Is Nevada really the best place to incorporate?

I hear a lot of questions on twitter and other social mediums about incorporating in Nevada but nobody seems to give good reasons as to why?

Having done my own extensive research, I figure I'd share my findings with everyone on my blog. Let's start with, why incorporate in the first place? The first thing that usually comes to mind is protection, but personally after hearing that I was 300% more likely to be audited while operating as a sole proprietor I then saw it as prevention! Even if you have done everything by-the book, I nor anyone I know likes a visit from the IRS. I quickly found out that you do not have to incorporate in the state where you do business. If there is a more favorable state which can provide more benefit then you can incorporate there making it your domicile. Next, you will also need to file in your current state for foreign registry. In California, where I live, I was also susceptible to any fees that California charges in association with incorporating, so it does tend to be slightly more expensive than filing just in your home state.

So where's the best place to incorporate?

After taking my own council, I found that there were 4 main domicile options for my business (home-entrepreneur) and they are: Nevada, Delaware, Wyoming, and your home state. So let's start by separating the wheat from the chaff…

Why should you incorporate in your home state? Well, for one it's cheaper and if it's all that you can afford then it is much better then operating as a sole proprietor. On the downside it may not provide the protection of some other more favorable states. Also, if you or your company changes location, then your former home state would become your domicile. You would have to foreign register in your new state unless you dissolve the company and start over. Starting over would crush your well seasoned business history and, you would have to re-build any credit your company established in the past. If you can afford it, there is a better choice and it really is Nevada. Let's compare the final 3:

Delaware vs. Nevada

The main rights in Delaware law benefit shareholders of public corporations. This attracts large public companies that trade on various exchanges across the country and provide the BEST protection to their shareholders. Delaware's corporate law, with regard to corporate takeovers, is the strongest in the US. However, I run a home-based or more appropriately a mobile business so this option was not the best for me for the following reasons…

In short, Delaware's state corporate tax amounts to 8.7%, they also requires disclosure of one of the principal business location outside of the state. They freely exchange information with the IRS and require that you report the actual number and value of the stock listed. Nevada on the other hand, carries no state tax and requires none of the items listed above. In addition Nevada's corporate legislature has recently surpassed Delaware's in it’s’ effort to ensure that the rights of small corporations are protected. Without going too much into detail and boring the pants off you, I'll just say that Nevada has much more protection and limits to the liabilities of it’s’ officers.

*To verify this information call the state corporate tax department of DE @ (302) 577-3300

Wyoming vs. Nevada

Wyoming might be a good choice for you wanting to remain anonymous, or are the type of person to pick up pennies while dollars fly over your head. Let me explain. Wyoming adds more privacy and lower fees then Nevada. But that's not protection!

Similar to Nevada, Wyoming does not levy a personal or corporate income tax, but like Nevada you MUST have a nexus in the state to qualify for your tax savings. Wyoming, also allows it owners to be completely anonymous. Nevada does not, but let's be honest there's always a paper trail and if your hiding there's probably a good reason and I don't want to enable you any further. The corporate veil in Wyoming is very strong but there have been many more cases that have run through the Nevada and Delaware court systems and found stronger levels of protection.

So what makes Nevada the best place in the US to incorporate?

Besides the favorable tax laws, it is really all about protection. The corporate veil was only pierced twice in the last 30 years and both cases involved outright fraud. Nevada, a pro-business state, protects the business owners and they have the best track record for doing so. Let's go back to the reason you incorporated in the first place… protection. Let's say, you spent the last ten years building your business and your life and something outside of your control lands you in the "hot seat." If you are incorporated in a weaker state the chances of them piercing the corporate veil and coming after you and your personal assets is much higher. You could have everything you worked for hanging in the balance. Have you noticed a new question on loan applications? “Are you currently involved in a lawsuit?” If so, even a frivolous law suit can effectively paralyze your credit. My advice, spend the extra few hundred bucks and incorporate in Nevada. But before doing so make sure you do it with a company that understands your personal situation, the future assessed value of your company, and, is willing to discuss your options. I do not recommend using your CPA or Lawyer unless they have extensive experience with filing corporations. It is imperative that you have the "I” dotted and "T’s" crossed and you are set up for success on day one.

*If you need a recommendation just leave a comment or send me a massage. Before Incorporating, you must read this 78 page FREE report!

P.S. If you are a home-based entrepreneur like myself you WILL need to foreign register in your state even though you conduct business online.