Considering Where to Incorporate

2007-03-08 10:33:40

( Business )



Corporations wishing to do business in more than one state, or those that decide to become a public corporation need to incorporate in another state that offers corporate laws that would benefit their company.

If you decide to incorporate elsewhere, you will then be known as a “foreign corporation” in another state. Corporations must register in order to do business in each state where they operate.

There are a number of factors to consider in deciding where to incorporate:

Tax rates – are the tax rates lower or higher in the state where you wish to incorporate?

Costs and Fees – what are the costs of registering your corporation in the other states where you will be doing business?

Insolvency – if company becomes insolvent, what are the laws regarding creditors in each state?

On deciding where to incorporate, there is usually two popular states that corporations end up on making their choice on: Nevada and Delaware.

50% of the Fortune 500 companies and almost half of the companies on the New York Stock Exchange choose Delaware. You should incorporate in Delaware if your corporation plans to go public in the future and if you have offices and operations in multiple states.

Incorporating in Delaware has numerous advantages:

A Delaware corporation can be formed in 24 hours by phone or fax; for an extra fee, some can even incorporate in an hour;

The incorporation and annual franchise taxes are kept at a minimum;

You can appoint only one person to hold all corporate offices and the same person to be the sole shareholder;

Tremendous tax savings as no income tax needs to be paid;

Delaware has a special court system called “Court of Chancery” which hears corporate cases and they are resolved far more quickly than in a normal court;

There is no need to be a resident of Delaware or a US citizen to own and form your corporation;

Delaware corporations can trade their stock in exchange for services, etc.

If you decide to maintain a private corporation, then you should incorporate in Nevada.

Nevada corporations can also be formed within 24 hours;

Shareholders’ identities can be kept confidential;

Your shareholders and directors do not necessarily have to reside in Nevada;

One person can be chosen to be the officer and director; that one single person can hold all corporate offices;

Corporate income tax, franchise tax, capital stock tax, corporate share tax, estate tax, inventory tax, personal income tax, stock transfer fee, inheritance and gift tax are waived;

Nevada corporations can be formed with no start up capital;

No formal meetings are required in daily operations. With proper consent, members of the board and stockholders can act by unanimous consent;

Can conduct different businesses under one corporation.

Finally, your corporate lawyer can most likely assist you further in making a decision on where to incorporate.


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