September 16, 2013 - Phil Hodgen


“Simplicity is hard work. But, there’s a huge payoff. The person who has a genuinely simpler system – a system made out of genuinely simple parts, is going to be able to affect the greatest change with the least work. He’s going to kick your ass. He’s gonna spend more time simplifying things up front and in the long haul he’s gonna wipe the plate with you because he’ll have that ability to change things when you’re struggling to push elephants around.”

— Rich Hickey, Creator of the Clojure programming language

See Rich Hickey’s Rails Conf 2012 Keynote Speech. (YouTube). Quoted portion starts at 23:02.

The same thing is true for tax planning. I have been working on tax planning for U.S. corporations doing business abroad. Don’t get too caught up with cleverness and structuring. My work in the last couple of weeks has consisted of demolishing and burning bad stuff (corporations, structures, convoluted business transactions) and replacing it with K.I.S.S. stuff. Disregarded entities. “I hire you, you do this project, I pay you $X” contracts instead of messy joint ventures.

Reaching for $1,000X of tax savings frequently costs you $2,000X in accounting and legal fees to make the IRS all warm and fuzzy on your tax returns. We saw this last week where a prior year tax election was made that saved $5,000 (!) of tax, but so far has cost $40,000 to fix. Not to mention the time distraction for the principal of the venture.

More to Rich Hickey’s point, a U.S. multinational that keeps its affairs rigorously simple will be nimble. They’re executing a deal while their competitors are sitting in a law firm (or Big 4) conference room looking at PowerPoints.

The same, of course, is true of foreign businesses expanding to do business in the United States.

Keep it simple.

Hat tip: DevOpsU.

American Business Abroad Foreign Business Activities in the USA