Incorporating in Delaware vs. Nevada vs.
Wyoming
It is commonly recognized today that Delaware, Wyoming and Nevada can all be called "incorporation friendly" states due to their corporative laws, relatively low fees, and limited or nonexistent state-level taxation. However, how would a person choose between the three?
NOTE: it is important to understand that in many cases the right choice of the state has to do with physical location of the business, and not with abritrary choice of "more attractive" state. Before making any choice we recommend you to first read our article dealing with Choosing Where To Incorporate.
NOTE: it is important to understand that in many cases the right choice of the state has to do with physical location of the business, and not with abritrary choice of "more attractive" state. Before making any choice we recommend you to first read our article dealing with Choosing Where To Incorporate.
Here we present an itemized comparison between those states, and below a summary and conclusions:
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Delaware |
Wyoming |
Nevada |
No state corporate income tax: |
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No tax on corporate shares: |
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No franchise tax: |
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Minimal annual fees: |
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One-person corporation is allowed: |
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Stockholders are not revealed to the State: |
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No annual report is required until the anniversary of the incorporation date: |
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No Initial List of Officers/Members is filed with the state: |
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No general Business License required: |
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Unlimited stock is allowed, of any par value: |
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Nominee shareholders are allowed: |
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Share certificates are not required: |
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Minimal initial filing fees: |
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No minimum capital requirements: |
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Meetings may be held anywhere: |
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Officers, directors, employees and agents are statutorily indemnified: |
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Continuance procedure (allows adoption of a corporation formed in another state): |
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Doesn't collect corporate income tax information to share with the IRS: |
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In general, Delaware, through its developed legal system and laws protecting shareholder rights, is geared toward the large complex public corporations, whereas Nevada and Wyoming are more attractive to the small privately held corporations and LLCs. Delaware law tends to protect the rights of boards of directors and shareholders, while Nevada and Wyoming tend to favor management.
Does the above comparison mean Delaware is not the best place to incorporate?
Not necessarily. The choice to incorporate in Delaware depends on the long term goals of your company.
Delaware has an excellent body of corporate case law spanning 110 years regarding such matters as management/shareholder issues and mergers & acquisitions, and that's precisely why the Fortune 500 are drawn to this state. Delaware laws tend to be "pro-management" when it comes to minority shareholder disputes. Huge public companies have literally hundreds of such disputes pending in the courts on any given day.
So if you are aiming to grow your company to become a Fortune 500 company (or at least planning it to attract VC investors and possibly go for IPO one day), Delaware's case law offers many insights into what you can and cannot do, and what the likely consequences may be.
