What state is best to incorporate in: Feature Article
When you are trying to decide which state is the best choice to incorporate your business in one thing that you need to know is that there are several factors that you need to think about. In analyzing these factors you are going to be able to make the best possible decision for your business, but if you only glance at the factors and make a small attempt to figure out the answers than you will probably end up making a mistake when it comes to choosing the best state to incorporate your business in.
Here are the factors that you need to analyze when deciding which state is going to be best:
What is the state's regulatory climate?
- What is the state's tax situation?
- What is the state's stance on individual privacy?
- What state will allow you the greatest flexibility to run your business the way you want to?
- What state has the best body of statute?
- What state offers the best business climate?
In looking at all of those questions and analyzing them it has been determined that there are two states that would be the best to incorporate your business in. The two best states would be Nevada and Delaware. But what state you choose to incorporate your business in will depend on your personal preference. So let's take a look at the reasons why people would choose each state so you can make your own decision.
Here are the reasons that people choose to incorporate their business in Nevada.
Nevada does not have a franchise tax. In fact the annual cost to maintain your corporation in Nevada with 25,000 shares in Good Standing is the small sum of $125. This fee is only charged because you have to file your annual list of officers and designation of registered agent, this fee is what is actually charged for you to file those things with the state. You will also need to pay a $20 fee so that you can file your annual report.
1. Corporations - Why Nevada?
This article gives you a breakdown of why they think that Nevada is the best state to incorporate your business in, when it used to be that Delaware was the best state.
2. What's the best state to incorporate in?
This article gives you information on why Delaware is the best state to incorporate in and also gives you an opinion on which states you should stay away from with your business.
4. Best State to Incorporate
This article talks about why it is best to incorporate in the state that you are doing business in even with some of the advantages that other states provide. The article gives valid reasons on why you should do it as well.
5. Incorporate Your Business
This article gives you information on the various things that you need to consider before choosing a state to incorporate in. It also gives you the best choices that you have to choose from.
6. Which State to Incorporate or Form an LLC
This article talks about what you need to do to incorporate your business. But the article also gives you the pros and cons of the various places you can go to incorporate your business.
7. View topic - Best state to incorporate in?
This is a message board where people can leave questions or comments and respond to others. This is great because you get actual people's responses to what they think about the different states you can incorporate in.
8. Incorporate Your Business
This article gives you a list of all fifty states and you can click on any one of the states to find out what it is you need to do in order to become incorporated in that state.
9. Tax Law: Which state to incorporate in
This article gives you the good and the bad about what various tax laws are in effect for each state. The article also gives you information on what you need to do to incorporate in that state.
10. Best States to Incorporate
This article gives you tips that you can follow on what you need to know in order to choose the best state to incorporate in. The article also gives you advice on what to look for in choosing the right state.
Nevada does not have an income tax. In Delaware there is a 8.7% income tax that can be charged but that income tax actually only applies to corporations that are doing business in Delaware, but it also greatly reduces the possibility of reducing or eliminating your home state corporate income tax. The reason for this is that the strategy used to do this involves doing business in the preferred state, so one way or another you are going to get hit with some kind of income tax. Not to mention that this also means reporting, forms, red tape, and many other things that you don't need in Nevada.
Nevada does not require the notification of stock issued or stock transfers, names of stockholders, etc.
You are not required to list places of business outside of Nevada.
You do not have to divulge information such as the date appointed for the next annual meeting of the stockholders or directors.
Nevada does not share information with the Internal Revenue Service; in fact they are the only state that does not share this information with the Internal Revenue Service. So if you incorporate in Nevada your corporation information is going to be completely private. Not to mention the fact that even if they did share information with the Internal Revenue Service they wouldn't have much to share because they don't ask for very much information in the first place.
Many states make a huge deal about the fact that they allow S-Corporations and that they will recognize them. But in Nevada the status of a corporation has no significance to the corporate owners or to the state of Nevada because of the fact that they don't have any kind of income tax. So basically whether you have an S or a C corporation it doesn't matter to the Nevada Department of Taxation because the allocation of taxable income from corporations to the individual has no effect on the state's revenue.
Nevada does not have a gross receipts tax. Pretty much every other state has this tax and it can vary greatly depending on what state you are incorporating in. Delaware has this tax and it can range anywhere from 0.096% to 1.92% depending on what type of business you are running.
Here are some reasons on why you should incorporate in Delaware:
The best reason is that Delaware law is well-established, meaning that it has been around for a long period of time. And because it has been around for quite awhile there are not the issues of the law not being tested. What this means is that the laws have been tested numerous times and precedents have been established with the laws.
Most lawyers in the United States are adept at dealing with Delaware law. One of the reasons that they are great at dealing with Delaware law is because of how old the laws are in that state. They have been around for a long period of time and have not been changed so they have what most lawyers consider a well established body of law which makes it easier for lawyers to understand, they don't have to keep up with the ever changing laws.
You won't have to pay high lawyer fees for the most part because you will not have to go to court to litigate the basic issues of corporations. The reason for this is the well established laws that are set up in Delaware. But in other states that have adopted business friendly laws they don't have the precedent to draw upon so you are going to need to go to court to try and establish a precedent which can cost quite a bit.
Once you have become incorporated if they ever have to do any deal that requires a legal opinion, part of that opinion will require the lawyer to validate corporate structure, for example due incorporation and valid existence. And for the most part every state but Delaware requires you to use a lawyer that is admitted to that state to make an opinion. In the state of Delaware any lawyer can make an opinion regardless of if they are admitted in Delaware or not.
Here are two states that you should avoid at all costs:
California - this is a good one to avoid because of how employee friendly the state is. Basically what this means is that pretty much all of the laws that are based will end up favoring the employees rather than the business owners. But one thing you have to keep in mind is that some of those laws may still apply if you are based in California, but if you are elsewhere you should definitely assume those burdens.
New York - this state is pretty balanced when it comes to dealing with owners versus employees, but there is one red flag that you need to know about, which is Section 630 of the NYS BCL. This section states that the top 10 shareholders are responsible for employees wages if the business goes out of business and the employees aren't paid. But this section only applies to businesses that are incorporated in New York not foreign companies, even if those companies are doing business in New York.
But one thing that you really want to keep in mind when it comes time to decide what state would be the best state to incorporate in is the laws of the various states when it comes to owning a business. The reason for this is that when it comes to business law it is not federal law that prevails, but it is state laws and those laws can vary from one state to the next.
According to many experts, this includes lawyers, is that they best state to incorporate your business in is the state that you will be conducting business in, which in most cases is the state that you live in. The reason for this is that pretty much every state views businesses being run within their borders as falling under their jurisdiction. So basically what that means is that you have to comply with the state laws in order to run your business legally. And for the most part this means you will be required to pay taxes and fees that the state charges for you to run your business.
It is because of these fees that many people try and incorporate their business in others states that do not require those higher fees, such as Nevada because they have very minor taxes. But the thing that people do not realize is that if you incorporate your business in one state but are running the business out of your home in another state you are actually violating the laws of your state. The reason for this is because tax agencies do not look at the state of incorporation they are more concerned with where the business is being conducted.