The Best State to Incorporate Your Business

When it comes to incorporating or forming an LLC for your business, many questions come up. One question that I often hear is…where? And most of the time, people ask, Should I incorporate in Delaware or Nevada?

Delaware and Nevada are both popular options for incorporation, and it’s easy to see why. Many big companies choose Delaware because it has some of the best, most flexible laws for businesses in the whole country. And more and more businesses are choosing Nevada because it has low filing fees and no state corporate income, franchise, or personal income taxes.

But here’s the thing: if you have a small business with less than five shareholders or members (which is the case for most small businesses), it’s a good idea to incorporate or form an LLC in the state where your business actually exists. I mean, where your business is physically located, where any property you own is located, where your employees live, and where your shareholders live.

So basically, unless your business has an office in Delaware or Nevada, it’s way easier and cheaper in the long run to incorporate or form an LLC in your own state. Trust me on this one. It just makes everything simpler.

Let me give you an example to show you what I mean. Imagine there’s a woman named Susan who owns a soap-making business in Maryland. She’s thinking about incorporating her business in Delaware, but she doesn’t realize that there are some strict rules in Maryland when it comes to bank accounts. Since her business is located out of state, she would need special permission to open a business bank account in Maryland, even though she lives right down the road from the bank. On top of that, it won’t be easy for her to open a bank account in Delaware either, because she doesn’t have a physical address in the state.

This is just one example of the challenges Susan would face. There are many other potential problems she could run into, not to mention the extra fees she would have to pay.

Let me give you an example. Imagine if a business decides to incorporate in a different state, like Delaware, instead of the state where the owner lives and operates the business. Well, in that case, there are some extra things they would have to do and fees they would have to pay in both states. These things can include:

• Choosing a person called a Registered Agent in the state where they incorporated
• Paying fees to the government in that state
• Submitting a report to the government every year in that state
• Choosing a Registered Agent in the state where they operate
• Paying fees to the government in that state
• Submitting a report to the government every year in that state
• Meeting the requirements to be considered a business from another state in that state
• Paying taxes in that state

But hey, just because you decide to call Nevada home for your business, it doesn’t mean that’s all the tax laws you have to worry about. Turns out, the state where your business actually operates might have a bone to pick with you and your taxes sooner or later. Yeah, it’s like a double whammy – not only do you have to pay taxes to the state you’re in, but your tax bill might actually increase because they see you as a foreign entity.

Before you know it, all the perks of incorporating in Delaware or Nevada start to lose their shine when you factor in all the extra costs and paperwork involved in running an out-of-state business. That whole business-friendly pitch they give you? It’s really only useful for big-shot companies with more than five people calling the shots.

Hey there, fellow small business owner! I understand how overwhelming paperwork and fees can be, so let’s not add to that burden by trying to operate in another state. Trust me, the easiest path is to incorporate in your home state.

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