legal Eagle Straight-forward legal tips for Military and Veteran Business Owners By Kelly Bagla, Esq.
CHOOSING THE RIGHT STATE TO REGISTER YOUR BUSINESS IN 2021 The real question is: “Which State do you want to get sued in?”
Each state varies in terms of fees and taxes, meaning the best option for a large public company may be completely different for a small business. Delaware, Nevada and Wyoming may be considered businessfriendly states, but none present a one-size-fits-all solution to choosing the right state of incorporation for your business. Below is a brief examination of each state that can help you select the state of incorporation that is right for your business. DELAWARE Many corporations register in Delaware because of the state’s lucrative tax codes and corporate-friendly laws. Investment bankers often require publicly traded companies to incorporate in Delaware to comply with some securities law requirements. Most Fortune 500 companies are incorporated in Delaware, largely because of the state’s premium justice system.
Embarking on a new business venture can be both challenging and rewarding. One of the biggest challenges a new business owner faces is choosing a state of incorporation or the state in which their business will be registered. Choosing the state of incorporation is a largely misunderstood aspect of starting a new business, creating confusion for even the brightest of business owners. A business owner can opt to register their business in the same state the business operates in, or they can register the business in a different state. States with lower corporate income tax rates like Delaware, Nevada and Wyoming are attractive options for many new business owners seeking to limit tax exposure of their new ventures. If the goals and needs of the business are not taken into consideration, however, incorporating the business out of state can have the exact opposite result. Delaware, Nevada and Wyoming may be considered business-friendly states, but none present a one-size-fitsall solution to choosing the right state of incorporation for your business. 52
WWW.HomelandMagazine.com / JANUARY 2021
Delaware’s separate Court of Chancery provides businesses with faster resolutions and more predictable outcomes to business disputes. The Court of Chancery appoints judges with business backgrounds to rule on these cases involving commercial transactions without a jury. Delaware attracts both large and small corporations because of the well-developed body of case law for corporations, reaching back over hundred years and covering a wide breadth of matters regarding shareholders, management, mergers and acquisitions, and more. The state has no income tax and additionally, Delaware does not charge corporate taxes from corporations which are incorporated in Delaware but do not conduct business in the state. NEVADA Nevada is also a popular state of incorporation. It is important to remember that small-business owners must register as a foreign registrant in their own state when they incorporate their businesses out of state. These duplicate filings can result in increased one-time formation fees and an annual compliance burden. With the high cost to file in Nevada, this can cause large expenditures for small businesses.