Should I incorporate in MY state, or in another state, such as Nevada, Delaware or Wyoming?

Some people have gotten advice to incorporate in another state, and so when they go to incorporate, they are confused about where to incorporate. 99% of the time, incorporating in your home state (where you live) is the right decision. For almost every case, this is what we recommend. For those who are still wanting to incorporate in a different state than where you live, please read this article first.

Most people say they want to incorporate in Nevada because of one of these reasons:

"I don't know know, I just thought it was better" - Usually people think it is "better" because those who specialize in promoting Nevada corporations constantly advertise that it is better. This doesn't mean it is true.

"I thought I could save on taxes because Nevada has no state tax" - Remember that your corporate profits will flow through to YOU personally, and YOU get taxed by whatever state you LIVE in, not where you are incorporated.

"The state fees in Nevada are less than the state fees in my own home state" - Remember that in most cases, you will need to register as a foriegn corporation in your own home state, and you'll end up paying those same fees anyway - PLUS you'll then ALSO be paying the Nevada fees, too. You'll have two secretary of states forms and proceedures to have to deal with each year. Wherever you are DOING business is where you need to be registered. If you don't register as a foreign corporation in your home state, then in your home state you won't be able to hire any employees, get a local bank account, or open up any kind of a kiosk or storefront. If you let people know that you are conducting business locally and that information is found out by your state's tax board, you will likely owe back fees and penalties as a foriegn corporation.

"I don't want anyone to know that I own the company" - Nevada is good for privacy, however, if you're building corporate credit, you're going to have to end up telling people who you are. Lenders do not lend to fake nominee officers who are listed on 100 other corporations. Nominee officers don't sign loan applications for you or drive to banks and meet with bankers. If you want privacy, you're thinking about an ASSET PROTECTION strategy. There are benefits to having a asset protection strategy. Many experts recommend having two different corporations - one that you use to conduct business and the second corporation to be a Nevada corporation for asset protection. Privacy and getting credit don't mix.

What are the main, true benefits to the incorporating in Delaware, Nevada and Wyoming?
	Delaware...the main benefit to incorporating in Delaware is that their state laws are more business friendly. Because of this, if your product or service is sound, you stand a much better change of avoiding a frivoulous class action lawsuit.
	Nevada...the main benefit to incorporating in Nevada is the ability to keep the control of the corporation private. Normally, the secretary of state requires that you list the officers of the corporation (the president, secretary, and treasurer), and that becomes public information. In Nevada, you can have "nominee officers". Through this loophole, the people who actually run the corporation can be kept from public view. This is good for asset protection.
	Wyoming... the main benefit is the same as Nevada above: nominee officers.

 

What is a foreign corporation? When do you need to register as a foreign corporation?

 

If you have a Nevada (or Delaware) corporation, but you are physically located in another state - let's say Michigan - then you will need to register as a foreign corporation in the state of Michigan IF you are PHYSICALLY conducting the business. In other words, if no business is being done - let's say that the company just sits there and doesn't do anything - then you wouldn't have to register as a foreign corp. But if you are on the phone, making things happen, getting contracts together, doing work, then you are suppossed to register in the state where that is taking place. If you want to open a local bank account, hire any employees that live in your home state, open a storefront or a kiosk, you will need to first register as a foreign corporation.

You need a real physical address for business credit purposes.

 

If you have a Nevada corporation, you will need a legitimate Nevada address - not a PO Box or a "virtual office". A home address would be just fine. If you know someone who lives in Nevada who agrees to let you run the business out of their house and receive mail there, that would work. Just keep in mind that in the world of business credit, you cannot operate your company out of a PO Box, or a virtual office.

Disclaimer: This article is meant for general knowledge and is not to be construed as legal or tax advice – for specific advice on your situation, please consult a qualified attorney or tax professional