Ask YC: Why not incorporate in Nevada? a state that is giving Delaware a run for its money.

[ideas101]

Believe it or not, businesses are flocking to the land of the neon lights to incorporate and here's why . . . .

Tax Benefits:

Nevada corporations reap the benefits of some tremendous tax breaks compared to businesses incorporated in other states. For starters, there is no corporate income tax in Nevada. Additionally, Nevada businesses enjoy no franchise tax, no sales tax, no taxes on corporate shares and no personal income tax. Depending on the scope and nature of your business, these combined tax breaks can result in substantial savings that can be invested in growing your business.

Minimal Reporting & Disclosure Requirements:

Another bonus of incorporating in Nevada is that the state has established a system to protect your company's privacy. Nevada itself has minimal reporting requirements. But unlike many other states, Nevada also does not have an information sharing agreement with the IRS. In other words, Nevada will not share your corporate information with the IRS and stockholders' names are not part of the public record. In Nevada, all that is on public record are the names of the corporation's officers and directors. If privacy is important to your business, Nevada is definitely an attractive option.

Small Business Advantages:

Nevada has a number of significant advantages that are custom-built for small businesses. One advantage is that the minimum number of officers or directors in a Nevada corporation is one. That means you don't need to recruit people to serve as corporate officers or as members of a board. You can fulfill the requirements yourself. If your business is new, another advantage is that Nevada requires no minimum capital investment for incorporation. For a small business struggling to get off the ground, that alone makes Nevada worth exploring.

Geographic Flexibility:

What if you want to incorporate in Nevada and live in another state? Can you do that? Absolutely! Stockholders, directors, and officers don't need to live or hold meetings in Nevada. In fact, they don't even need to be U.S. citizens.

Other Benefits:

Nevada has other benefits as well. In Nevada, officers and directors of the corporation can be protected from personal liability for acts of the corporation, provided those acts are lawful. Nevada corporations can also issue stock in exchange for capital, services, personal property, real estate, leases, and options. The determination of value for these transactions is determined solely by the corporation's directors and their decision is final.

Source: http://www.gaebler.com/Nevada-Incorporation.htm

[epi0Bauqu]

Wrt to tax benefits: In the US, you generally are supposed to pay taxes where you do business. This usually means that if you incorporate in Nevada, but do all your work in CA, you should be paying taxes in CA. So unless you plan on doing all your business in NV, i.e. actually working there, a lot of the tax benefits really go out the window.

[ideas101 → epi0Bauqu]

can you explain what is meant by "doing all your business in NV" - do you need a physical office in NV? or do you need to sell your stuff to NV customer?? or do you need to live in NV?? or all of above???

[epi0Bauqu → ideas101]

I think you are confused. It isn't a check box requirement with regards to incorporating in NV. You can incorporate there, do business wherever, and never set foot there. In that case, you would be paying taxes in all the places you do business.

In other words, you don't have to just do business in NV to evade taxes elsewhere, you have to do all your business in NV. For example, say you incorporate in NV and do all your business in CA--that's fine. You would just pay all your taxes in CA. And if you had offices in three states, you would be registering in all three of those states and paying taxes accordingly.

"Doing business" is a matter of state law and so its definition varies from state to state. However, generally, if you have an office in a state, you will have to register there and are subject to taxation there. What that means exactly depends on your particular situation and what exactly you are doing in those jurisdictions. For example, if you just pay employees there you probably need to pay various employer taxes, whereas if you have a physical store there you will need to pay sales and income taxes, most likely. And if your only office is in CA, you will most likely pay all your taxes there.

[jakewolf]

Everyone uses Delaware because there's a countrywide understanding of their business laws, lot's of precedent and it's fast to get things done. So why change?

[popat]

i never knew that you don't even need to be a U.S. citizen ... is there any difference between delaware S-corp and nevada S-corp??

[epi0Bauqu → popat]

An S-corp designation stems from a tax election with the IRS, not from an entity creation.

[ideas101 → popat]

i guess i read that "S" is meant as a sub-chapter and it is same for all corp no matter where they incorporate. it gives dual benefit of sole proprietorship and corporation.