Your home state, Delaware or Nevada: where to form your company
Delaware and Nevada come up in almost every conversation about starting a company. They have a reputation, and part of it is deserved. For most small businesses, though, the right answer is the state you actually work in, and the reason is simple arithmetic.
The rule that changes the math
A company has to register in every state where it does business. If you form in Delaware but run your business from Ohio, you have formed one company and must then register it again in Ohio as a "foreign" company.
That means two formation fees, two registered agents, two annual reports and two sets of deadlines. Whatever you hoped to save in Delaware, you now pay on top of what Ohio would have charged you anyway.
"Doing business" is broader than people expect. An office, employees, a shop, a warehouse or regular in-person work in a state usually counts. Selling online to customers in other states usually does not on its own.
When Delaware makes sense
Delaware's advantage is its business court and a long, settled body of company law. Lawyers and investors know exactly how a Delaware corporation behaves.
That matters if you plan to raise money from professional investors, issue stock to a team, or eventually sell the company. Many venture investors expect a Delaware corporation and some will ask you to convert before they invest.
If none of that is in your plans, the court is a benefit you are paying for and will probably never use.
When Nevada makes sense
Nevada has no state income tax, and that is the headline. But the tax you owe depends on where the income is earned, not where the company is formed. A business run from California still owes California on its California income.
Nevada also charges annual list and business license fees every year, which adds up to a few hundred dollars more than many states.
Nevada is a good fit when you genuinely live and work there.
When your home state wins
For a local service business, a shop, a consultancy or anyone selling mainly from one place, forming at home is usually cheapest and simplest:
- One filing, one annual report, one registered agent
- Local courts if there is ever a dispute
- Banks and landlords in your state are used to dealing with local companies
- No foreign registration to keep track of
Privacy is a separate question
Some owners pick another state because it hides their name from public records. A registered agent service and a business address keep your home address off the filings in most states, without the cost of running two registrations.
The short version
- Working in one state and not raising investment: form at home
- Raising venture money or issuing stock to a team: Delaware corporation
- Living and working in Nevada: Nevada
- Want privacy: use a registered agent and business address, not another state