Best States for Starting a Business in the US
Starting a business does not have to be stressful. As long as you have
everything all planned out, you are all set. But there is one thing that is
important if you want to succeed in your business - the location. When it comes
to having a successful business, one of the essential things to consider is the
location. Here are some of the areas you can not go wrong with when you are
starting a business in the United States.
Delaware
Delaware is one of the best locations to set up your new venture. It is
an exciting place to start up your business. This is evident from the many
companies that have their headquarters in Delaware. Here are a few reasons why
you need to choose Delaware as a suitable location for your business.
Privacy protection
Companies in Delaware do not have to list the names and addresses of the
members in their filings. The members are listed only on the operating
agreement, which is private. It means that ownership information is not
available for the public.
Flexibility in venture structure
Delaware has flexible corporate statutes. The shareholders, officers,
and directors do not have to be Delaware residents. Only one person is allowed
to be the officer, director, and shareholder of a company.
Asset protection
When you set up your business in Delaware, you get to protect your
assets from lawsuits. In Delaware, there needs to be a charging order when
collecting debt on corporations with a single member.
Tax benefits
You will also get to benefit in terms of tax. Any company operating
outside Delaware borders does not need to pay taxes in the state. What it means
is that you do not have to pay the state taxes if you do not have a physical
office. You are also not charged tax for the following:
●
Sales tax-you do not pay sales tax. So, if you
have an online business, you can remain competitive
●
Corporate tax on interest
●
Personal or business property tax
●
Value-added tax
●
Inheritance tax
●
Intangible asset tax like that on naming rights,
patents and trademarks
Business-friendly laws
Delaware has a well-established court of Chancery that deals with
corporate disputes. The court focuses on commercial litigation and IPR issues.
The court only has judges specialized in this sphere of the law so business
issues in this court are resolved quickly. Furthermore, Delaware has favorable
business laws. In case your business has been involved in litigation, your case
gets handled with a judge experienced in corporate law.
Cheap filing fees
The filing fees are quite affordable when compared to other states and
will cost you $90. If you own a limited liability company, you do not have to
file annual reports.
Investor appeal
You will find it easier to attract venture capitalists, angel investors,
and private equity firms when you set up your business in Delaware. Investors
will invest in your company because of the business-friendly laws in the state.
Nevada
Over the years, Nevada has seen substantial growth in the number of
people interested in setting up a company in the state. Whether you are a
resident or just in search of a business-friendly state, Nevada is one state
that you should consider. You will enjoy the tax-friendly nature of Nevada. You
do not pay state income tax on wages. It means that you will spend less on
employee compensation. So, why do your business in Nevada and not any other
state?
No state-level taxes
When you are getting started with your new business venture, taxes can
bring you down. You do not have to worry about charges when you are operating
your business in Nevada. You do not pay the following fees:
●
Admissions tax
●
Corporate income tax
●
Personal income tax
●
Gift tax
●
Franchise tax on income received
●
Unitary tax
Asset protection
Starting a new business venture can be very risky. You may encounter
someone who wants to sue your business along the way. Luckily, in Nevada, it is
only the company that is liable and not the owner. The responsibility will be
on your business unless you have been involved in fraudulent activity. Then,
the state can go after you with all its might. In Nevada, you also do not have
to list your company assets. Thus, there will be no public record of your
company assets.
Privacy protection
The owners operating a company in Nevada enjoy
privacy protection. Their managers can remain anonymous. The owners and
managers are also not listed in the public sphere.
Wyoming
Wyoming is also another state where you can set up your business. Here
are some of the reasons why you should consider setting up your business in
Wyoming.
No state taxes
One significant advantage of operating a business in Wyoming is tax
flexibility. Higher fees can push down your profits thus affecting your
business growth. Wyoming does not have state taxes for an LLC. The tax
advantages in Wyoming include:
●
Personal income tax - you will only pay the
personal income tax when you are operating your business in the state.
●
Corporate tax - you are not charged corporate
tax
●
Excise tax - you will not pay taxes on items
such as food or gas
●
Inheritance tax
●
Intangible tax - taxes are not imposed on bonds
and stock or any other intangible assets
Asset protection
Your corporation is treated as a separate legal entity - it has its
federal tax ID number. The corporation is also responsible for its debts and
liabilities. Operating a business in Wyoming means you benefit from the high
degree of protection against lawsuits. Moreover, you get to maintain your
privacy.
Privacy allowed
As a business owner in Wyoming, you get to enjoy security and privacy.
The privacy you enjoy include:
●
No requirement of listing a member or a manager
for the time you are operating the limited liability company.
●
Minimal reporting and disclosure obligations
●
Company ownership is not disclosed on public
records
No citizenship requirements
It is not a requirement for the owners to be US citizens to incorporate
a company. You can set up a business in Wyoming no matter which part of the
world you live in.
Unlimited stock issuance
You will also benefit from the provision of unlimited stock issuance in
Wyoming. Most states limit the amount of stock you can issue.
Limited liability
If you are operating a limited liability company in Wyoming, the company
bears all the debt. You are not responsible for the company’s debts. However,
again the protection given to you by the law does not apply when you get
involved in fraudulent activities.
No minimum capitalization
Whether it is a limited liability company or a small-medium enterprise,
there are no minimum and maximum limits on the capital that needs to be
invested in the firm. You can start your business from as low as $1 to
$500,000, so there is a lot of flexibility given to you.
Ways to avoid tax
If you feel like you are paying too much tax, there are ways you can
avoid paying it altogether. You only need to have tax planning to help you
reduce the amount you owe to the IRS.
Tax-free income
Individual incomes are not subject to tax. Earning a tax-free income
will help you avoid paying higher taxes. You can buy a home, invest in
municipal bonds, and get health insurance.
Tax credits
The next thing you can do is to use the tax credits. Some of the tax
credits you can take advantage of include- depreciation when you buy a car,
education tax credits, and child care tax credits.
Defer taxes
Deferring taxes can be a way for you to avoid tax. When you defer the
tax payment to future years, it is like getting a loan from the government.
Minimize the tax deductions
You can also take advantage of tax deductions to reduce the amount of
tax you have to pay. You will pay less tax when you have more deductions. As a
business owner, you can deduct your business expenses. Some business expenses
you can deduct are operating costs, inventory, travel, and office, among
others. If you run a small business, you can also qualify for the 20 percent
pass-through tax deduction.
Reduce the tax rate
You can also opt for reducing your tax rate. The federal tax rate ranges
from zero percent to 37 percent. If you get profits from long term investments
like mutual funds and bonds, these are taxed at the capital gains tax rates.
So, it means that you pay lower taxes than the federal income tax rate.
Choose an S Corp to reduce taxes
Your filing status can have a huge effect on the amount of tax you pay.
Taxpayers have a choice on the filing status. Your filing status determines the
tax bracket. Taxes should not prevent you from getting started in your business
venture. If you are concerned about taxes, then choosing an S corporation means
that you get taxed at a personal level. Even with a limited liability shelf
corporation, you can still choose to have it taxed like an S-corporation. A
shelf corporation is an ideal business for any state.
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