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When people start thinking about incorporating a company outside of their home state, often the two most popular states considered for incorporation are Delaware and Nevada. Although many people believe Nevada is just as corporate-friendly as Delaware, that is simply not true.
You can read more about why so many companies incorporate in Delaware.
The infographic below illustrates how much more supportive of corporate entities Delaware is, and reveals the myth of incorporating in Nevada. Click or tap to see the full size image, or scroll below the image for the text version.
Delaware has been ranked the state with the strongest corporate law structure every year for the past 13 years.
Here's how the two states compare in a few important categories:
State Liability System (overall):
Treatment of Tort and Contract Litigation:
Virtually all venture capitalists require that a company is registered in Delaware in order to invest in it. Other states, including Nevada, are simply not recognized as providing the same level of professionalism to the venture capital investor.
When it comes to privacy, Delaware does not require any public information on members of Delaware LLCs. Nevada requires that names and addresses of all members are provided and kept on public record.
An additional benefit of Delaware is that it does not require a business license if the company is not physically operating in Delaware. In Nevada, a business license is required for all companies, meaning those not physically operating in Nevada incur and additional expense $500 per corporation and $200 per any other entity every year.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.