It is not required that you incorporate your business in the state in which it operates. Small businesses just starting out will most likely choose to incorporate in the state in which they transact a majority of their business. Others will choose to take advantage of a preferred state such as Nevada.
In deciding which state is best to incorporate in, consider:
Why would you choose Nevada over just simply forming a Corporation in your home state? Nevada is continually ranked the number one state in which to do business and has some of the most aggressive pro-business laws in the country. Nevada incorporated over 50,000 companies last year, and 60% of those have officers and directors who live outside the state of Nevada.
Let's take a closer look at how Nevada encourages economic growth and how you can profit from this environment.
If you want to take advantage of the pro-business state of Nevada, but you transact most of your business in another state, you need to qualify your Nevada company to do business in that state. This usually includes paying a small fee, which to most business owners is small potatoes compared to the benefits you get from forming your Corporation in a preferred jurisdiction.
The following table provides a look at the LLC vs Corporation, and LLC vs S-Corporation. Tax comparisons can be found in the lower portion of the table.
C-CORPORATIONView the Details Incorporate Now
LLCView the Details Incorporate Now
S-CORPORATIONView the Details Incorporate Now
Stock, there may be different classes.
|Membership interests. There may be different classes of membership.||One class of stock. Which may be voting or non-voting.|
|Eligible Owners||No restrictions.||No restrictions.||100 shareholder limit. No non-individual and no non-resident alien shareholders.|
|Management||Managed by director(s) and officer(s).||Two Management Types
- Managed by Manager
- Managed by Members
|Managed by director(s) and officer(s).|
|Allocations of Ownership||None. Dividends must be paid based upon stock ownership.||Permitted if the allocations have substantial economic effect.||None. Income, gain, and loss pass-through to the shareholders based on the percentage of shares owned.|
|Liability Protection||There is limited liability for shareholders, officers and directors.||There is limited liability for members and managers (if applicable)||There is limited liability for shareholders, officers and directors.|
|Duration||Perpetual||Dissolves at the time specified in the Operating Agreement or upon the loss of a member unless other members agree to continue.||Perpetual|
|Transfer of Ownership||Shares freely transferred.||There may be restrictions under certain state laws.||Shares can be transferred only to eligible S-corporation shareholders|
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