Choosing a State
The best state to incorporate in all depends on your business, intentions, geographic requirements, taxation and privacy needs. There are advantages to incorporating in Nevada, as well as Delaware, however, if you’re incorporating and will be conducting business primarily in a single state, or your home state, then that maybe the most logical state to incorporate in, for you. If you are seeking higher levels of privacy or tax related advantages, you may consider incorporating your business outside of your home state. We’ll compare the benefits of incorporating in various states.
You must first ask yourself where you will be conducting all or the majority of your business. Most small business will incorporate and operate in the state where they conduct business. This follows a very logical and simple decision process, however it does exclude some of the other questions you may ask yourself when deciding what state offers additional advantages. Consider ownership privacy, tax benefits and publicly traded growth potential, for starters.
You should learn about the advantages of various states before you incorporate a business. If you plan to incorporate outside of your home state, or the state in which you will conduct the majority of your business, you may be required to qualify as a foreign entity. This is also known as foreign qualification, essentially it is registering as a business incorporated in another state. This requires some additional paperwork and formalities.
Incorporating For Maximum Privacy
Nevada has several powerful privacy benefits which make it an attractive state for business incorporation. Along with being a tax-free state, Nevada allows nominee officers and directors when you incorporate your business. This means that you can complete the document filing with the state using elected nominee officers and directors whose names go on the public filed articles. This is an additional layer of privacy for the owners and directors of an incorporated business. The names of the actual corporate members are kept off of public record. If privacy is a huge concern, then you may consider the best state to incorporate in is Nevada. Both Corporations and LLC’s are allowed to have nominees on the articles of incorporation or formation.
A Nevada corporation can do business in any state with some simple documentation filing that can be performed by Companies Incorporated. Nevada has some strong lawsuit protection provisions such that if the company is sued, the officers, directors and shareholders have substantial protection. The owners of a privately held Nevada corporation are private and not listed in the public records. Moreover, there is no corporate income tax in Nevada. So, there are no extra taxes to pay or income tax forms to file in Nevada. Nevada LLC law has some significant benefits for protecting assets held in the LLC. When a member of a Nevada LLC is sued there are legal provisions such that assets held in the company are protected from seizure.
Incorporation in a Business Friendly Environment
Delaware has long been home of some of the most favorable business friendly environment for incorporating your business. Delaware has what is called the “Court of Chancery”, consisting of judges who hear only corporate law cases. This specialization makes for consistent rulings. So, rather than fight an expensive legal battle, past similar cases can be reviewed to more reliably predict an outcome. Most publicly traded companies are incorporated in Delaware, and because of this there is an image of public creditability that may increase the likelihood for investors to contribute money to your public or private offering. If your business plan has an IPO in it, the best state to incorporate in could be Delaware in order to take advantage of these business friendly benefits.
You have several key factors when deciding where your business should be incorporated. Take these considerations seriously and weigh the advantages with any additional administrative workflow or required documentation. How much privacy do you need and does your business have an acute geographic or do you serve a national or global market? Considerations should also include state law, some states have a history of favoring corporations in a legal battle and the corporate veil is a tremendous advantage in these cases. Please keep in mind that the right state to incorporate in all depends on you, your business, your needs and situation, what worked for one, may not apply to you.