Top 3 States for Incorporation
Forming your company is a challenging task to overcome. One of the most crucial steps in the formation process is determining in which state you’re going to incorporate your entity. The state in which you incorporate is significant because some states are friendlier than others with incorporation laws. The problem is knowing which state to choose.
Our corporate team has compiled a list of the top 3 states to incorporate into and why they’re a good choice for most businesses.
Having the government looming over your business and worrying about state compliance can be a large threat to the privacy, flexibility, and finances of your business when you incorporate. Delaware is a state where these issues can be avoided. Delaware follows a laissez-faire approach to incorporation, hence why more companies have incorporated there than any other state.
- In Delaware, a business is not required to disclose its officers and directors when forming a business.
- Another advantage to incorporating in Delaware is the court system. Delaware uses corporate judges rather than juries for corporate legal issues in the Court of Chancery. The judges are experts in corporate law and tend to be much more favorable to businesses than juries.
- There are tax advantages to incorporating in Delaware. If you incorporate in Delaware but have your business headquarters elsewhere, you do not have to pay state income tax.
- Delaware processes filings quickly and has several expedited options. It is possible to receive filing evidence back in two hours rather than several days.
- Officers, directors, and shareholders are not required to live in Delaware. One person can also be the sole officer of a corporation in Delaware. Several states require more than one individual to hold officer positions. In Delaware, one person can hold multiple officer positions.
Financial implications of incorporation could be the most significant factor when choosing your state. Nevada holds this advantage when compared to other choices. There is plenty of financial and regulatory benefits to incorporating in Nevada.
- One major advantage of incorporating a legal entity in Nevada is the lack of corporate income tax or franchise taxes.
- A corporation can be set up in Nevada and have a corporate headquarters in a different state.
- Nevada does not require you to list the names of directors to incorporate. Any authorized person, including an attorney, can be named as the person of record for your company.
- Nevada has heightened asset protection. Nevada does not have loopholes that could cause you to be held responsible for damages caused by your entity.
- Nevada does not require an entity to list company corporate assets. This is only required by the Federal government for Nevada entities.
Looking for an overall, well-rounded state for all your incorporation needs is crucial, so making the right choice is essential to your entity’s success. Wyoming is another state that doesn’t garner as much attention when it could be the best choice for incorporating.
- There are business incentives since Wyoming does not have a corporate state income tax or franchise tax for corporations.
- There is an annual report requirement with a low filing fee. However, Wyoming does require share certificates.
- The administrative costs of incorporating are lower than in Delaware or Nevada.
- Wyoming does not require a business license fee.
- No annual report is required until the anniversary of the incorporation date
Top 3 States In Comparison
Please look at a side-by-side chart that compares the benefits of incorporating in either Delaware, Nevada, or Wyoming.
There are pros and cons to incorporating in Delaware, Nevada, or Wyoming. Nevada requires a business license fee of $350 and if you are a profit company the fee is $650. Wyoming does not require a business license fee. Another advantage to incorporating in Wyoming is that no annual report is required until the anniversary of the incorporation date. Another disadvantage to incorporating in Nevada is the lack of privacy. You can type a person’s first and last name into the Nevada Secretary of State’s website and pull up a list of companies that person is part of. In Wyoming and Delaware, you cannot search by a person’s name. You can only search by company name in Nevada. In Delaware, you can search by company name or entity number. To be clear, each state has one leg up on the other in some areas of incorporation. However, compared to all other states, these three are always going to be a good choice.
Disclaimer: This article provides general information and materials related to contract management. This article does not provide legal advice. Agile Legal is not a law firm, nor does it provide legal advice. You should contact an attorney to obtain advice with respect to any particular legal issues or questions.