Incorporate in Nevada, Illinois or Delaware?

A very common question I’m asked every day by clients is should I incorporate in Nevada, Delaware or Illinois.  And my first question to each of them is, where are you doing business?  It’s true that Delaware has long been the state of choice for incorporating due to its typically pro-business laws and now Nevada is fast becoming the state of choice for incorporating for the same reason.  But that doesn’t always mean it would be beneficial or cost effective for every business.

If you are truly a national company doing business in every or several states or at least in Delaware or Nevada, then it may make sense to incorporate there.  However, if all or a majority of your business is being conducted in Illinois it may be best to incorporate in Illinois.

Annual Reports and Other Fees. Here’s why.  If you incorporate in Delaware or Nevada then first you must file in that state ($100+ to incorporate in Delaware, $75+ for Nevada).  You will also need to file an annual report in that state as well, each and every year that you are in business ($60+ in Delaware, $125+ in Nevada).  Then you will need to qualify that corporation to do business in Illinois which can cost upwards of $175.  You will also need to file an Illinois annual report each and every year that you are in business costing $100+ each year.  Furthermore, you will only avail yourself of the pro business laws in Delaware or Nevada if and when you are sued.  If you are sued, you would need to seek counsel representation in that state.  You would also need to travel to that state to defend the lawsuit.  Depending on the length of the process it can turn out to be quite costly, increasing your expenses to defend that lawsuit.

Not Easy to Change. You also need to know that if you change your mind down the road and no longer want to be incorporated in Delaware or Nevada, you would need to either dissolve the out of state corporation and withdraw your foreign corporation from Illinois or form a new Illinois corporation and merge the out of state corporation with the new corporation.  Then you would need to start all over in Illinois with a new Illinois corporation.  Unfortunately you would lose your original incorporation date and any credit history your Nevada or Delaware corporation had.

Incorporating out of state will actually cost you more in filing fees and it is unlikely that you will save money on state taxes since typically a business will pay state taxes in the state in which the income is earned.

All of these factors must be considered when deciding which state to incorporate your business. AMC Legal can help you decide which state would be best for your business to incorporate in.

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