance) produce gold at $250 per troy ounce and sell it for an average price of $1,500. This provides a $1250 per ounce gross profit. Mine enough gold and there is plenty of profit to spread around. It goes without saying that every business that has ever existed eventually fails or goes out of business via merger or liquidation.
But while profits last, stockholders get dividends and the top-level officers draw a good salary, expenses, and perks (car and country club dues). If you are a conventional sort of person, you may enjoy being a “company man”.
Independent Operators, the Trade-off
Every corporation also supports a myriad of independent operators who keep it running. These include consultants, temporary employees (independent contractors), brokers on commission, manufacturers’reps, etc. We think it is better to be in the latter category than to be an employee. But there are far more employees than entrepreneurs and self-employed people.
Wherever we have looked into the operations of any big business, at several key phases, some people operating out of their back pocket, makes far more money on commissions and fees than anyone involved in the more conventional aspects of running any business.
They may be the manufacturer’s representative or a broker on chemicals used to leech the gold from the ore. Or the guy who makes the deal to have the gold turned into collector coins that sell for far more than the weight value of the gold.
More often, the chap who runs off with most of the golden eggs is a financial man from an outfit like Goldman Sachs who, for a percentage of the deal, arranges for a company to go public, or to go private, or to issue bonds or stocks. Another winner is the guy who as an independent contractor provides the computer software, brokers the transport, or handles environmental compliance. Not to mention lawyers and outside auditors.
The people who take the cream are called by various names: promoters, professionals, consultants, entrepreneurs, or deal-makers. The most successful of these dealmakers.