I am incorporated in the BVI as well. It is a generally excellent. Just be aware of the difficulty of setting up credit card processing if your company is incorporated there. The people who will deal with you are the same sorts of people who deal with overseas gambling, etc.. It is much more expensive.

Hong Kong offers an excellent alternative where it is much easier to setup payment systems, or even incorporate Paypal. Slightly more expensive per year as you need to pay for a local address and an annual audit. The accountant who sets up your company should be able to take care of both.

Could you recommend a credit card processor? and how 'expensive' are they usually?

Right now we are using PayPal Website Payments Pro with my 'other' startup and it works like a charm (incorporated in the US with a US bank account / US paypal).

Also, how did you incorporate in the BVI? Any recommendations?

As for HK, you're right, however I'm not keen on incorporating anywhere near China for business reasons. If it wasn't for that I'd have incorporated there in no time, especially since HSBC allows you to open a bank account there, which means PayPal access + easy credit card processing (you do need to go there and meet the bank representative in person though, a one time thing).

..and oh yeah, I must add that the main problem with tax havens such as the BVI is that you will most probably run into problems with PayPal. You could incorporate / open a bank account in Luxembourg or Switzerland (see website above), but that will cost you $250,000 and $500,000 minimum deposits, respectively.

My company is BVI incorporated with a merchant account at HSBC in Hong Kong. My accountant in HK took care of the work. If you want her details just email me (contact in profile). As far as the payment side of things go, just thinking about it makes me feel unclean and I can't honestly recommend anyone. You can find a bunch of overseas credit card processors by Googling around, but you'll start getting offers at around 5% per transaction plus setup fees.

FWIW, this isn't tax avoidance advice - I'm personally incorporated abroad as I'm not American and can't open a business in the United States. If you need credit card processing incorporating a US business is probably the easiest solution. Otherwise, spend the extra $400 it will cost to incorporate in Hong Kong. The extra money is basically the cost for the accounting firm of running a virtual office and doing the perfunctory end-of-year audit. And you'll be able to setup Paypal directly using your corporate address and bank account. The only downside is you will need to pay taxes on SALES to Hong Kong residents. And you should figure out your local tax issues depending on where you live and work.

For what it's worth, I live and work in Asia and am in HK maybe 2-3 times a year and think your concerns aren't an issue. At least not for the next forty or so years.

If you're US citizens doing this, and >50% of the foreign corp is owned by US citizens, the company is a "controlled foreign corporation" and effectively treated by the IRS as a domestic corporation. If you don't report, you might not get caught, but then if you do get caught, you're approximately doomed.

Are you comfortable with singapore? All foreign income not brought back into the country (in an out of singapore bank account) is not taxed.

Interesting, haven't thought of Singapore. Will do my research! Do you have any experiences you'd like to share?

In Singapore, the corporate tax is 17%. For new companies, the first 300K is tax free. See http://www.iras.gov.sg/irasHome/page01.aspx?id=748 for more details. The plus side of doing business in Singapore is its stable government, good technology infrastructure and tons of government grants to help new businesses. See http://www.business.gov.sg/

No personal experience, but i have read good things about it.

For an American-operated startup, in what way does this actually save you money? Assuming you don't withhold information and lie, the IRS and your state will still tax you on pretty much all of your income anyway.

I'm not a CPA / lawyer so I do not know. You could incorporate withholding company A in the BVI (or another tax free jurisdiction) and then incorporate company B in the states (Delware?) and make some sort of operating agreement (company B 'consults' for company A and only pays taxes on the money company A pays it). Keep in mind that the board of directors of company A can be anonymous, and so can the shareholders. Consult the website, it differs from jurisdiction to another.

Again, I'm not a lawyer, I'm not an accountant, what I described above is a mere guess and depending on state / federal laws and regulations YMMV.