Q&A: Business Incorporated

By Rieva LesonskyBusiness on Main

Where is the best place to incorporate in the United States? Which state has the lowest corporate tax bracket and why?

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The simple answer is that Nevada has no corporate income tax and Delaware is a very business-friendly state. But where to incorporate is a decision with far-reaching ramifications, and it shouldn't be based solely on corporate tax rates.

While big corporations might save money by incorporating in a state with a lower tax bracket, small businesses often don't. If you incorporate in one state but are located in another, you'll have to "qualify" your company to do business in the state where you're located. This means dealing with fees, legal requirements and paperwork from not one, but two states.

Keeping in mind that almost every state is suffering from declining tax revenues, it's possible that state tax rates for businesses may change in the near future. If you've done a business plan, you should have a good idea of your projected sales for the next few years.

Have an accountant assess what you could expect to pay depending on where you incorporate. Also talk to an attorney familiar with the business climates in both states.

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