Incorporate in TX or NV/DE?

October 10, 2011 2:07 PM

I'd like to incorporate an S-Corporation. I live in Texas. Should I incorporate in TX or is there any advantage in incorporating in one of the corp friendly states like Nevada or Delaware?
posted by naveed to Work & Money (8 answers total)

I work at a company that does this. While I don't know the specific rules, due to the byzantine nature of the regulations of what you're asking about, you really, really want to get a professional (and not a bunch of people on the internet) to answer this question. Many will answer your questions for free.
posted by griphus at 2:19 PM on October 10, 2011

If it's just a side or small startup business, I've not seen any advantage to doing so. The extra stuff you have to deal with outweighs the perceived benefit.
posted by chrisfromthelc at 2:26 PM on October 10, 2011

Seconding griphus, but if we unwashed masses are to help, we'll need a lot more information about what you want to do, who you'll be doing it with, why you want an S-corp and not just a type of partnership, etc.
posted by resurrexit at 2:59 PM on October 10, 2011

Will you be making enough profit to pay for the retainer for representation in one of those states?

This isn't business advice, just experience: an LLC will hold you for a looooong time. Most of my employers in the past 15 years have been LLCs, even with multiple principals and payroll and dozens of employees. If your CPA finds an advantage later, you can retroactively reclass as an S. You may choose to be taxed as an S even with a sole prop or LLC.

In other words, go chitchat with a CPA and figure out if you are one of the rarer cases where an LLC isn't appropriate for starting out.
posted by Lyn Never at 3:05 PM on October 10, 2011

Response by poster: Yes, it's a small single person software startup. It's probably going to be just software consulting work for the near future.
posted by naveed at 4:30 PM on October 10, 2011

I'd look into the minimum corporate tax laws for your state and see what happens if you inc in Texas vs Delaware or Nevada. In California, for instance, there's a minimum corporate tax of $800 even if you have no or negative revenue in the year.
posted by zippy at 6:06 PM on October 10, 2011 [1 favorite]

Regardless of where you incorporate, you'll most likely have nexus in Texas (ha!) which means that you'll probably end up paying the taxes there no matter what. Please go talk to a CPA that specializes in these things.
posted by Zoyashka at 6:39 PM on October 10, 2011

Response by poster: Thank you everyone. Very useful information.
posted by naveed at 10:42 AM on October 11, 2011