Which State is best for Setting up a Small Company?

Choosing a US State for a Small IT Firm

[Tigrou]

I have recently moved to the US and to make it official, I have to set up a company somewhere in the US that I'd draw salary from. I understand that the company does not have to be registered in the same state as the company office.

Another point is that the new company will technically a spinoff of a European corp that has been running for 5 years. The shares though would be allocated between 3 partners and dividends would have to sent to Europe on occasion.

With all this in mind, I am looking for suggestions on states that provide both:
user-friendly submissions
have favourable tax rates.

I don't mind paying a lawyer to do it "right" but I obviously don't want to throw money away if I don't have to.

Any advice greatly appreciated.

Many thanks,
Colin

[digitalv]

What is it you're selling? If it's a "service" and no actual hard goods, in some states you don't have to pay any state taxes at all. Florida being one of them.

[vkaryl]

There's always Nevada - cheap incorporation; no state income taxes; fairly low sales tax rates (everything is supported by the gaming industry).

If I could I'd move back there just to stop paying state income tax where I live now *sigh*.

[fashezee]

I heard Delaware is very corporate friendly.

[Tigrou]

Thanks for the input people!

We are most definitely providing a service - a monthly internet research report for organisations.

I'll check out Florida, Nevada and Delaware in more detail.

Thanks again,
Colin

[bhartzer]

Delaware is very corporate friendly

I agree. There are companies that will provide you with a mailing address, a suite number, and everything you need to establish your company in Delaware.

[mcguffin]

Delaware and Nevada are both very much worth checking out.

I would recommend that you contact an attorney, especially since you're talking about partnerships and sending profits back to Europe. Be sure to choose an attorney who can competently speak to the specific state's corporate laws.

The U.S. offers several different corporate structures, and each has its own advantages and disadvantages.

• C corporations
  
• Limited Liability Parnterships
  
• Limited Liability Corporation
  

Generally, the owners of a C corporation hold stock in the company. Profits are taxed at the corporate level, and when dividends are issued those are taxed at the personal income level.

LLPs and LLCs "pass through" their profits to the partners. The partners pay income tax on the profit, but the partnership itself does not. This often greatly reduces tax liability, and it is a structure that can work very well for a closely-held company.

I strongly recommend that you speak with attorney, preferrably one who has experience with these structures and tax law, for more information.

Disclaimer: I am neither an attorney nor a tax specialist, and my comments do not constitute professional advice or counsel.

[Tigrou]

Thank you for the advice fellow webmasters.