Serving business owners since 2007Delaware has long held the uncontested title of “the state in which to incorporate’’, and without any formidable challenge.
That is until recently. Things are changing. Now there are 2 serious big-time contenders, both determined to lure new businesses to incorporate or form limited liability companies (LLC’s) in their state.
We do have a fight!
We’ll tag our contenders “Delaware West” and “Delaware South”, both of which are striving to become the “New Delaware”. In case you don’t already know, “Delaware West” is Nevada and “Delaware South” is Florida, two states where officials and state legislatures seem dead serious about becoming the place to incorporate or form LLC’s or other business entities.
Now before we pick a winner, let’s compare the record of these three states, Delaware, Nevada and Florida.
Weather/climate
Depending on your druthers, it’s a no-brainer. Both Nevada and Florida offer climates that attract many who value their leisurely lifestyle when choosing a home state for their corporation or LLC.
Taxes
At this point in time, Delaware is the only one of the three states with a personal income tax while Nevada is the only one without a corporate income tax. Nevada and Florida do not have a franchise tax but Delaware does, and it can be formidable for large companies.
| Delaware | Florida | Nevada | |
| Corporate income tax | 8.7% | 5.5% of taxable income over $5000 | None |
| Personal income tax | 2.2% to 5.95% | None | None |
| Franchise tax | Based on size – can be formidable | None | None |
Formation fees
Differences in the formation fees in Delaware, Nevada and Florida are insignificant, as all have fees that are among the lowest.
Processing time
All three states rank high when it comes to the speed with which they process corporation and LLC filings. Generally, Delaware and Florida are a little faster than Nevada where normal processing time is no more than a week. Each has available Expedited and Rush processing which can reduce the time required to as little as one or two days.
Business tax climate ranking
So which state has the most favorable tax climate for businesses? It should come as no surprise that, according to the Tax Foundation’s 2018 State Business Tax Climate Index, Nevada, Florida and Delaware (in that order) are all among the 10 best states. Nevada ranks 4th, Florida 5th and Delaware 9th.
Privacy
Owners, directors and officers of businesses can maintain reasonable privacy in Delaware, Nevada and Florida but privacy in Nevada is unsurpassed by any other state. Nevada is the only one of all of our states that does not share information with the IRS.
Court system
Of course none can compare to the Delaware Court of Chancery, a 210-year-old business court whose judges, not juries, render decisions. Most modern U.S. corporation case law has been written by this court which is known for rendering decisions that are pro-business.
And the winner is
So do you incorporate or form your LLC in Delaware, “Delaware West”, or “Delaware South”? Not so fast – how about “none of the above”?
It is generally safe to say that if yours is a closely held business, primarily doing business in one state, you will find it easier and less expensive to incorporate or form your LLC in the state in which you will be conducting your business. And that may not be Delaware, Nevada or Florida. The actual advantage to you of incorporating in one of those states just because it has low initial fees, less stringent regulations, or even very low or no corporate income taxes is not as great as it may first appear. We must remember that smaller businesses will not experience benefits comparable to those experienced by the larger public companies.
But the bigger you are, or will be, and the more states in which you will do business, the tougher your decision. You must then take into account many more issues, some of which are very complex. You should not only consider the fees and taxes of your home state but also the fees and taxes assessed by all of the states in which you will do business and therefore have to qualify as a foreign corporation.
No matter your size, we at MaxFilings advise you to consult with a professional familiar with all current laws and regulations that apply to your specific business. An accountant, tax advisor or financial planner should be involved when addressing tax issues since they are both complex and subject to interpretation.
