“Do not let what you cannot do, interfere with what you CAN do.” – John Wooden
Work with what you have. Don’t try and reinvent the wheel. The tried and true advice that we dread to hear, but, often to our dismay, it turns out to rarely fail us.
The truth is, we often hope for a quick and simple remedy to our dilemma, but you most likely possess valuable skills that you haven’t yet maximized upon. It’s possible, you just need a new perspective or the right motivation. Keep reading. You’ll catch my drift.
It happens to everyone. Going through the usual mundane daily routines leaves us blind to things happening around us at times. When considering something like opening a business in Russia, our thoughts fixate on discovering new and innovative ideas. While novel ideas do exist, let’s not complicate things at this stage.
I assure you, you will have plenty of complicated situations in Russia like explaining to the barber in Russian how you want your haircut after he puts the cape over your arms. Or what about doing metric conversions in your head then trying to articulate the results in Russian? I’ve been there; believe me. You’ll run into baffling situations while living in Russia as a foreigner but running your own business from Russia certainly doesn’t have to be one of them.
The simpler way to set up and run a business in Russia is most likely not what you thought, but coupled with the most versatile type of work visa Russia offers, it’s surely something to mull over if moving to Russia has made it on your to do list. With that in mind, let me walk you through some fast-track ways to establish a business in Russia, even remotely, if you work for yourself, you’re already employed, you’re a budding entrepreneur or current solopreneur or you have a little capital in your safety deposit box. Doing business in Russia doesn’t necessarily mean starting with nothing. Take something that already exists and put a twist on it.
4 Ways to Start a Business & Move to Russia (the quick-er way)
Let’s Russia was born to guide you through your Russian experience. We’ve been there, done that and we’ve done it once again just to reassure ourselves. We strive to share not only our successes but also our failures so you learn from them when you take the plunge into Russian life, however you choose to do it.
Crossing an HQS Visa & a Weakened Ruble
Although there are multiple options when it comes to moving to Russia, the main requirement for the solutions I present here stipulates that you make at least $30,000 per year ($2,500 per month). In order to qualify for the HQS visa, or Highly-Qualified Specialist work visa, your minimum salary must exceed two million rubles per year (167,000 rubles per month). With the withered rate of rubles to dollars, many exceed that level of salary now. Why the HQS work visa? For simplicity and savings.
As long as you qualify for HQS status,
- your income tax rate stays at a flat 13%
- freely travel in and out of Russia as you please
- foreigner registration ceases to be such as hassle
- processing time is significantly shortened and
- expenses on hiring employees, yourself included, literally hits zero.
Read more about why the HQS visa trumps residency or citizenship in Russia here. Do you meet the minimum salary requirement? If so, let’s figure out which of the following describes your situation.
1. Starting a Business in Russia as a Small Business Owner
In today’s world, running an online or partially remote business poses little difficulty. It’s all about drive and execution. Let’s consider some key facts.
According to SBA.gov, there are 30.2 million small businesses in the United States, 50% of them already operate from home while they employ 59 million people. If you currently run a small business based where you live, consider moving all or part of your existing business and operate it under a Limited Liability Company established in Russia as 100% owner. Not every company is location independent, however, almost every company has aspects to its operations that are possible to carry out remotely. And every company has been forced to test at which extent they’re ready for remote operation during a literal shut-down due to COVID-19. Let’s take a look at some specific examples.
Let’s say you have a marketing agency or a similar business where you focus on local clients. You approach clients in person and offer your services to help them expand online or in their community. Couldn’t you teach someone to take your place? Isn’t it time for you to grow your business anyway? For that to happen, you’ll need to hire help. Forbes has predicted that freelancers will comprise half of the workforce by 2020 so you have an abundance of part-time help to choose from.
The leg work of your business is mostly done online and by telephone anyway whether you’re doing this yourself or not. If building trust with your clients is done mostly in person, your representative is fully capable of handling that while you manage other aspects from your newly established Russian company. Your home business can outsource those tasks to your Russian LLC. You change little of the structure of the way your clients communicate with your home business in that case. You have two routes to take: 1) you continue doing much of the work remotely while hiring help with specific location-based tasks or 2) you hire help to take care of both localized services and remote work and focus on managing your business. More than ever before, people wish to have the flexibility of working remotely and if you give them that, why not give yourself the same opportunity?
Fundera shares an exhaustive list of service business ideas here. Of the ones that you cannot perform remotely, there are still many aspects of those businesses, like window washing, that need managing. Afterall, you didn’t start your own business just to do all the work yourself, did you? It’s time to step into management to run your business instead of working in your business. But alas, running a business isn’t for everyone. There are other options for you, don’t worry.
2. Starting a Business in Russia as an Employee
You have a rock-solid job. You enjoy what you do for your current employer and they feel the same about you. How can you make a change like moving to Russia and keep your position, or at least, a position similar to it? You start working for the Russian company you establish and your employer becomes a client. You become a contractor for your current employer. This cuts your income tax rate to a flat 13% and your employer cuts their expenses in employing you as a full-time employee. How would that conversation go? You’ll need to prepare for negotiations with your boss.
First, see things from your employer’s perspective. Understand that they incur costs to employ you, to retain you, to replace you if you decide to leave, not to mention the invaluable time, training and other investments they’ve put into you as their employee. You may very well have the upper hand at the negotiating table as long as you do your homework and prepare your arguments. Two prerequisites to making this work are:
1) you have a good relationship with your employer and
2) your job can mostly be done remotely.
Write down all your responsibilities and tasks and separate them into two categories. The first category details things that are possible to do remotely. This includes things you don’t do remotely but could such as attending meetings via video conference or making sales calls instead of in-person pitches. The second category lists the things you cannot do remotely such as on-site inspections if you’re a project manager and your job involves physically inspecting locations.
For the second category, you’ll need to devise a plan of how you will accomplish those tasks remotely. Here’s where we exhibit some creativity. Propose to take on a colleague’s task that can be done remotely, possibly some quarterly reporting or something similar, and the colleague performs the inspections. Propose to hand that responsibility off to someone else entirely and in return give something up or add more value to the company in some way, like minimizing company expenses.
Do calculations. Everybody loves math when it plays in their favor, right? For instance, you’re currently in the United States making $70,000 per year. Your income tax rate lies at 22% for a single person, not to mention whatever tax your state slips out of your pocket. Then, you add FICA taxes and deductions. The numbers keep adding up. Get with your CPA or tax advisor and see how much you can potentially save in total by moving yourself to Russia with a 13% income tax rate.
Now, calculate how much your employer contributes and the expenses they incur on your behalf. If it’s anywhere near the average, it comes to around $7,500 for social contributions and an additional $9,600 in health and benefits per year that your employer could be saving by you working from your Russian company. With these numbers, you’ll have a solid understanding of how much each party saves when you become a contractor versus a full-time employee with benefits.
I feel compelled to address health insurance because many argue and worry about losing benefits if you switch to becoming an independent contractor. Yes, that’s most likely true. However, considering the astronomical cost of healthcare in the United States especially compared to other countries, you’d be surprised at what you can afford in Russia at a fraction of the cost.
According to KFF.org, the insured single person or family spends about 11% of their yearly income on healthcare in the United States and that doesn’t include what the US employer ponies up. Based on data from 2017, an average family making $75,025 per year spends about $8,200 per year on insurance premiums, out-of-pocket costs like deductibles and copays while an employer contributes an additional $8,500 for a total of $16,700 per year. That was data from 3 years ago so we’d assume the rates have risen for 2020. Take a look at this online tool to see more examples. How about we see how that compares with Russia?
Of the expats with residency status in Russia and thereby access to free healthcare, many still prefer private clinics over state clinics. The reasons are mostly due to the language barrier and longer wait times. Consider this. On several occasions, I took my kids to our local state clinic in Moscow that was right next to our building. We had two options. We either wait in line to see the doctor for free (my kids have Russian citizenship) or pay a fee of 1,000 rubles (about $15 at the time) to see a pediatrician right away. We were in and out within about 20 minutes with a prescription of what they needed. Needless to say, I was elated when we got a doctor’s visit and the medicine we needed for as much as a copay in the USA. On another occasion, I had a root canal done at a local Russian dental office in Moscow. I ended up paying the equivalent of $213 for the whole process including multiple visits. When I asked my brother who runs his own dental practice in Las Vegas, he quoted a minimum of over $600 for the same procedure.
Private healthcare in major Russian cities has been growing favorably over the last ten years. Nowadays, combining a traveler’s insurance policy that covers major accidents and emergencies and regular doctor’s visits to a private clinic will cost you much less than what you currently spend in the US and Europe. In comparing two comprehensive health plans offered by two different private clinics in Moscow that include unlimited general visits, 2 house calls, up to 10 massage sessions, 2 dental cleanings and much more, one charges up to $1,935 and the other up to $2,590. That is merely a snapshot of what is available. Individual needs vary considerably so you may not need a fully-loaded healthcare plan.
To briefly sum up the second option for running your own business from Russia, approach your current employer as your first and biggest client. You have a firm argument backing you based on numbers alone. Thoroughly examine potential counter arguments from all angles and your rebuttals to them and prepare your best alternative to a negotiated agreement. That is, formulate a plan B and possibly even a plan C. If none of those work, remember that you don’t necessarily have to stay in Russia continuously in order to run a business from there. In case your heart’s set on moving to Russia, hear me out on the next option. Going solo.
3. Starting a Business in Russia with your Side Income
For those of you who dream of the day you quit your day job because, unlike the previous type of employee, you loathe what you currently do for work, good news awaits you: solopreneurs, freelancers, consultants and budding entrepreneurs. By moving you and your side business to Russia, you are able to afford more on what you’re currently earning. The only other way to do that where you are at this point is to:
A) increase the prices of your services,
B) decrease expenses,
C) increase productivity and expand service options or
D) acquire more clients.
Unfortunately, all of these strategies require additional time, especially increasing clientele, and time constraints from your day job clearly don’t help.
Many people get cold feet before taking the plunge and leaving the stability of their office job due to fear of not making enough money to cover the bills. That’s understandable. The coronavirus pandemic has shown us just how stable your current situation is. And don’t forget, the Russian ruble has weakened to the lowest level in many years. More dollars get you farther today, which may be the push you need. Re-evaluate your financial state and determine whether you can make it work. If you qualify for HQS status at a salary of 2 million rubles per year, you will be fine on that salary in Moscow let alone any other city in Russia.
Starting a side job and earning another stream of income today is infinitely easier than it used to be. If you already have a side gig, you may already know this, but maybe you’re not quite at the level where you feel confident enough to take the leap and quit your job and focus on your own project or working for yourself. If you haven’t yet started your own side job but have contemplated it, mull over these statistics a bit.
According to Intuit, 64% of small businesses start with only $10,000 in capital. Better yet, LendEDU found that successful micro businesses get off the ground with as little as $3,000. Best of all, and thanks to the technology available at our fingertips in our day and age, LendEDU also found that approximately one quarter of small businesses start with zero financing. What I’m trying to point out is that the opportunities are presenting themselves and with a business in Russia, it’s all the more attainable thanks to a lower income tax rate and the current level of the ruble. Start building a second stream of income on the side as a consultant, freelancer, whatever it is and you’ll be able to take advantage of the HQS visa benefits, although, again, there are even less expensive ways to build a business in Russia that require much more work but that’s a topic for another post.
4. Starting a Business in Russia as an Investor
Cash is king and this is no exception. The fourth of the quicker ways to set up a business and get a work visa for Russia is the easiest way if you have some moolah to drop on the table. Maybe you sold some real estate, made some wise investment decisions early on or inherited some assets. Whatever the source, it makes things a bit smoother from the get-go. The only issue to bear in mind is that if your investment doesn’t start churning enough revenue for your Russian business to keep your minimum required salary and thereby your HQS status, the migration authorities can revoke your HQS status and your wonderful work visa along with it. Feed your Russian LLC funding only for so long.
Of course, you’ll need a business plan if you have capital to invest and open your own business in Russia. If you don’t plan on operating a business from your Russian company that serves customers from your home country or worldwide, focus on the Russian market. Naturally, this necessitates much more market research and strategic planning from your end or just hire someone in Russia to assist you.
Other alternatives include buying either a part or all of an existing business. Purchase an existing business and obtain an HQS visa and work permit through the company you purchase. Again, consider the abundance of opportunities at a moment when the ruble is at its lowest. There are some businesses quite literally for the taking. Another alternative is to partner with someone who has an existing business in Russia if you have no interest in running your own. It surely is a buyer’s market in any case.
Too many of us seem to forget our own strengths when the situation around us changes. When it comes to starting a business in Russia as a foreigner, seriously consider what you already have to work with. It’s possible only a few details need tweaking. I’m confident that many of you could start a business in Russia and continue serving the customers or employer you presently work with. Get creative while working with what you’ve got. If you don’t quite bring in a salary above $30,000 per year to meet the HQS visa requirement, put a plan into action today to get there. Whether it’s adding to your skill set for your own business, gaining more clients as a freelancer or strengthening your position in negotiating with your current employer, it’s all within reach now more than ever before. Running your own business in Russia affords advantages available to you as a foreigner and is flexible to adapt to your specific needs.
Be sure to check out our options to help you set up your own company and process your work visa either in person or remotely. We’re always happy to help you navigate through your options based on your individual situation.