Why should you avoid Delaware or Nevada?
You are soon going to set up your company in the United States, and to ensure that it can grow under optimal conditions, you have decided to gather thorough information beforehand about taxes, politics, the justice system, and so on.
This is an excellent initiative, because you will have to make numerous decisions for your company or companies. The first concerns the U.S. state in which you will register the company: Delaware, Nevada, or Florida? Indeed, as you may know, it is essential not to choose your business location in the USA at random.
Delaware and Nevada
These two states are often presented as ideal options. However, behind the marketing promises, it is worth taking a more balanced look at the situation.
Delaware
Delaware is often presented as a highly advantageous jurisdiction for registering a company. This reputation is based in particular on two widely circulated ideas:
- supposedly zero local taxation;
- allegedly guaranteed anonymity.
In practice, this image is misleading. Federal taxation does apply, as it does everywhere in the USA, and commercial messaging should not be confused with legal reality.
Another important point: Delaware suffers from an image as a “tax haven.” For an entrepreneur wishing to launch a serious business, this reputation is not necessarily an advantage.
Nevada
Nevada is also promoted for its marketing advantages: no local corporate income tax, no tax on dividends, anonymity, and so on.
On paper, these promises may seem attractive. In reality, they are not enough to make Nevada the best choice for a foreign entrepreneur who wants to establish a sustainable business structure in the United States.
As with Delaware, we therefore do not recommend this option to most of our clients.
Why is Delaware often perceived as a tax haven?
The “Delaware Tax Loophole”
Although Delaware is often described as a tax haven, this is largely due to the “Delaware Tax Loophole”. This feature concerns income related to intangible assets (patents, trademarks, etc.) and explains why many multinational companies have a company there.
However, this feature does not mean that Delaware is necessarily the ideal solution for all foreign entrepreneurs wishing to launch a business in the USA.
Beware of confusion with the LLC
Many entrepreneurs confuse this tax niche with the LLC’s tax transparency. However, they are not the same thing. Tax transparency means that, in certain cases, the company is not taxed as a legal entity in the USA: the member reports the income in their country of tax residence.
It is therefore important to be cautious with articles or websites that present Delaware as a miracle solution. In most cases, it is better to prioritize a state that is more consistent with a serious entrepreneurial project.
What alternative is there for establishing your company in the United States?
Florida
Fortunately, there are alternatives in the United States. It is entirely possible to benefit from tax advantages legally. For example, you can choose Florida, a state with an excellent international reputation.
We invite you to discover the many advantages of Florida for registering your company in the USA so that you can make an informed choice.
If you would like advice on the best option for your project, our firm can guide you based on your situation.