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Few know that the law does
not require a company to incorporate in its
"home" state. In fact, an entity
can choose from any of the 50 states or the
District of Columbia. Some states have a
much greater number of corporate
formations, which begs the question -
"Why?"
Due in large part to their liberal
incorporation laws and favorable tax
policies, the most "incorporation
friendly" states are Delaware and
Nevada. And here's why...
Nevada began with corporate statutes based
on Delaware, and went further to establish
a corporate structure that allows investors
and owners of Nevada corporations to remain
completely private. The Supreme Court of
Nevada has consistently taken a very strong
stand in the protection of corporate
privacy, even when a corporation fails to
adhere to basic corporate formalities.
Since the implementation of these privacy
statutes in 1991, the number of new
incorporations in Nevada has exploded.
Unlike most other states, Nevada does not
require corporate stockowners to disclose
their information. In fact, the information
is not kept on file with the state.
Additionally, to ensure privacy, Nevada
allows its corporations to use bearer stock
certificates, which make it virtually
impossible to prove the ownership of a
Nevada corporation. Accordingly, owners or
investors utilizing bearer shares can have
complete control and ownership while
remaining anonymous.
Nevada also does not tax the income of its
corporations or its state's citizens. A
Nevada corporation is also not subject to
any other hidden taxes such as franchise
taxes, capital stock taxes, or inventory
taxes. Sales tax applies only to products
sold within the state.
Incorporate
a Business or Form a Limited Liability
Company in the State of Nevada. Come
tax time next year, you'll be glad you did!
Delaware’s advantages as a place of
incorporation range from the Delaware
General Corporation Law to the flexibility
built into the corporate formation process.
Incorporating in Delaware is generally less
expensive than most other states. The
initial charge for incorporating in
Delaware can be as low as $89.00; the
annual franchise tax can be as low as
$65.00 in many cases; and the cost of
continuing operations is low as well. There
is no Delaware corporate income tax for
corporations that are formed in Delaware so
long as they do not transact business in
Delaware.
Another benefit of Delaware incorporation
is Delaware's extensive and often easily
interpretable law. Delaware has a separate
Court of Chancery (a business court) that
does not use juries, but instead utilizes
merit-based (not elected) judges. Because
there are no juries, decisions from the
Chancery Court are issued as written
opinions, and as such, Delaware has a large
body of written legal precedent to rely
upon.
Delaware law also allows for a version of
the Limited Liability Company called a
Serial LLC. Traditionally, an LLC is
relatively simple to form and maintain. It
is similar to the formation of a sole
proprietorship or a partnership, but also
provides a layer of protection (the
corporate shield) as a limitation of
liability. Unlike regular LLCs, Delaware's
“Serial” LLC allows different lines of
business to be treated separately from each
other from a liability standpoint.
Incorporate
a Business or Form a Limited Liability
Company in the State of Delaware. Come
tax time next year, you'll be glad you did!
For most small businesses, however, it may
still be best to incorporate in the state
where that business is based. Even though
some factors favor incorporating in the
"friendly" states of Delaware or
Nevada, it may be more expensive and more
of a hassle to incorporate a smaller
business out of state. For this reason, it
is important to consult with your attorney
or accountant about the pros and cons of
incorporating out of state before making
your final decision.
Incorporate
a Business or Form a Limited Liability
Company in the your home state. Come
tax time next year, you'll be glad you did!
MyCorporation.com offers a full line of
document filing services in any state:
- Form a NEW Corporation
- Form a NEW LLC
- Visit our FREE Online Trademark
Search Facility
- Initial/Annual Report Filings for
Corporations and L.L.C.s
- Change Corporate Name
- Foreign Qualifications for
Corporations and L.L.C.s
- Registered Agent Services (any
state!)
- Corporate Kits
- LLC Kits
- Customized Corporate Minutes and
Bylaws
- Custom Corporate Seal/Embosser
- Stock Membership Certificates
- LLC Customized Operating Agreement
- Articles of Dissolution
- Certificates of Good Standing
- Federal Tax Identification Number
- Name Availability Checks
- Name Reservation Requests
Although MyCorporation.com is
happy to assist you with all of your
document filing needs, I strongly urge you
to speak with a licensed professional who
can provide you with sound advice as to the
form of entity that best suits your
particular needs.
Good luck in all your business endeavors!
Deborah Sweeney, Esq.
Michelman & Robinson, LLP
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Deborah S. Sweeney is a licensed attorney
and a member of the California State Bar.
Ms. Sweeney is currently the head of the
intellectual property department at
MICHELMAN & ROBINSON, LLP, Los Angeles,
California and may be contacted directly at
818.783.5530. Although this letter is
intended for informational purposes, it
cannot serve as a replacement for legal
advice nor does it purport to do so. |
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IMPORTANT DISCLAIMER
This publication is NOT INTENDED TO SERVE
AS A SUBSTITUTE FOR LEGAL ADVICE. Please consult
with a licensed attorney if you require legal
advice.
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