Lately I’ve been receiving questions from clients and peers about incorporating in two states often mentioned in the same breath: Nevada and Delaware. Both are known for their ability to accommodate small businesses and franchises, and I’m consulted on the former because I’m licensed to practice in the Silver State.
Historically, Delaware has been the mecca for domicile, or residence, when forming a new entity. There’s low taxes, good incentives for owners and economic partnerships to guide you along. But a 2014 increase in Delaware’s franchise taxes has been influencing owners to look elsewhere for re-domicile. In short, a Delaware business with $20 million in earnings can rack up annual fees between $70K to $180K. That’s the equivalent of at least a few employees, especially for the smallest companies. It’s better than most states but I realize the geography may not work for you.
This isn’t a Delaware-bashing session, though. The Union’s first state continues to set the precedent for a business-friendly landscape. However, analysts and lawyers have noticed that Delaware’s standard has been migrating toward that of the Model Business Corporation Act (MBCA), which has been the standard followed by many states — including Nevada.
It’s No Mirage
I know what the average reader or entrepreneur might be thinking — re-domiciling from Delaware to the home of Las Vegas seems like the equivalent of replacing my accountant with an exotic dancer. But Nevada happens to be the second-most popular commercial filing jurisdiction in the country, due to the generally favorable business laws and low-tax environment. Simply put, it’s a fine idea to incorporate there — various taxes completely missing there that other states will impose on your business. Plus, if you’re looking to eventually expand operations to highly-populated areas, like California, you’re merely a drive away.
Another option is the Florida. The Sunshine State is as trendy as ever due to the business boom it’s experiencing. Some other states performing well while staying close to the MBCA are Wisconsin and Colorado, which boast low fees and management-friendly incentives.
You can still stretch your company’s dollar pretty far in Delaware, but it seems more and more like you’ll be able to do the same in certain other states.
Contact Brinen & Associates to discuss your options, and if we handle business in those states we’ll aim to get you up and running before you know it.