| One of the most common questions for entities | | | | exploded. Unlike most other states, Nevada does not |
| wishing to incorporate is - "Where should I | | | | require corporate stockowners to disclose their |
| incorporate?" In fact, an entity can choose from any of | | | | information. In fact, the information is not kept on file |
| the 50 states or the District of Columbia. There has | | | | with the state. |
| been a great deal of hype about incorporating in | | | | Additionally, to ensure privacy, Nevada allows its |
| certain states that happen to be well-known for having | | | | corporations to use bearer stock certificates, which |
| favorable laws for corporations. When an entity elects | | | | make it virtually impossible to prove the ownership of a |
| to incorporate outside its "home" state, the most | | | | Nevada corporation. Accordingly, owners or investors |
| common states in which the entities incorporate include | | | | utilizing bearer shares can have complete control and |
| Delaware and Nevada. However, even taking account | | | | ownership while remaining anonymous. |
| of favorable laws in certain states, an entity's "home" | | | | Nevada also does not tax the income of its |
| state (i.e., the state in which the corporation conducts a | | | | corporations or its state's citizens. A Nevada |
| majority of its business) may often be the best state | | | | corporation is also not subject to any other hidden |
| to incorporate. | | | | taxes such as franchise taxes, capital stock taxes, or |
| Due in large part to their liberal incorporation laws and | | | | inventory taxes. Sales tax applies only to products sold |
| favorable tax policies, the most "incorporation friendly" | | | | within the state. |
| states are Delaware and Nevada. And here's why... | | | | Incorporate a Business or Form a Limited Liability |
| Should I incorporate in Delaware? | | | | Company in the State of Nevada. |
| Delaware's advantages as a place of incorporation | | | | Come tax time next year, you'll be glad you did! |
| range from the Delaware General Corporation Law to | | | | Incorporating in Your Home State May be BEST! |
| the flexibility built into the corporate formation process. | | | | For most small businesses, however, it may still be |
| Incorporating in Delaware is generally less expensive | | | | best to incorporate in the state where your business is |
| than most other states. The initial charge for | | | | based. Many legal and business professionals advise |
| incorporating in Delaware can be as low as $89.00; the | | | | that you incorporate in the state in which your |
| annual franchise tax can be as low as $65.00 in many | | | | corporation intends to conduct the majority of its |
| cases; and the cost of continuing operations is low as | | | | business, and, if you intend to do business in only one |
| well. There is no Delaware corporate income tax for | | | | state, you should incorporate in that state. |
| corporations that are formed in Delaware so long as | | | | If you incorporate in a state that is traditionally |
| they do not transact business in Delaware. | | | | considered to be "corporation friendly," but then |
| Another benefit of Delaware incorporation is | | | | conduct business outside your state of incorporation, |
| Delaware's extensive and often easily interpretable | | | | you will likely have to qualify to do business in the state |
| law. Delaware has a separate Court of Chancery (a | | | | in which you are conducting business. Qualifying to do |
| business court) that does not use juries, but instead | | | | business outside your state of incorporation is called |
| utilizes merit-based (not elected) judges. Because | | | | "foreign qualifying" or "foreign qualification." Qualifying as |
| there are no juries, decisions from the Chancery Court | | | | a foreign corporation involves: (1) filing the appropriate |
| are issued as written opinions, and as such, Delaware | | | | foreign qualification documentation with the relevant |
| has a large body of written legal precedent to rely | | | | Secretary of State; and (2) paying additional filing and |
| upon. | | | | maintenance fees. For some entities it may be worth |
| Delaware law also allows for a version of the Limited | | | | the additional time and money associated with foreign |
| Liability Company called a Serial LLC. Traditionally, an | | | | qualification, but for many corporations, it simply |
| LLC is relatively simple to form and maintain. It is similar | | | | creates an additional, unnecessary headache. |
| to the formation of a sole proprietorship or a | | | | When determining the appropriate state of |
| partnership, but also provides a layer of protection (the | | | | incorporation, you should undertake the following |
| corporate shield) as a limitation of liability. Unlike regular | | | | considerations: |
| LLCs, Delaware's "Serial" LLC allows different lines of | | | | 1. What are the tax implications/benefits of |
| business to be treated separately from each other | | | | incorporating outside your home state vs. incorporating |
| from a liability standpoint. | | | | inside your home state? |
| Incorporate a Business or Form a Limited Liability | | | | 2. What are the additional costs of incorporating |
| Company in the State of Delaware. | | | | outside your home state and where, if anywhere, must |
| Come tax time next year, you'll be glad you did! | | | | you foreign qualify? |
| What about Nevada? | | | | 3. Are the corporate laws in one state favorable to |
| Nevada began with corporate statutes based on | | | | the type of business entity you are forming, and how |
| Delaware, and went further to establish a corporate | | | | do they affect the obligations of the principals and/or |
| structure that allows investors and owners of Nevada | | | | shareholders of the corporation? |
| corporations to remain completely private. The | | | | Even though some factors favor incorporating in the |
| Supreme Court of Nevada has consistently taken a | | | | "friendly" states of Delaware or Nevada, it may be |
| very strong stand in the protection of corporate | | | | more expensive and more complicated to incorporate |
| privacy, even when a corporation fails to adhere to | | | | out of state. For this reason, it is important to consult |
| basic corporate formalities. | | | | with your attorney or accountant about the pros and |
| Since the implementation of these privacy statutes in | | | | cons of incorporating out of state before making your |
| 1991, the number of new incorporations in Nevada has | | | | final decision. |