There are various reasons why you should go ahead and incorporate your business in Nevada. There are different kinds of companies you can start in a Nevada corporation.
Choosing a Nevada Corporation
There are many benefits of incorporating in Nevada. The laws in Nevada support liberal incorporation laws and tax. These liberal policies are favorable for businesses to run in the state. The benefits enjoyed by these corporations include protection of assets, tax advantages, and privacy laws. California law, on the other hand, denies corporations the right to incorporate outside their home state. There are dangers you may come across if you decide to incorporate a business outside your state.
Benefits of Incorporating in Nevada
If you have already decided to operate your business outside of Nevada, it is essential that you consider incorporating it in the state to enjoy the benefits. Having your headquarters, office or warehouse is in Nevada you will be a viable candidate to enjoy these benefits. The first benefit is that you will not pay a state tax. It is also close to impossible for another individual to acquire your assets or those of your shareholders because of lack of adherence to certain corporate formalities.
In addition to these, the state also upholds and protects the privacy of the corporations. It also protects the shareholders, officers, and directors of the companies. Unlike many other states including California, the shareholders of these corporations do not have to reveal their personal information. The shareholders have the opportunity to remain anonymous throughout provided the Nevada Corporation does not engage in Business in another state.
The Loss of Benefits When a Nevada Corporation Does Business in California
It might be impossible for you to continue enjoying all the benefits found by incorporating in Nevada and still do business in another state. Doing business in California means you cannot enjoy any benefits. The corporate laws in California are stricter compared to these in Nevada. For example, pseudo-foreign corporation laws state that the moment a foreign corporation does business with the state it should register in California. The foreign corporation must also observe California business practices since it has continued transactions with the state. Failure to comply results to consequences like civil penalties, and denial of contracts since you does not meet all the qualifications.
In addition to the above, for you to register as a corporation in California you pay a franchise tax; you need to apply for a license for your business and disclose the officers and directors of your corporation. The privacy levels in California are lower compared to Nevada, and this may be a deal breaker for most people.
Have in mind that you will have to file two tax returns in Nevada and California. If your corporation stops operating, you will need to shut it down both in California and Nevada and file final income tax returns.
Delaware Incorporation Vs. Nevada Incorporation
The following are more details about incorporating in Delaware and Nevada
In Delaware, the minimum cost you can use to establish a corporation is $89. The state has a higher franchise tax compared to other states, but it has no corporate income tax.
$400 is the least amount to establish a corporation in Nevada. The amount is a total that covers the business license, list of officers while in Delaware a business license is not a necessity.
One thing that the two states share is that they do not require the corporations to hold board meetings in the state always. There are no restrictions to where the headquarters of the company should be situated. For this reason, the headquarters can be in any state and so are the meetings. A registered agent based in any state you choose receives all official correspondence.
Delaware and Nevada’s corporation laws
Knowing all there is to know about incorporating in Nevada and California will assist you in deciding which state you prefer. Some laws prevent corporations from exploiting and benefiting from loopholes that exist in the two havens. The first question you need to ask yourself after you decide to base your incorporation and business in Nevada and Delaware is whether you have enough business earnings to support this venture. Also, consider if you want to go public at a certain point or if it is out of the question. Do enough research about your state and find which one will promote the growth of your business more sufficiently. It is important always to think about the future and the consequences of the choices you make for your business in the present.
The differences and similarities discussed above will help you to have a better perspective of the advantages and disadvantages of incorporating in Nevada or Delaware and sometimes making the decision by yourself maybe challenging. If you do not understand important details and you need clarifications, look for an attorney to give you counsel. Making informed decisions always does more good and no harm. An attorney can interpret for you the laws that will affect your corporation.