Of all the states in which you can incorporate a new company Delaware remains the most popular. When you are trying to determine in which state you want to incorporate your new business, you need to research the taxation requirements and the state statutes for LLCs to see if that state is the best option for you and your business. The first step in this process is to consider how LLCs and corporations are taxed by every state you are considering and what taxation requirements are imposed on any foreign businesses. You should research whether or not a state imposes an income tax on LLCs and corporations (depending on which one you are opening), and whether there is a minimum tax amount or a franchise tax. You should also consider the additional costs of meeting regular taxation requirements as imposed by the state and see if that outweighs the benefits of incorporating in a state other than your home state. It is best to calculate your company’s projected revenue for at least the first few years to evaluate which states have an advantage with regard to the amount of taxes required.
Delaware is one of the most popular states in which small business owners incorporate because of the unique advantages this state offers for many specific types of businesses. When you incorporate your company in Delaware you will enjoy many benefits. The business laws of this state are the most flexible in the United States. In lieu of using a jury, the state of Delaware uses a Court of Chancery for business law only and they rely on judges only. If you incorporate a corporation in Delaware but you do not conduct any business in that state, you are not subject to state corporate income tax, though you will be subject to a franchise tax. Taxation in the state of Delaware is favorable toward companies that have a large number of shares of stock or have some form of complex capitalization structures. If you are not a resident of the state of Delaware you are not subject to personal income tax after incorporation. If you form an LLC and incorporate in the state of Delaware, your managers and/or members do not need to be residents. If you form a corporation in the state of Delaware, your directors, shareholders, and/or officers do not have do not have to be residents. If you own stock shares and live outside of Delaware, you are not subject to any of the state taxes. It is for these reasons and more that the state of Delaware remains the most popular state for company incorporation for citizens and foreigners alike.
If you decide to create a company in Delaware but you will conduct your business in another state you will have to foreign qualify your business in that state. This means you need to pay for a special permit which enables you to conduct business in other states. If you have questions about foreign qualify it is best to speak with an attorney