In Part 1, we discussed the non-legal issues that can influence where to incorporate, such as financial, convenience of where they are doing business, and continuing operations.  Now we will discuss some of the legal considerations for where to incorporate.  As we mentioned in Part 1, Delaware, Nevada, and Wyoming are three states considered corporate havens, so we will discuss some basic information about these three states.

Delaware

The Good:

(1) Delaware offers some of the most developed, flexible, and pro-business statutes in the country

(2) Delaware has a tremendous amount of case-law spanning 110 years that adds to the ability to predict the consequences for doing something that the company should not do.

The Bad:

(1) State Corporate Income Tax and Franchise Tax

(2) Corporate reporting requirements

(3) Regulations compelling disclosure of information

Nevada

The Good:

(1) Nevada offers Officers and Directors some of the highest levels of protection from lawsuits.

The Bad:

(1) Nevada has Limits on stock/par values

(2) Nevada legislature has been trying to pass business taxes for the past couple of years to offset a budget deficit

Wyoming

The Good:

(1) Wyoming is one of the most cost-effective states to incorporate in, (although only incorporating in the state you do business in is more cost-effective)

(2) Wyoming offers Officers and Directors the some of the highest levels of protection from lawsuits

(3) Wyoming was the first state to provide Limited Liability Company statutes in the country, dating back to 1977 and updated in 2010 to ensure they remain current.

(4) Share certificates are not required

(5) The ability to move an established Corporation to Wyoming while maintaining the original incorporation date

The Bad:

Wyoming business statutes closely resemble Nevada, however there is less case-law backing up those statutes.  This means that when a case goes to trial, depending on what is being litigated, the predictability of the results is less certain than in Nevada or Delaware.  Over time, this will likely improve, but for now it is what there is.

 

Where to Incorporate…

For a small business operating in one state, it is often (not always) recommended to incorporate in your home state.  If you are a larger business, working in several states, or plan to operate in the other state, then it is often (once again, not always) recommended to pick the best state out of the states that you do business, giving appropriate weight to costs and benefits of choosing the state.

Deemer Law Group, P.C. is licensed to practice in Wyoming and we incorporated our firm in Wyoming because we do business in Wyoming.  If we had no ties to Wyoming, we likely would not have incorporated in Wyoming.  With that said, Wyoming has been wonderful with making it easy to be incorporated there.  As an example, when we needed a certificate of good standing, it was as simple as going on-line, requesting one, and it immediately comes up.  No wait.  No costs.  Done.

We also have clients that choose to incorporate in Wyoming because it makes sense for what they want to happen with their business.  It is a relatively inexpensive endeavor, but the majority of our clients incorporate in the state where they reside because it saves them money every year.

The bottom line, it is up to the client where they want to incorporate.  We will provide the benefits and drawbacks to a clients specific situation, and allow them to decide.