Discussion:Incorporating in Del or Nev
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Discussion Forum Index --> Basic Tax Questions --> Incorporating in Del or Nev
Discussion Forum Index --> Tax Questions --> Incorporating in Del or Nev
| 22 August 2008 | |
| This question was been asked of me twice this week: "Should I incorporate in NV / Del? I've heard it's advantageous to do so. What do you recommend?..." Both questioners were small start-up businesses... (a.) a bridal shop and (b.) investors in rental properties. I am wondering specifically what the benefit(s) could be. | |
Death&Taxes (talk|edits) said: | 22 August 2008 |
| Urban Tax Legend? Search Delaware Incorporation and Nevada Incorporation. Here is one sample: Discussion: Nevada non-taxable Corps | |
| 22 August 2008 | |
| D&T. I did a search and read that thread, but the posters by and large had no profile, so I didn't know how much weight to put on their opinions.
I DO respect your experience and expertise on the other hand... Can you confirm that Nevade incorporation is irrelevant for income tax purposes if the entity's services are provided in Virginia? Thanks | |
Death&Taxes (talk|edits) said: | 22 August 2008 |
| He will have to register the corporation in VA anyway, thus paying potential fees in both states. I have no idea of the yearly fees in Nevada.
The first poster on that thread was Riley. While he has no profile, we will not begrudge him that. To be fair, there may be reasons to do so in regards to corporate governance and the ability to sue, at least that is the rumor I hear about Delaware, but for taxes? A bridal shop? Nothing. | |
| August 22, 2008 | |
| The only logical reason to org in NV or DE is a multistate entity generally, so that the laws of that organizing state can control. But since you still have to register in every state you do business, for a one or two state outfit, it makes no sense and merely increases costs and legalities. For nuttin'. | |
| 22 August 2008 | |
| Delaware is targeted by a good many corporations at their inception because it has a very robust history of corporate caselaw, which allows the promoters to better manage the risk of the venture due to their ability to more accurately foresee the results of a lawsuit.
Nevada is simply sold to the public by promoters who use the marketing sizzle of no state income tax (even though we all know that only applies to residents of NV) and the perception that since numerous celebrities have Nevada corporations there must be some value to it. | |
| 22 August 2008 | |
| There's no income tax in any state.
Unless there's income that's sourced to or a business is operating in a state. And each state has their own variation of rules as to what sourcing and doing business means. That goes for individuals as well as corporations. | |
| 25 August 2008 | |
| I have a client who is incorporated in Deleware.He also has a Michigan C-Corporation. He is located in the state of Michigan and his company does trucking. He does not truck out of state. This company occasionally has legal issues from truck related accidents. I do not see were being a Deleware Corporation did him any good. So what good is it? | |
| 25 August 2008 | |
| None other than someone sold him on the idea. He has MI nexus. | |
| August 26, 2008 | |
| Incorporating in Delaware meant that Delaware law applies to the internal affairs of the corporation and Delaware courts are available to adjudicate disputes relating to its internal affairs. That may or may not have been worthwhile, but Delaware franchise tax can be held to $75 -- $35 until recently -- just by controlling the number of authorized shares. | |
Smsmithcpa (talk|edits) said: | 26 August 2008 |
| I had a client once who wanted to organize in NV because of its privacy regarding the individuals behind the corporation. It certainly wasn't some kind of shady operation so I didn't understand his need for secrecy but he seemed to find it in NV. | |
| 26 August 2008 | |
| That's correct, the company pays the Deleware franchise tax. | |
| August 26, 2008 | |
| I did have a tax atty that I respect and work with regularly, set up a DE LLC for my lotto client due to the way DE handles LLC law. Beyond my paygrade. | |
| 26 August 2008 | |
| One of the key points to be kept in mind is the location of the corpus of the matter concerned when the sh*t hits the fan (if it does hit the fan).
This goes for trust corpus, as well as company checking, savings accounts etc. Whether or not it's required that such funds be kept in state or not, it stands to reason that the full benefits of a state's laws are most effective when the matter at hand is located in that state. The people that form these things often forget that point. In other words, if you have a corporation formed in Delaware, keep most of the corporate money in Delaware. If you really want to be safe: in a state chartered bank. The above is a separate subject from any tax benefits or consequences that may appertain to a certain state. I agree that Delaware may be worth looking at, even Alaska for some things, and believe it or not, even Missouri. | |
