Finding the most efficient state for company establishment is one of the most challenging issues for entrepreneurs seeking to establish a US company. In this blog post, we will cover the four states that are most frequently asked about while establishing a US company. By discussing tax-related issues, we will compare these four states according to their advantages and common points.
There are two issues you should consider while starting a US company. While the first one is the company type you will choose, the other is the state in which you will establish your company. You can click here to find out all the details on the company types we have shared in our previous blog post.
The states of Delaware, Wyoming, Nevada, and Florida are preferred more than other US states. Let’s compare these four states in terms of tax and understand why.
Delaware
- There is a franchise tax. (300 USD per year for LLCs)
- The state does not have a corporate tax.
- The state does not have a sales tax.
Being one of the most preferred US states to establish a business, Delaware only requires companies to pay a Franchise tax. Apart from that, the state doesn’t have a sales or income tax. These conditions apply if you are not physically located in the state. If you operate while physically located in the state, there will be taxes imposed.
Wyoming
- There is no franchise tax.
- The state does not have a corporate tax.
- The state does not have a sales tax.
Unlike Delaware, Wyoming, another most preferred US state to establish a business, does not require companies to pay a Franchise tax. Similar to Delaware, Wyoming doesn’t have a sales or income tax as well. These conditions apply if you are not physically located in the state. If you operate while physically located in the state, there will be taxes imposed.
Nevada
- There is no franchise tax.
- The state does not have a corporate tax.
- The state does not have a sales tax.
As the newest option for those seeking to establish a US company, Nevada, just like Wyoming, does not have a sales, franchise, and state tax. These conditions apply if you are not physically located in the state. If you operate while physically located in the state, there will be taxes imposed.
Florida
- The state does not have a sales tax.
- There is a franchise tax. (138.75 USD per year for LLCs)
- The state does not have a corporate tax.
One of the other states frequently searched and preferred for US company establishment is the state of Florida. Like Delaware, Florida also requires companies to pay a Franchise tax once a year. However, the state does not have taxes such as sales and state tax. These conditions apply if you are not physically located in the state. If you operate while physically located in the state, there will be taxes imposed.
Which state is more advantageous for establishing a US company?
Besides the different tax-related common points, it is possible to establish a sole shareholder company in all the states listed above that require legal representatives to perform company establishment. Although these four states share similar tax-related offerings, more than 60% of US companies establish in Delaware. There are a few reasons for that.
Delaware State Courts offer business owners greater peace of mind. Besides, its entrepreneur-friendly laws and advanced corporate law protect companies facing different issues and trials. Thus, Delaware is known and preferred as an investor-friendly US state.
Delaware also has a confidentiality basis, meaning that the state or any other person cannot access information such as the field of activity, the company owner, and partnership details of your incorporated business. Therefore, it is among the factors that influence the decision of choosing the state while establishing a US company.
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