Overview of Where to Incorporate
Corporations are creations of state law. Because state laws differ, there
may be advantages and disadvantages of incorporating in a particular state.
If you decide to incorporate you must first decide where to incorporate.
If your corporation will operate an active business in one state, then
it is probably best to incorporate in the state where it will do business.
An out-of-state corporation must register as a foreign corporation in
your home state. This subjects the corporation to your home state laws
and to some extent nullifies the advantages of incorporating elsewhere.
If your corporation has flexibility as to where to incorporate, then Delaware
is a good choice. America's largest corporations are Delaware corporations.
More smaller corporations are Nevada corporations. Nevada has become America's
incorporation capital. Nevada's corporate laws are matched by Wyoming's.
Some benefits of Nevada:
— The state income is tax-free. Other states are more costly tax-wise
if you expect big profits.
— There are no franchise taxes.
— Only requires a current list of officers and directors. Most states
require annual disclosures. (Stockholder meeting dates, business localities,
value of shares issued, etc.)
— The corporate officers and directors have more protection. For example,
Nevada corporations can eliminate or limit the personal liability of officers
and directors for breach of fiduciary duty (other than paying improper
dividends). Nevada also has a shorter statute of limitations to sue officers
and directors and offer more opportunities for director indemnification.
— Allow broad indemnities to others who incur liability on behalf of the
corporation. Insurance trust funds, self-insurance and granting directors
a security interest or lien on corporate assets to guarantee their indemnifications
are some examples. For asset protection, corporate officers and directors
can lien the corporate assets to indemnify themselves. This gives them
a priority claim over the corporate assets without the need to show an
exchange of funds. This is a critical strategy for asset protection. Other
states invalidate such self-serving legal arrangements. Absent fraud,
these financial arrangements in Nevada are conclusive and cannot be voided
by the courts. Nevada corporate shares are also treated as LLC memberships.
The owners' creditors can only gain a charging order.
— Many business owners set up Nevada corporations. You can find many firms
who offer incorporation and resident agent services to their nationwide
clients. You can also order How to Establish and Operate Your Own Nevada
Corporation (Garrett Publishing) to learn how to quickly and inexpensively
form your own Nevada Corporation. Of course, The Presser Law Firm, P.A.
sets up corporations in every state and our corporations include those
most important safeguards.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality — for every 60
minutes you spend making money, spend 60 seconds thinking about how to