Embarking on a new business venture can be both challenging and rewarding. One of the biggest challenges a new business owner faces is choosing a state of incorporation or the state in which their business will be registered. Choosing the state of incorporation is a largely misunderstood aspect of starting a new business, creating confusion for even the brightest of business owners.

A business owner can opt to register their business in the same state the business operates in, or they can register the business in a different state. States with lower corporate income tax rates like Wyoming are attractive options for many new business owners seeking to limit tax exposure of their new ventures. If the goals and needs of the business aren’t taken into consideration, however, incorporating the business out of state can have the exact opposite result.

Wyoming may be considered a business-friendly state, but none present a one-size-fits-all solution to choosing the right state of incorporation for your business. Each state varies in terms of fees and taxes, meaning the best option for a large public company may be completely different for a small business with limited activity or few investors.

No required licensing or filling fees

Many companies incorporate in Wyoming because the administrative costs are generally lower than in Delaware or Nevada. Unlike many states, Wyoming does not require licensing or filing fees to be paid to complete the process of incorporation. The only fee Wyoming charges is an annual filing fee to maintain the corporation, which is $52.

Wyoming also has personal asset protection laws in place to protect business owners and company officers from losing assets like cars and houses in the event of litigation. The state also takes data protection laws seriously, requiring registered agents to maintain private data for businesses rather than have sensitive data entered into a public database. Wyoming doesn’t require business owners to be U.S. citizens in order to incorporate, however, there are certain exceptions. Businesses from countries like Cuba, Zimbabwe, Burma and North Korea are not eligible to incorporate in Wyoming.

Thriving fisical health

Wyoming ranks third in the nation for fiscal health and is one of the few states in the U.S. that has a budget surplus. Because of the thriving fiscal health of the state, Wyoming does not collect corporate or personal income taxes.

Forming a corporation in a different state won’t necessarily save a business any money in the long run. Incorporating out of state will usually do little for a business unless it conducts its operations in that state. It may sometimes be more beneficial for a business to incorporate out of state, however, it will always cost more upfront to do so.

Incorporating in a tax-friendly state is not an effective strategy for reducing taxes unless the business plans to operate in that state. In general, a business will be subject to the tax laws of whatever state it operates in.

Source: Forbes.com

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