Where You Should Incorporate

 

We hope the foregoing review of business entities has been helpful and given you some ideas. All of them have a place, many can be used in conjunction with one another, but, by far, our favorite is the corporation.  Corporations have become the quintessential form of doing business throughout the world for more than a century.  Just the simple act of incorporating in your home state can protect your personal assets, reduce taxes, and provide a universe of "fringe benefits" such as retirement plans, deferred compensation, annuities, life insurance, and medical reimbursement plans, just to name a very few. Moreover, many of these benefits may be tax deductible to the corporation and tax-free to the employee (that would be you).  So what state should you incorporate in?

 

 

Exploding The Delaware Myth

 

You may have heard that Delaware is the "incorporation capital" of America. It’s true! More than 60% of Fortune 500 companies are incorporated in Delaware. If you own a Fortune 500 company (and for your sake, we hope you do) then, by all means, you should strongly consider incorporating in Delaware. However, if you are a small- or medium-sized business that is more concerned with tax benefits, flexibility, privacy and a minimum of bureaucracy and "red tape," then Wyoming is the clear choice for you.

 

You see, Delaware has an excellent body of corporate case law spanning 110 years regarding such matters as management/shareholder issues and mergers/acquisitions. That’s precisely why the Fortune 500 are drawn to the state of Delaware. Delaware laws tend to be "pro-management" when it comes to minority shareholder disputes. Huge public companies have literally hundreds of such disputes pending in the courts on any given day. So, if you are managing a Fortune 500 company, Delaware’s case law offers many insights into what you can and cannot do, and what the likely consequences may be.

 

Unfortunately, Delaware also has corporate income tax, personal income tax, a state franchise tax, reporting requirements, and regulations compelling disclosure of substantial amounts of information resulting in far less privacy for you. We are always surprised at how many otherwise knowledgeable professionals advise their small business/ entrepreneur clients to incorporate in Delaware. Well intentioned though it may be, it is not sound advice.

 

Perhaps you’re one of those who received such advice and have incorporated your business in Delaware. It’s not too late! Refer to the preceding section and you will see that we can easily "move" your corporation to Wyoming, while preserving the original incorporation date.

 

Nevada vs. Wyoming

 

Nevada does not share information with the IRS.

 

Wyoming Answer: Nevada makes the IRS mad. Wyoming does share information with the IRS, but only  the information given by companies with real assets inside the state. So, you have the best of both worlds; the IRS is not targeting you because you are in a non-friendly state (like they may in Nevada), and yet there is no information that is shared because most businesses do not have real assets inside the state of Wyoming.

 

 

Nevada allows bearer shares.

 

Wyoming Answer: Nevada's law did not say anything about bearer shares, but that law is was changed in 2007 to disallow bearer shares.  If you think you need bearer shares, call us first.  You are most likely being misled.

 

 

Nevada has privacy.

 

Wyoming Answer: Go to the Secretary of State of Nevada's web site and type in a person's last name and/or first name.  You will see a list of all companies that person is a part of in Nevada.  Go to the Secretary of State of Wyoming's website and you will find that the only way to search on a company is by company name.  You cannot search using a person's name.

 

 

No taxes in Nevada.

 

Wyoming Answer: No state income taxes on people or companies in Wyoming either  and Wyoming is not considering any, Nevada has.

 

There are more comparisons in the chart below.

 

 

Benefits	Nevada	Wyoming	Delaware
No state corporate income tax
No tax on corporate shares
No franchise tax
Minimal annual fees
One-person corporation is allowed
Stockholders are not revealed to the State
No annual report is required until the anniversary of the incorporation date
Unlimited stock is allowed, of any par value
Nominee shareholders are allowed
Share certificates are not required
Minimal initial filing fees
No minimum capital requirements
Meetings may be held anywhere
Officers, directors, employees and agents are statutorily indemnified
Continuance procedure (allows Wyoming to adopt a corporation formed in another state)
Doesn't collect corporate income tax information to share with the IRS

 

Why Wyoming?

 

As you can see from the above list, Wyoming has advantages that Nevada does not have.  

 

Also, with the changes that Nevada has made to its laws, in 2003,2005 and in 2009, Wyoming has become the best state in the nation to incorporate in.

 

If you are comparing price, Wyoming is about 35% less to incorporate in than Nevada.

 

Another thing that they will not tell you about Nevada.  The state is running a deficit and the Nevada State Legislature has been trying to pass a corporate income tax and it came within a few votes of passing a tax, a few years ago.  It is thought that they will pass some sort of business tax, in the next few years. 

 

Wyoming is not considering any business income tax and does not need to. Wyoming has a budget surplus in 2009 of two years!  Don't gamble on Nevada passing a law that could cost you taxes after you incorporate there.