Which states are most popular to incorporate a business? This list tends to vary on a year-to-year basis. Some states, like Delaware and Nevada, have long-standing reputations as corporate darlings. However, other states are starting to emerge as some of the best states to do business because of their startup friendliness.
Amid the COVID-19 pandemic, states like Texas and Florida are trending with businesses. Major corporations, including those in coastal cities, are relocating their headquarters to states where taxes and filing fees are significantly less expensive.
Which states are trending with entrepreneurs that want to start a business? Some of the states emerging in popularity to incorporate a business might surprise you.
- South Dakota
There are several benefits to incorporating in Texas. Small and big businesses alike may enjoy the reasonable cost of living, talented workforce, and business friendly climate. Texas also has a low tax burden. Entrepreneurs that reside in and conduct business out of Texas do not have to pay personal income taxes.
Filing as an LLC in Texas does not require paying annual fees. However, Texas LLCs must file annual reports. An annual report is a record of changes that are made in a business throughout the course of a year. Some of these changes may include the names and addresses of business members and officers. They may also reflect business address changes, a change in address for a registered agent, and changes in the business’ activities.
Much like Texas, Florida is well-known for having low state tax burdens. Florida does not have personal income taxes. What about corporate taxes? These are also gradually decreasing. Previously, this taxable rate was at 5.5% on January 1, 2019. For all dates after January 1,2019, the corporate income tax rate is now 4.458% in Florida.
Startups, especially those in the tech industry, are making waves across Florida. Cities like Miami offer plenty of benefits to entrepreneurs. Some of these include tech talent hires, diversity in representation, and affordable living in a sunny, warm climate. There are also grants and loans available to finance small businesses, including those impacted by COVID-19. The strength of The Sunshine State’s growing business ecosystem means more entrepreneurs are choosing to incorporate in Florida.
Nevada is often referred to as a tax haven. Incorporating in Nevada means receiving perks by way of minimal business taxes.
Thanks to its business-friendly state statute, Nevada has no corporate or personal income tax. The state does not require keeping annual meetings or operating agreements to stay in compliance either. Entrepreneurs may operate their businesses in Nevada and receive these tax benefits. Or, they may incorporate in Nevada and choose to operate their business in another state — and still receive these tax perks.
Similar tax benefits abound in another corporate darling, Delaware. Nicknamed the incorporation state, Delaware has incorporated over one million entities. Delaware is one of the most affordable states to incorporate a business and also boasts a business-friendly corporate law.
An out-of-state business that files to incorporate in Delaware does not pay any corporate income tax or state income tax. This allows businesses to save on taxes, particularly out-of-state businesses that earn little in Delaware. What if your business has a brick-and-mortar storefront in Delaware? The business does not collect sales tax on purchases.
What if your startup experiences an issue with business law? Delaware is here to help. The State of Delaware’s Court of Chancery is a valuable resource that tackles business matters for entrepreneurs. This court has a skilled jurisdiction that may assist business owners in resolving any issues their business faces.
There is no personal income tax for South Dakota businesses. Incorporating in South Dakota means entrepreneurs get to enjoy a state of formation where there are low taxes and annual fees to stay in compliance.
South Dakota’s favorable corporate and individual income tax rate are so favorable that the state has been able to make leaps ahead as the best state to start a business. It is number two on the Tax Foundation’s 2021 State Business Tax Climate Index.
The growth of startups in Wyoming allows the state to rank as one of the top 10 states to start a business. In fact, Wyoming ranks at number one on the Tax Foundation’s 2021 State Business Tax Climate Index!
There is a rich history of business formations in Wyoming. This is the first state that allowed individuals to form corporations in the United States! In 1977, permission was granted by the state to form limited liability companies in Wyoming.
Wyoming, much like Nevada, is a business-friendly state. There are few tax burdens. Wyoming does not have personal income taxes. There are also no franchise taxes for corporations. This makes it appealing to startups with brick-and-mortar storefronts as well as online eCommerce businesses. However, it should be noted that annual reports must be filed in Wyoming. The filing fee is quite low. Filing annual report documents keeps Wyoming businesses in compliance so they may enjoy their state of incorporation.
Which State Is Best For My Business?
Are you unsure as to which state you should start and incorporate a business? Let our team of professionals assist you! We can answer questions you have about incorporating in one of these states or any other states across the United States. Give us a call at 877-692-6772 or contact us at mycorporation.com.