- Setup & Recurring Fees: While a minor consideration in the grand scheme of establishing and operating a business, you need to pay a one-time filing fee to the state’s secretary of state office in every state for forming your business. That fee can be as low as $50 and as high as $455, depending upon the location. After establishment, most states charge an annual fee to maintain your business along with submission of an annual report.
- Franchise Taxes: A franchise tax is levied by a state on corporations and other entities for the privilege of incorporating or registering to transact business in the state.The method for calculating franchise taxes varies by state. Some states charge a minimum tax regardless of earnings or losses, while others base their franchise tax on the number of shares and par value. Nevada and Wyoming charge no franchise tax at all.
- Legal and Court System: A main reason why so many successful large companies are incorporated in Delaware is because it has a separate court to resolve business disputes that do not conduct jury trials. Many business owners prefer bench trials because matters are handled quicker and because juries are unpredictable and inconsistent.
- State Corporate Income Tax: In addition to federal taxes, most states also charge a state corporate tax on income. Nevada, South Dakota and Wyoming do not charge any corporate income state or a personal state income tax. Ohio, Texas and Washington have a tax on the gross company revenues. However, these advantages do not apply to a business located in another state – you cannot avoid your home state’s tax structure by incorporating in another state. To take advantage of these benefits, you would have to physically move to the desired location.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.
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