As the manager of an incorporation service company, I get asked a lot, "should I form my LLC in Delaware,? or ?I hear that incorporating in Nevada is the best thing for me to do? Many of us have heard the hype: Is it really better for most small businesses to form their entity in Delaware or Nevada?
Probably not!
First, let's deal with why many businesses form corporations (and more recently, LLCs) in Delaware (and to a lesser extent Nevada & Wyoming). Touting lower fees, quicker processing (for $50 extra, you can incorporate in 24 hours), a pro-business court system (with over one hundred years of case law on the books), anonymity for the corporate officers & owners (more so with LLCs) and no state taxes, Delaware has been at the forefront of the incorporation push. As overseas banking is to the Cayman Islands, incorporations became the major industry for Delaware. In fact, half of the NYSE's companies are Delaware based. Although the state does not charge taxes, Delaware picks up $Millions in incorporation fees and Annual Report dues. Not wanting to miss out on all the fun (and money), Nevada & Wyoming followed much later.
Often companies will form their corporation in Delaware or Nevada and never even set foot in that state! Neither Delaware nor Nevada requires you to set up an office in their state. So, why wouldn?t everyone form in DE or NV? Let?s look at each benefit a little more closely:
LOWER FEES
It is true that state fees in DE ($89) & NV ($75) to file a corporation are low. But, they are also lower in most states now. California, was the worst @ $900 in upfront fees, but they lowered them to $100 a few years ago. This is also the case (although not as much) with LLCs. However, it?s not just the incorporation fee you need to worry about. There are other costs.
Let?s say your business is based in Arizona and you want to file a Corporation in Delaware. Besides the Delaware incorporation fee, you?re also responsible for Delaware?s ongoing Annual Report fees. Although a corporate office is not required in Delaware, a
Registered Agent office is required. And unless you want to set up a physical office, you better find an approved Delaware Registered Agent. Registered Agents like
IncyourBiZ Corp, charge $99 per year to be physically available in Delaware if your corporation gets sued.
