Use this checklist before you pay formation fees. Each bullet links back to calculators that assume **individual** taxation; corporations need bespoke modeling.
Rule 1 — Liability surface
If contracts include IP indemnities, SLA penalties, or multi-year warranties, a limited wrapper separates personal assets. US LLC, UK Ltd, French SASU, German GmbH, and Singapore Pte Ltd exist for this reason first—tax second.
Rule 2 — Retained earnings vs distributions
- US S-corp (eligible) can split salary vs distribution—payroll tax savings but IRS scrutiny. - French SASU uses IS + dividend flat tax—compare to micro if profit < thresholds. - UAE CT applies to qualifying businesses even when personal income tax is zero.
If you spend 100% of profit every year, incorporation rarely beats sole prop simplicity.
Rule 3 — Fixed admin cost
Budget $2k–$5k/yr minimum for bookkeeping + filings in most OECD hubs; €3k–€8k in France/Germany is common. If margin is <10%, stay lightweight until pipeline stabilizes.
Country starting points
- [US](/us/) — LLC vs S-corp vs C-corp with CPA - [UK](/uk/) — Ltd + IR35 posture - [FR](/fr/) — SASU IS vs micro - [DE](/de/) — GmbH vs Freiberufler - [SG](/sg/) — Pte Ltd + director salary - [AE](/ae/) — Mainland vs FZ + CT registration
Verdict
Incorporate when (risk + retained cash + credibility) > (formation + compliance). Otherwise, raise your freelance rate and buy insurance.
Canada — CCPC and investment income
Canadian-Controlled Private Corporations get a lower rate on active business income up to the SBD limit; passive income inside the corp faces punitive integration rules since 2019. If you are incorporating mainly to defer investing, model Part I + Part IV tax with an accountant—not a blog.
Italy & Spain — corporate vs forfettario/autónomo
Italian Srl stacks IRES + IRAP (where due) + salary withholdings; forfettario dies if you cross thresholds or take incompatible income. Spanish SL adds corporate tax + dividend paths versus autónomo personal rates—gestoría cost often €3k–8k/yr before tax.
Red flags — incorporate for the wrong reason
- “I heard Delaware saves tax” while you live and work elsewhere. - “Invoices will look more serious” without contracts that need a balance sheet. - “I want to hide income”—compliance theater, not planning.
Wrapper vs typical fixed compliance (annual, directional)
Fees vary by city and revenue; YMMV. Sole prop = bookkeeping + filings only; corporations add payroll, statutory audits in some jurisdictions, and corporate tax returns.
| Structure | Typical fixed compliance | Incorporate when… |
|---|---|---|
| Sole prop / freelancer | $0.8k–3k / €1k–4k | Low liability, spend most cash yearly |
| US LLC (disregarded) | $1k–3k + state | Contract hygiene + liability shield |
| US S-corp | $3k–8k + payroll | Net **$80–120k+** after reasonable salary talk |
| UK Ltd | £1.5k–4k | Dividend/salary split + IR35 posture |
| DE GmbH | €5k–12k | Trade liability + retained earnings |
| FR SASU | €4k–10k | IS + dividend strategy vs micro ceiling |
| SG Pte Ltd | S$3k–8k | Local contracts + director payroll |
| AE FZ Co | AED 15k–40k+ | CT registration + multi-year visas |
Add **one-off formation** **$500–5k** depending on notary/state.
FAQ
No—this is educational; hire local counsel before signing statutes.
Possible but tax treaties and PE risk dominate—get cross-border advice.
Thin profits, heavy losses, or inability to run **reasonable salary** payroll on time.
S455 tax on loans to directors—avoid casual drawings without planning.
Applies to qualifying businesses above thresholds—verify FTA registration.
Niche—requires transfer pricing and substance.
Sometimes, but liquidation and tax on distributions may apply.
PI/E&O covers many contract risks; Ltd covers balance-sheet separation—different tools.