The Gig-economy, Digital Nomads and the Virtual Company

 In Business Model Management, Entering Foreign Markets, Featured, Industry News

The advantages for the specialised solo professional are obvious. You can work where and when you prefer. Provided you understand how to promote and sell your services, you can live a comfortable life without the need to go to the same office every day, without a boss that you don’t like or respect and without getting embroiled in corporate politics.

The term gig-economy covers the phenomenon where more and more people choose to work as freelancers. They are paid by the hour, for a certain project or a specific delivery and do not have an exclusive arrangement with any employer. The term is borrowed from the entertainment industry where musicians are paid per performance – the gig.

Just as in the entertainment industry, the variations in pay and engagement conditions in the gig-economy are enormous. Some join it because they cannot find permanent employment, and some choose it because it pays better and offers more attractive working conditions than permanent employment. Driving for Uber in New Delhi is a gig. Playing for an audience of 100,000 people at Wembley is a gig.


A substantial chunk of the gig-economy is organized around digital marketplaces where supply can meet demand. Uber is such a marketplace for transportation services, Meploy for manual labour, Toptal for software engineering, Upwork for all sorts of professional services, while Codeable is a marketplace for vetted WordPress experts.

The perfect gig

At the very top of the gig-economy, we find the Rolling Stones, Barack Obama, Oprah Winfrey and other celebrities who basically decide what they will charge. Behind them are a team of people taking care of business.

In the next layer you have the thousands of specialised solo professionals that can also charge attractive fees for their work, but don’t want to spend on the administrative overhead that running a business requires. They typically organise as a limited company from which they invoice their clients and from where they pay expenses, a salary to themselves and take out a profit.

The advantages for the specialised solo professional are obvious. You can work where and when you prefer. Provided you understand how to promote and sell your services, you can live a comfortable life without the need to go to the same office every day, without a boss that you don’t like or respect and without getting embroiled in corporate politics. If your services are in high demand you can decide to work on the projects of your choice and only the hours you prefer.

On the demand side of the market, companies increasingly use specialised solo professionals for projects where they don’t have the expertise inhouse, where the type and duration of the activity don’t justify a permanent headcount or where there is an outspoken shortage of talent. If there was a fire on the oil rig you called Red Adair (1915-2004) and you didn’t negotiate the price. He is the originator of the famous quote:

“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.”

The gig-economy for specialised professionals grows because both sides of the market like the idea and can benefit from a project-driven relationship.

The dark side of gig-economy where you as an individual become a company is the administrative overhead that follows. As a solo freelancer, you are responsible for all activities including business development, marketing, sales, invoicing, accounting, tax and VAT-reporting, salary payments (to yourself) and the closing and filing of the annual report and tax forms. Performing all the back-office administration and ensuring that you comply with the legislation can be both tedious, time-consuming and costly. And more often than not this is not what the specialised professional is best at.

The Estonian e-citizenship

In December 2014 the Estonian government launched a program that allows non-Estonians access to services such as company formation, banking, payment processing, and taxation. Anyone can apply and, provided you are qualified, receive the e-citizen package including the smart card that allows you to interact with government services and sign official documents such as registering a company.

Anyone can apply for e-recidency in Estonia. Upon approval you can pick up the kit at any Estonian embassy.

This allows anyone to start and run a company out of Estonia without ever having to set foot on Estonian soil. Everything can be done electronically using the digital infrastructure and signature that has been implemented throughout the country.

While the e-citizen program is available to anyone, it is particularly attractive to residents of other EU countries. Because of the Single Market and SEPA legislation within the EU, it is easy and inexpensive to do business across borders including issuing invoices and moving funds. You can invoice a business client in another EU country without the need for paying withholding tax or adding VAT. You can pay out a salary to yourself and have it taxed in your country of residence and Estonia doesn’t tax profits that stay within the company. Only when you pay out dividends do you have to pay the twenty per cent corporate tax and whatever your country of residence asks for. Most, and all EU, countries have tax agreements with Estonia so that double taxation can be avoided.

XOLO – software that takes care of the tedious bureaucracy

With this backdrop, XOLO, in the fall of 2015 (then named LeapIN), launched a software platform for people who would like to take advantage of the Estonian e-citizen opportunity. XOLO includes company registration, a bank account, a credit card, a bookkeeping system and all the services required to comply with Estonian legislation such as tax and VAT reporting and the filing of the annual report. All for a fixed monthly fee of €79. All you have to do is issue your invoices and upload your expenses. XOLO takes care of the rest. It’s a managed service, and all interactions are performed electronically.

Although there are no restrictions on what type of business you can run out of your Estonian company (provided it’s legal!), XOLO has decided to focus entirely on the solo-entrepreneur, boutique-consultant and the freelancer.

“It is a strategic marketing decision,” says Allan Martinson, CEO at XOLO. “We specialise in making the life of the individual business operator as easy and inexpensive as possible. They all want to spend their time on client projects. We offer to take care of the back-office and do the housekeeping for them.”

Allan Martinson, CEO at XOLO

The narrow focus seems to have paid off. With a website in English only, XOLO has managed to attract several thousands of customers from over a hundred different countries.

In 2019 XOLO launched the new product GO offering the full package of services without the need for the e-citizenship. The GO service is offered to residents of EU countries provided they do business with customers that have a valid VAT number (B2B transactions). Formally freelancers, they now run their businesses in a partnership from a dedicated XOLO registered company. Invoices are issued from the XOLO legal entity and expenses are also paid by the same entity. The individual GO account has a dedicated bank account to where revenue flows and from where expenses are paid. The freelancer can withdraw any available amount from his or her GO account at any time. The charge is five per cent of outgoing payments and there is no initial setup fee.

“With XOLO GO we have lowered the threshold for freelancers substantially,” says Allan Martinson. “Our clients are up and running in less than half an hour and there is no fixed monthly fee to worry about. When the business picks up GO customers can switch to LEAP and enjoy the same service at a fixed monthly flat rate.”

The baker that became an ecommerce wizard

Benny Holgaard, a Danish national, became a XOLO user in 2019. Since 2012 he has been running, a company specialising in building and managing webshops. In 2014 he decided to leave Denmark and travel the world. Since his work didn’t require him to be at any specific place at any specific time, he was looking for an administrative platform from where he could run his business.

“Taking care of my clients whilst on the road is not a problem at all,” explains Benny Holgaard, currently locked down due to the Coronavirus in Cordova in the Philippines. “However, maintaining the administrative back-office cores with payments, bank transfers and taxation turned out to be a nightmare.”

Benny Holgaard

Leaving Denmark, Benny Holgaard incorporated on Seychelles while still having his bank account in Denmark. That combination turned out to be toxic and the overheads associated with constantly having to prove that his business activities were legitimate kept growing.

“The Estonian E-citizenship was exactly what I needed,” says Benny Holgaard,” and the combination of XOLO and Transferwise has taken all my back-office troubles away.”

The clients are invoiced from the Estonian company and payments are made via Transferwise to an account by a German bank. Serving his clients’ different web-shops Benny uses a pool of freelancers with whom he has long-lasting relationships. They need to be paid on time and with Transferwise he can ensure both swift turnaround and low transaction fees.

“I picked up my E-citizen package last year at the Estonian Embassy in Tokyo where I was passing through at the time,” says Benny Holgaard. “Getting incorporated and setting up the XOLO back-office was easy. They have also helped me streamline my contractual relationships with the freelancers which were previously based on oral or email agreements. XOLO takes care of the administration leaving me free to travel and take care of my clients.” is a simple virtual business and all the clients have found Benny Holgaard either through word of mouth or through the online groups in which he is very active. At the beginning his clients were Danish but this year the mix will be fifty-fifty.

“We have built a reputation of being technically competent, business savvy and highly responsive,” explains Benny Holgaard. “People that are serious about e-commerce find us and become our clients.”

Building and maintaining web-shops is a global industry and the needs of the clients are identical across national borders and cultures. It’s about attracting traffic, improving conversion rates and increasing basket size. Benny Holgaard’s approach to helping his clients make more money seems to work.

Based in Brazil working for a virtual company headquartered in London

Christoffer Bjørg Pedersen is an IT freelancer currently based in Brazil. He runs his business under the name Windjammer IT Services OÜ.

“I was actually based in Portugal,” says Christoffer. “We were just visiting Brazil for a few months, but due to the Corona-crisis I don’t know when we can leave again.”

Christoffer does freelance gigs as an IT-consultant and is currently in a long-term engagement with a client incorporated in the UK.

“My client is fully virtual,” Christoffer explains. “The people are scattered all over the globe and I am not even sure anyone is working out of the UK.”

Leaving Denmark in 2011 Christoffer first settled in Sweden and then in Latvia. When he relocated to Montenegro, he also registered a legal entity there. The bureaucracy was significant and expensive and as he decided to travel on, the Estonian e-citizenship seemed the right solution.

Kotor Bay in Montenegro

“For a digital nomad such as me XOLO and the Estonian e-citizenship is perfect,” says Christoffer. “XOLO takes care of all the back-office duties and they are also very helpful with questions related to payments and taxation.”

For the time being Christoffer has a Transferwise account and credit card for his business activities. Customers pay invoices to this account and from there he can pay his business expenses and transfer funds to his private accounts in Sweden and Portugal.

“The bigger issues associated with being a digital nomad are banking and personal taxation,” Christoffer explains. “There are two options for taking out funds from the Estonian company. As a salary or as a profit. Either way, you will have to decide where you declare the personal income for taxation and that is not easy if you are not a permanent resident anywhere.”

So far Christoffer has, with help from friends familiar with the paperwork, filed tax reports in Montenegro, Sweden, and Brazil.

“The number of digital nomads such as me is growing very fast and we need more flexible frameworks for the money side of our activities,” Christoffer concludes. “Being a digital nomad is a lifestyle and not a tax avoidance scheme.”

This post is an excerpt from my upcoming book Going Global on a Shoestring

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