Incorporating a new business is exciting. You’ve followed your dream and are ready to formally establish your new business. There are a few factors to keep in mind when incorporating your business, not the least of which is where to incorporate. Certain states in the US have adopted business-friendly incorporation standards that help companies lower their tax burden or offer other benefits. Below, you’ll find information about the five best places in the US to incorporate your new business.
One of the smallest states in the Union is also one of the most popular states with entrepreneurs. There are more than 850,000 businesses already registered in the state of Delaware. Nearly 50% of publicly-traded companies in the US, and 63% of all Fortune 500 companies, are incorporated in Delaware. Why?
The state of Delaware charges no sales tax and offers a comprehensive package of incorporation services that includes access to legal guidance in the state’s court system. Additional benefits include relaxed business laws, such as a high cap on the amount of interest lenders can charge when you borrow money.
The state is perhaps best known for the slogan “What Happens in Vegas, Stays in Vegas.” Well, Nevada just so happens to be a great place to incorporate as well. Entrepreneurs are fond of Nevada because of the state’s low taxation and commitment to the privacy of businesses incorporating in the state. Nevada is one of just three states in the country that does not enforce corporate, individual income, or corporate shares tax on businesses.
Florida is one of the nation’s friendliest states when it comes to taxation. There is no individual income tax in Florida, and companies can avoid additional corporate income tax through the S-corporation exemption that allows companies to avoid state taxation. If you’re involved in software development, Florida is an emerging hub in tech. The state has a tax exemption for companies buying and selling business-to-business software.
Like many other states on this list, Wyoming has no corporate or personal income taxes. The only taxes that corporations pay are federal income taxes, leaving the rest of the money in your pocket as a business owner. Further, Wyoming offers tax exemptions to businesses purchasing raw materials for production. Certain business-to-consumer transactions, such as gasoline and groceries, are exempt from state taxes as well.
New York isn’t the nation’s best place when it comes to tax rates, depending upon the type of corporation you form. However, that doesn’t mean New York is without benefits. S-corporations in New York pay no federal income taxes, except on certain capital gains and passive income. A new “benefit corporation” designation allows companies to avoid legal ramifications if they provide information to the public about workers’ rights within the company, potential pollution, and other negative environmental impacts.
There is no need to incorporate in any of these five states. You are free to incorporate your business wherever it works for you. However, the tax-friendly nature of these states the desire to lure businesses makes them all valuable places to consider incorporating your new business.