Top 3 States To Incorporate Your Headquarter in the U.S

Are you a foreign entrepreneurs and U.S. citizens considering out-of-state incorporation? Find out the benefits and considerations of each state before incorporating!

Written by
Benjamin Ong
Published on
January 10, 2024

Are you a foreigner looking to expand your business to the dynamic markets of the United States, or are you a US citizen aiming to incorporate out-of-state? Within the vast U.S. landscape, each state offers a distinctive blend of resources, financial dynamics, and industry prowess. The strategic decision of where to establish your business is pivotal for success; it goes beyond geographical considerations. It delves into finding a synergistic environment that aligns seamlessly with your business objectives. Stellar explores the top three states (and a bonus state) where your business is not merely welcomed but destined to thrive.

What Needs To Be Considered?

After assisting numerous entrepreneurs and founders, we have broken down four major questions to help them identify their perfect state.

  • Access to capital and funding opportunities: Are you seeking investors or funding?
  • Tax structures and incentives: How crucial are tax benefits to you?
  • Legal requirements and regulatory ease: How susceptible is your business to legal pursuits/lawsuits?
  • Local market conditions and industry presence: Are you aiming to hire or conduct operations/sales in a specific state?

Depending on your answers, you should most likely be able to identify one or two states best suited to meet your business goals. This article provides only a rough overview of these factors, and we believe each business deserves its own considerations — Stellar is here to help. Book a free call with us today.

Now let’s get on to breaking each state and their benefits down…

Stellar’s Choice: Delaware

Delaware, despite being the second-smallest state in the U.S., stands as the legal home to over 60% of Fortune 500 companies, including industry giants such as Alphabet (Google's parent company), Amazon, and CVS Health. Over a million business entities have chosen Delaware as their legal domicile, and this begs the question - why?

That’s because Delaware's State Government is not just business-friendly; it's accessible and operates its Division of Corporations with cutting-edge efficiency.

Benefits:

  • Corporation Court: Delaware's Court of Chancery, exclusively handling corporate cases, features judges with expertise in corporate law, leading to more predictable decisions — and faster resolutions.
  • Tax Benefits: Delaware, often referred to as a tax haven, does not impose income tax on corporations not conducting business within the state. Shareholders residing outside Delaware are exempt from state taxation on shares.
  • No Residency Requirements & Top Notch Privacy: Delaware's appeal to founders lies in its lack of residency requirements, crucial for foreign or out-of-state founders. Filing in Delaware provides anonymity, as there's no need to disclose directors' and officers' names, along with a streamlined corporate structure.
  • Investors' Choice: Venture capital and angel investors often prefer businesses incorporated in Delaware, enhancing attractiveness to potential investors.
For reference, the accompanying chart shows the total number of incorporations in Delaware in 2020.

Cons:

  • No Real Tax Savings for Small Businesses: While Delaware doesn't tax companies incorporated within its borders that don't conduct business there, the home state will impose taxes. Franchise taxes and annual report fees add to the overall cost.
  • Limited Local Market: Delaware's compact size results in a smaller in-state consumer base, limiting the local market for businesses.

Should I Incorporate in Delaware?

You should definitely look to incorporate in Delaware if you are :

  • Looking For Investors/Funding
  • Looking To Save Up On Tax
  • Not planning to reside in the US
  • Worried about potential lawsuits due to the nature of your business - i.e Financial Services, Tech Companies, Manufacturing…

Wyoming

Wyoming beckons young entrepreneurs with open arms, providing a business-friendly environment ideal for startups and small businesses.

Benefits

  • Friendly Tax Structure & Low Admin Costs:  The state boasts no franchise, corporate, or personal state income tax, along with favorable exemptions, low energy costs, minimal formalities, and a private business environment. Unlike some other states(Nevada), Wyoming does not require an annual State business license which costs 200$ to 500$ annually.
  • Lifetime Proxies: Wyoming’s unique offering of lifetime proxies enables businesses to appoint individuals with perpetual authority to vote on their behalf, providing an enduring mechanism for decision-making.
  • Asset Protection: Wyoming stands out for its robust LLC laws, offering formidable protection against personal liability for business debts. The state's stringent charging order protection further enhances security, restricting creditors to obtaining charging orders instead of directly seizing LLC assets. This dual-layered approach effectively shields personal assets from the risks associated with business liabilities.

Cons:

  • Limited Workforce: Wyoming's small population, the lowest of any U.S. state, may pose challenges for businesses seeking a larger pool of talent.
  • Remote Location: Geographically distant from major economic hubs, Wyoming's connectivity may be less favorable for businesses requiring proximity to larger cities.

Should I Incorporate in Wyoming?

Consider incorporating in Wyoming if you:

  • Seek Tax Advantages & High Cost Saving Efficiency
  • Require Wyoming’s Lifetime Proxies Offering
  • Prioritize Asset Protection

Nevada

Benefits

  • Tax Oasis: Nevada's crown jewel is its lack of franchise, corporate and personal income taxes. For any foreign startup struggling with tax complexities back home, this offers an immediate boon. Reinvesting profits into growth becomes easier, fostering long-term sustainability.
  • Privacy: Nevada also offers anonymity to business owners when setting up their business. You have 100% control on whether your name appears on public filings with the state.
  • Simple Compliance: Nevada is one of the states that does not require you to have operational agreements or annual meetings. This allows you to easily manage your business in Nevada compared to other states.

Cons:

  • Limited Workforce: Wyoming's small population, the lowest of any U.S. state, may pose challenges

Should I Incorporate in Nevada?

Consider incorporating in Nevada if you:

  • Desire Tax Advantages (No Franchise, Corporate, or Personal Income Taxes)
  • Prioritize Privacy in Business Operations
  • Prefer Simplified Compliance Requirements

Bonus State: California

California stands as an economic powerhouse, wielding a financial clout so robust that, if treated as an independent nation, its economy would secure the fifth position globally. In 2017 alone, California's gross domestic product experienced a notable surge, climbing by $127 billion to surpass an impressive $2.7 trillion.

Source: Statista

Benefits:

  • Potential Market: With a staggering population of nearly 40 million residents, California presents small businesses with unparalleled access to a vast customer base having consistent earning potential and deep pockets.
  • Innovation Hub: Positioned as a global hotspot for technology and innovation, California provides a dynamic network of potential partners and clients. The state is home to a plethora of world-class universities, including Stanford, UCLA, UC San Diego, etc, fostering the largest talent pool of highly educated and skilled candidates in the nation.
  • Large Economy:** Ranking among the top five largest economies globally, California's southern region serves as the lucrative entertainment hub of the world. At the same time, the northern Silicon Valley area continues to drive technological innovations. A robust economy is integral to business operations, translating into more customers, increased business opportunities, and broader access to essential partners and suppliers for sustained growth.

Cons:

According to the Hoover Institute, the years 2018 and 2019 witnessed the departure of more than 765 commercial facilities from California, including high-profile companies such as Tesla, Oracle, and Hewlett-Packard. While some high-profile companies relocated, many were smaller businesses, and the reasons were varied but mostly due to high tax rates.

  • Value At A Cost: The primary drivers behind the California exodus are high tax rates, punitive regulations, elevated labor costs, and soaring utility and energy expenses.

A tax study says, For the 12th year in a row, California's business tax climate ranks as 48th among the 50 states, the latest survey from the Tax Foundation finds.

Should I Incorporate in California?

Consider incorporating in California if you:

  • Want access to the large local market
  • Want to expand your network in the tech industry
  • Want to hire top talents in the technology and innovation sectors

Conclusion

Expanding your business in the United States demands strategic choices aligned with your mission and industry demands. Delaware, California, Wyoming and Nevada each offer unique advantages and challenges. Whether it's Delaware's corporate-friendly courts, California's innovation culture, Wyoming's Lifetime Proxies, or Nevada's tax savings & simplicity, careful consideration is key. With Stellar's strategic insights tailored to your business aspirations, the journey of expansion is guided toward opportunities that await. Book a free call today.

Disclaimer: The Author & Stellar is not a Financial Advisor nor An Attorney. This information is not legal advice. Stellar recommends and is also able to assist you in speaking with a professional or attorney before performing any strategies mentioned above.

Share this post
Blog
Benjamin Ong
January 10, 2024
7
min read
NEW!
Try the Stellar Company Assistant Now
Click here
Stellar Company Assistant (AI)
Stellar helps business owner to manage corporate services such as incorporation, tax filing and more.