Delaware vs. Nevada
For a long period of time Delaware is the leading state of choice for business incorporation thanks to its corporate friendly economical and law policy.
However, often you may read titles like "Delaware vs. Nevada" or "Nevada vs. Delaware". What's the deal with Nevada incorporation?
Nevada has been a pioneer state in certain state laws liberalization, incorporation being one of the targeted juridical and economical areas. Nevada has certain advantages over Delaware if you are an US citizen or resident. However, most US aliens prefer Delaware over Nevada.
The following list is a briefing of Nevada pro arguments:
- Delaware has a franchise tax, Nevada does not
- Delaware has an income tax, Nevada does not. While it is true that this 8.7% income tax applies only to revenue earned within Delaware
- Delaware is now regulated by a corporation commission, Nevada is not. You should be aware that any time a state or federal bureaucracy is created it immediately begins to make rules and regulations to promote, enlarge, and enhance itself and make itself indispensable and necessary at your expense and inconvenience
- Delaware, like every one of the other states except Nevada, reports tax data to the Internal Revenue Service
- Some states make a major item out of the fact they recognize S-Corporations. The status of a corporation as an S-Corporation really has no significance to the corporate owners if the state has no income tax. In Nevada, whether you have an S-Corporation or not really doesn't matter to the Department of Taxation since allocation of taxable income from corporations to the individual has no effect on the state's revenue. Delaware, however, does recognize S-Corporations and therein lies the rub. A Corporation can get S-Corporation treatment to the extent its owners are residents
- In Delaware you must disclose the date appointed for the next annual meeting of stockholders for election of Directors. You do not have to divulge any information like this in your Nevada corporation
- In Delaware you must disclose in your annual report the location of principal places of business outside of Delaware, this is not required in Nevada
- In Delaware you must list the number and value of shares of stock actually issued. This could be dangerous to you and it is not required in Nevada
- In Delaware you must report the transfer of stock, not so in Nevada where maximum flexibility is always maintained
- The annual registration cost to maintain your corporation in Nevada is half that of Delaware
- In Delaware you must pay tax on income earned in Delaware. The state of Nevada has no income tax either on the corporate or individual level. In fact, Nevada's constitution prohibits personal income tax
To conclude, if the advantages listed above make a difference in your business you should also consider Nevada incorporation.