What state should I incorporate in? | Hacker News Reader

What state should I incorporate in?

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18 pointspeter12314 comments

Vermont has an interesting "virtual" company provision now which could attract you if you intend to have a geographically dispersed board and do not wish to come together for meetings.

I don't think that any company thinking about raising outside financing should seriously consider Vermont. Basically, the reason why is no one is familiar with Vermont corporate law.

Our accountant and attorney both said: Delaware if you are looking for investment, or the state you live in otherwise (simpler, more straightforward tax-wise, etc...). So we LLC'ed in WA.

The place I'm working now is incorporated right here in WA. It's one of the things that I love about them: they say what they mean.

Incorporating somewhere across the country we've never been strikes me as almost premature optimization. You're already trying to be too-clever-by-half (what does your source code look like?). It also suggests a disconnect with the community (what else are you willing to do to us to save a buck?).

I'm not saying it's inherently good or bad, but simply that there are a set of people like me (potential employees, maybe!) for whom it's a good sign if you never even considered being a Delaware (or Cayman Islands) company.

Delaware.

Delaware if you want to take external investment or are looking for an IPO. Nevada if you're self-funded.

Why Nevada over Delaware if you're self-funded?

IIRC, Nevada is pretty light on state taxation.

Quick look at Wikipedia notes that there are no personal or corporate state taxes.

If you resides in California, don't you still need to pay CA business taxes?

Yes

If you're doing biz in CA, I'm pretty sure that CA still collects corporate income tax. (I forget if CA still has a unitary corporate tax, but it definitely wants taxes on in-state profits.)

Unfortunately, one of the downsides of CA is the $800 annual franchise tax =[. Can't get around it even if you incorporate somewhere else.

Good news is, if you're an Inc you can waive the first year. LLCs can't though.

When I dug into this when I was setting up, my understanding was that, in Delaware, there is established case law dealing with multiple shareholders that investors really like. But in Nevada, privacy laws are supposedly stronger (I believe they don't share corporate info with the IRS) and it is advertised that Nevada courts are less likely to pierce the corporate veil. A recent googling just turned up this counter-argument to that (http://www.youngentrepreneur.com/forum/f2-general-business/d...) so YMMV.

I believe the costs are pretty comparable if you're an out-of-stater: You'll get hit with annual registration fees (slightly higher in Nevada, I believe) and the need for a registered agent in either location, but you'll get hit with a franchise tax in Delaware (not sure if it offsets the Nevada registration fee off the top of my head). Either way, if you're not operating in Nevada or Delaware, the state in which your business is operating is going to want taxes, so it doesn't really help in that regard. (And, as an aside, if you're in California, taxes really suck).

Does it really matter? You can always switch your corporation's state at a later date.

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