The appeal of Delaware & Nevada

 

Delaware and Nevada are two states in which some small business owners opt to incorporate a business. They offer unique advantages for certain types of businesses. Some potential advantages of incorporating your business in Delaware include:

 

• Delaware’s business law is one of the most flexible in the country.

• The Court of Chancery focuses solely on business law and uses judges instead of juries.

• For corporations, there is no state corporate income tax for companies that are formed in Delaware but do not transact business there (but there is a franchise tax).

• Taxation requirements are often favorable to companies with complex capitalization structures and/or a large number of authorized shares of stock.

• There is no personal income tax for non-residents.

• Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be residents of Delaware.

• Stock shares owned by persons outside Delaware are not subject to Delaware taxes.

 

Some potential advantages to forming a corporation or LLC in Nevada include:

• Nevada has no state corporate income tax and imposes no fees on corporate shares.

• There is no personal income tax or any franchise tax for corporations or LLCs (but initial and annual statement fees and business license fees apply).

• Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be residents of Nevada.

 

Remember, if you form in Delaware or Nevada but you transact business in another state, it is likely that you will have to foreign qualify your business in that state.

 

For questions about the best state of incorporation for your business, or to determine if you need to foreign qualify in another state, consider talking to an attorney.