After you make the decision to form your own business, the next most important thing that you need to take care of is the structure of your firm. This is important because the structure of your firm will play a major role in how well your business does. Will your firm be a sole proprietorship-based business, where you incur all the profits or loss? Or will your firm be incorporated to limit your liability? The choice is yours.
Many businesses today choose to incorporate themselves. However, with this said, many firms also do not put much weight and thought into where they want to incorporate their business; they simply do it in the state where their business is set up. What they fail to realize is that by incorporating their business in another state they maybe able to avail certain favorable corporate tax laws. This happens because corporate tax laws vary from state to state, and some states such as Delaware and Nevada offer excellent tax breaks. However, if you wish do business in more than one state or if you wish to take your corporation public, you should consider setting up your business in a state where corporate laws are flexible and can positively affect your firm.
Corporations incorporated in one state and who do business in another are known as 'foreign corporations' in the state in which they do business. If your corporation wishes to do business in another state they also need to register in the state in which they wish to operate, as well as meet filing requirements and other necessary miscellaneous fees. Some things that you need to consider about incorporating your business elsewhere include; the favorability of tax rates; the costs and fee structures associated with incorporating your business; the insolvency laws of the state; and ease with which you can incorporate your business. Only after considering all these points should you decide where to incorporate your business.
Incorporate your business in Nevada
One state which offers corporations a lot of flexibility is Delaware, however recently Nevada has also changed some of its corporate laws to build a more favorable environment in which corporations can be set up.
Some of the main benefits of incorporating your business in Nevada include:
The identities of shareholders do not have to be disclosed in the corporation's public records.
Directors, officers and shareholders can be non-residents of the state of Nevada.
One person can hold all corporate offices.
You do not have to pay state annual franchise tax.
There are no state corporate taxes on profits.
You do not have to pay state personal income tax.
The formation of a corporation in Nevada is easy and quick.
To setup a corporation in Nevada you must have a legal address and registered agent within the state.
Some other advantages for incorporating your business in Nevada are; along with four other states, Nevada has no corporate income tax. Additionally with strict privacy regulations corporations in Nevada can keep their public records secret giving a business anonymity and confidentiality. Corporations also get liability protection as well as flexibility in management in Nevada as the state prohibits information sharing with the IRS.
