In this Part III I will focus on the costs of incorporation and annual fees and taxes to determine which state out of three is the least expensive. I will take a look at the privacy laws of the three states, since privacy is a major concern for business owners. Just a reminder: all the information here is as of April 2010, and may have since become outdated.
The fee for incorporating a corporation in Delaware is a minimum of $89, but is increased incrementally if the amount of authorized capital exceeds $75,000. The fee to file a document of formation is $90 for an LLC and $200 for LP, LLP (per partner) and statutory trust.
Wyoming charges a flat fee of $100 to form any of its business entities.
Nevada charges a flat fee of $75 to form an LLC, an LP or an LLP, and $100 - an LLLP. For corporations, Nevada bases the amount of fees on the value of authorized share capital (fees start at $75 for the capital of $75,000 or less and gradually increase to $375 for capital valued at less than $1 million, with incremental increases to a maximum fee of $35,000). There is also a requirement to file an initial officer and director/member and manager/general partner list with an accompanying fee of $125.
These price differentiations among the three states indicate that (1) it is relatively inexpensive to form an LLC in either state; (2) Nevada and Delaware are more expensive places of incorporation for big corporations as they calculate the filing fees based on the amount of capital stock; and (3) Delaware has generally higher fees to form an LP, LLP, LLLP and trusts than do Nevada and Wyoming.
Annual Fees and Taxes
A look at the state’s annual fees and taxes shows that Wyoming is the least expensive incorporation state as compared to Nevada or Delaware. Wyoming’s annual license tax is based solely on the value of all assets located and employed within Wyoming. The minimum fee is $50 and it increases based on the amount of assets within the state.21 Additionally, Wyoming has no corporate income tax, personal income tax, inventory tax, tax on intanglible assets such as stocks or bonds, and there is no legislative plan to implement these types of taxes.22
Nevada, on the other hand, charges a yearly $125 ($175 for some LLLPs) officer and director filing fee and imposes an additional business license fee of $200 per year on corporations, LLCs, LP, LLPs and LLLPs (last increased on July 1, 2009).23 There is also a requirement that domestic and foreign corporations (including close and professional corporations) pay an annual list fee calculated based on the amount of authorized stock, with a minimum fee of $125 and a maximum fee of $11,100. Like Wyoming, Nevada does not at this time charge a corporate income tax, franchise tax, personal income tax, inventory tax or tax on corporate shares.
In Delaware, all corporations have to file an annual report and pay a filing fee of $50. In addition, all corporations have to pay franchise tax for the privilege of incorporating in Delaware, calculated based on the number of authorized shares or assumed no par capital (minimum tax is $75 and a maximum tax is $180,000). GPs, LPs, and LLCs do not file an annual report but pay an annual fee of $250, and LLPs and LLLPs have to file an annual report and pay $200 per partner. 24 Delaware also levies a corporate income tax on domestic corporations (those corporations that do not conduct business in the state, although are incorporated there, do not have to file a tax return).25 Delaware does not impose a state or local sales tax, but does impose a gross receipts tax on the seller of goods (tangible or otherwise) or provider of services in the state.
Concerns about privacy may be the deciding factor for some businesses if asset protection issues are involved. Nevada requires that all business entities file annual lists with the state, which contain the name and resident or business address of partners, officers, directors, managers or managing members of business entities incorporated in Nevada. It is possible to search the state website for business-related information not only by the name of the business but also by officer’s name. In Nevada, shareholders can vote by proxy, valid only for 6 months, unless the appointment document provides a different length of time, not to exceed seven years. 26
Wyoming’s annual update reports do not require disclosing the names of business owners except for the person signing the report. Wyoming also allows nominee shareholders (designated persons to appear on public record instead of the actual persons involved) as well as action by lifetime proxy. 27
Similarly to Wyoming, Delaware does not require disclosure of the names of business owners, directors or officers of business entities in its filings, allows nominee shareholders and provides for lifetime proxy.28 Therefore, it appears that Wyoming and Delaware laws offer greater privacy protection to the business owners of the entities formed in their states than Nevada.
21 Wyoming requires its business entities to file an annual report on or before the first day of the anniversary month of the company’s incorporation and pay a license tax (except for statutory trusts). The cost is $50 or two-tenths of one million on the dollar ($.0002), whichever is greater, on the portion of the corporate assets located and employed in Wyoming. See Wyoming Secretary of State, Frequently Asked Questions, available at http://soswy.state.wy.us/FAQ.aspx (last visited Mar. 25, 2010).
22 See Wyoming Department of Revenue, Income Tax, available at http://revenue.state.wy.us/ (last visited Mar. 25, 2010).
23 See Nevada Secretary of State, Forms and Fees, available at http://nvsos.gov/index.aspx?page=127 (last visited Mar. 25, 2010).
24 See Delaware Division of Corporations, How to Form a New Business Entity, available at http://corp.delaware.gov/howtoform.shtml (last visited Mar. 25, 2010).
25 Delaware Division of Revenue, Filing Corporate Income Tax, available at http://revenue.delaware.gov/services/Business_Tax/FilingCIT.shtml (last visited Mar. 25, 2010).
26 See NEV. REV. STAT. § 78.355 (1991).
27 Effectively, it is possible to appoint lifetime proxies, as Wyoming Business Corporation Act provides for the appointment of proxies for an 11-month period unless a longer period is expressly provided for in the form of appointment. See Wyo. Stat. Ann. § 17-16-722(c).
28 DEL. CODE. ANN. Tit. 8, § 212(b) (providing that a proxy is for a period of three years, unless the proxy provides for a longer period).