Where to Incorporate

Launch by LegalShield makes it easy to form a corporation for only $145 + state fees. You’ve probably heard the old saying that there is nothing certain in this world except for death and taxes. We’ll skip death for now, but let’s talk about a constant annoyance for small businesses - taxes. Tax policy differs from state to state. In fact, some states try to make their tax policy enticing for smaller businesses, in order to attract companies to reside within that state's borders.

Incorporation Benefits

Incorporating in a business-friendly state offers advantages to both parties. The state gets a job-producing entity, and small businesses get to keep more of their money. Certain states have attempted to turn themselves into "corporate havens." This may mean a decrease in that state’s immediate tax revenue, but the influx of businesses into the state often offsets that decrease. When choosing a place to incorporate, don’t take the decision lightly. Two business-friendly states that could very well be at the top of your list are Nevada and Delaware. Delaware is called home by 60 percent of Fortune 500 companies, despite being the second smallest state in terms of area and the fifth smallest in population size.

The Corporate Laws

This is not too surprising if you’re familiar with Delaware's corporate laws. If you locate in Delaware but don’t operate within the state, Delaware doesn’t charge a corporate income tax. Even if your business does operate within the state, your purchases are not subject to sales tax and income is subject to a flat tax of 8.7%. The Delaware Economic Development Office helps encourage small business within state boundaries. Their website, http://dedo.delaware.gov, contains links to a variety of sources that are of interest to small business. The state provides funding ideas, guidance, and support to any business that wants to establish in Delaware.

But if you’re thinking about heading west, westerners have their own tax haven in Nevada. Low cost of living along with no inventory tax, no personal or corporate income tax, and low payroll taxes means Nevada is one of the most attractive incorporation locations in the United States. While there aren’t as many resources available to businesses as in Delaware, the low or non-existent tax rates can make starting a business in Nevada well worth it. Even in Nevada though, you aren’t on your own. The Nevada Small Business Administration, in cooperation with the University of Nevada, Reno: College of Business, offers an excellent resource called the Nevada Small Business Development Center, accessible at http://nsbdc.org. Alongside plentiful information, the website offers necessary forms, frequently asked questions and other resources to make your life easier. Certain companies such as non-profits, high tech start-ups, or businesses founded by groups like minorities and veterans can qualify for available tax dollars as well.

Tax Savings

Taxes are no fun. They eat into revenue and make doing business harder. Most states will offer reasons why they are a great place to incorporate, but Nevada and Delaware have shown that they can deliver on their promises. It’s important to consider your options and consult with a professional before making a decision, but Delaware and Nevada are both consistently chosen as states of incorporation for a reason. Less money to the state via taxes means more money back into your business, and that increase in capital could mean the difference between success and failure.

Launch by LegalShield makes it easy to form a corporation for only $145 + state fees.  PLUS, you become a LegalShield member with access to a dedicated law firm. Your law firm is available for unlimited consultations, contract reviews, employment questions and more.

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