JESSON||RAINS ATTORNEYS AT LAW
  • Home
  • Practice Areas
    • Wills and Trusts
    • Business Law & Litigation
    • Construction Contracts and Litigation
  • Team
    • Edward Jesson - Attorney
    • Kelly Rains Jesson - Attorney
    • Danielle Nodar - Associate Attorney
    • Sue Lambert - Office Manager
    • ​Ashley Deese ​- Paralegal
    • Shayla Martin - Legal Assistant
  • News & Blog
    • COVID-19 Resources
  • Contact
  • Testimonials
  • Free Resources
    • Business Resources
    • Estate Planning Resources
    • Probate Resources
📞 704-444-0594

Blog

Should I form my business in a state other than North Carolina?

5/30/2017

0 Comments

 
Picture
Soon-to-be-business owners often ask us if there is any reason to form their businesses in Delaware instead of North Carolina because they’ve heard or read that corporations frequently form their businesses there.  Lately, there’s been a lot of interest in incorporating in Nevada and Wyoming due to aggressive advertising.
For most small business owners, incorporating in a state other than your home state will have very little benefit to you and the business and will likely cost you more money.  Not only will you have to file annual forms with both states every year, which costs money, you’ll have to get a Certificate of Authority to do business in North Carolina after your formation paperwork has been approved in the other state, which also costs money.  Depending on the state, the formation paperwork could cost considerably more than North Carolina.
 
Some people recommend incorporating in Nevada and Wyoming because those states do not have a corporate tax or a personal income tax.  This fact may be insignificant if your business is an LLC, not a corporation, because an LLC oftentimes does not pay corporate taxes.  If your business is paying corporate taxes, it may have to pay them anyway because the corporation is based out of and does business in North Carolina.  Furthermore, whether you pay personal income tax depends on the state where you live.  North Carolina has a personal income tax.  Forming in a tax-free state will not save you money on taxes if you live and work in another state. 

The reason why so many large corporations form or convert their business to a Delaware corporation is because Delaware has a sophisticated corporate law and a Court of Chancery that only hears corporate cases.  Based on these thoroughly-developed statutes and judicial opinions, corporate directors and officers are able to better understand their fiduciary duties and shareholders know what to expect.  Delaware also has a reputation of being pro-management.

Nevada has recently amended its corporation law, which now resembles Delaware’s.  However, at one point, Nevada touted that it is even more pro-management, limiting director’s and officer’s liability only to violations involving intentional misconduct or fraud.  Shareholders may want to be cautious of Nevada corporations.

For most small businesses, these facts are insignificant because they are single member or family-run LLCs.  There are no boards of directors or shareholders.  However, if a small business expects to grow rapidly and has an eye towards getting venture capitalist funding or an IPO, it may want to consider forming in Delaware.  Investors may require that those businesses convert into a Delaware corporation.  If it is highly likely that will happen, the business may save some money by forming that way initially.  This is a rare case, and converting a business to a Delaware corporation is not very expensive.
​
So in conclusion, like a lot of things we write about, do not always believe what you hear!  There are little to no advantages to forming your business in other states, and it is likely that doing so without guidance from an attorney can result in additional costs to you.  Please give us a call if you would like more information.
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Subscribe to our newsletter.

    Subscribe

    Author

    Kelly Rains Jesson
    ​Edward A. Jesson

    Categories

    All
    529 Plans
    ADR
    Alternative Dispute Resolution
    Amendments
    Asset Protection
    Asset Purchase
    Assumed Business Name
    B-Corps
    Blockchain
    Business
    Business Formation
    Business Litigation
    Business Purchase
    Business Scam
    Buy/sell
    Civil Procedure
    Collections
    Community
    Construction
    Contracts
    Copyrights
    Corporations
    COVID 19
    Cryptocurrency
    Data Privacy
    DBA
    Default
    Dissolution
    Elder Law
    Employment
    Estate Planning
    Ethics
    Eviction
    Firearms
    Firearm Trusts
    FLSA
    Guardianship
    Health Care Directive
    Holding Company
    Intellectual Property
    Landlord-Tenant
    Liens
    Litigation
    Living Will
    LLC
    News
    No Surprises Act
    Operating Agreement
    Partnership
    Patents
    Power Of Attorney
    Probate
    Real Property
    Retirement
    Secretary Of State
    Small Business
    Trademarks
    Trade Secrets
    Transactional
    Trusts
    Wills

    RSS Feed

    View my profile on LinkedIn

      Contact us.

    Submit

    Archives

    March 2023
    February 2023
    January 2023
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    March 2016
    January 2016
    December 2015
    November 2015
    October 2015

Picture
Jesson & Rains, PLLC
5821 Fairview Road #218
Charlotte, NC 28209
(704) 444-0594
information@jessonrainslaw.com

By appointment only.

SERVICES

Wills & Trusts Probate
Business Law & Litigation
Construction Contracts & Litigation


Our Attorneys
Location

SUPPORT

Contact
Disclaimer
©Jesson & Rains, PLLC  ALL RIGHTS RESERVED.
  • Home
  • Practice Areas
    • Wills and Trusts
    • Business Law & Litigation
    • Construction Contracts and Litigation
  • Team
    • Edward Jesson - Attorney
    • Kelly Rains Jesson - Attorney
    • Danielle Nodar - Associate Attorney
    • Sue Lambert - Office Manager
    • ​Ashley Deese ​- Paralegal
    • Shayla Martin - Legal Assistant
  • News & Blog
    • COVID-19 Resources
  • Contact
  • Testimonials
  • Free Resources
    • Business Resources
    • Estate Planning Resources
    • Probate Resources