When selecting where to form an entity, initial considerations should be your place of residence and the site of business operations. This allows you to avoid filings for an out of state, foreign entity if you’re technically doing business in different states. In the event that you are willing to undergo two sets of registrations and filing fees, or if you have the luxury of selecting an original formation state that has lower regulatory profiles, lower state income and/or franchise taxes, and favorable corporate provisions, several states merit consideration.
Common preferred states for formation include: (1) Delaware, which allows for the greatest level of anonymity in filings, applies the incredibly flexible Delaware’s General Corporation Law, has a Court of Chancery which is deferential to business owners and officers in disputes, and remains the preferred formation venue for private equity funding and public entities; (2) Texas, which allows for no state income tax and low barriers to reporting, as well as an established Business Organization Code which is deferential to liability shielding for business owners and officers; and (3) Nevada, which also has very robust privacy protection and no state, income, personal, franchise taxes, but instead a gross receipts tax.
As always, the specific circumstances, your long term plans, individual business concerns, and growth opportunities will help inform this decision and we can create a solution that works for any business, from the simplest single-member LLCs run out of your own home all the way up to a C Corporation that will eventually undertake an IPO.
Disclaimer: The information and material on this website is general information about our practice and firm. This information does not offer specific legal advice and the use of this information does not create an attorney-client relationship with RR&A or any of its attorneys. The information on this website should not be used for legal advice, and persons should not act upon the information on this website without engaging professional legal counsel.