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Business Formation

Coroporate Tax Benefits of Delaware and Nevada

Should you form your business in a low tax state?

Deborah Sweeney, CEO of MyCorporation


We have all been told, from a very young age, that there is nothing certain in this world except for death and taxes. Death we can cover later, but taxes are a constant annoyance for small businesses. Each state has a different policy regarding taxes, and some make it their business to help business; that is, they try to make their tax policy enticing for smaller business to found their companies within that state's borders.

Incorporation Benefits

The state gets a job-producing entity, and small businesses get to keep their money. Many see this as a win-win, and certain states have taken steps to turn themselves into "corporate havens." While this does mean a decrease in immediate tax revenue for the state, the influx of major businesses into the area is believed to offset that decrease.

When looking to incorporate, the area in which you choose to do business should not be taken lightly. Two states, Nevada and Delaware, are very business friendly, and should be at the top of your list. Delaware, despite being the second smallest state in terms of area and the fifth smallest in population size, is called home by sixty percent of Fortune 500 companies.

The Corporate Laws

This is not too surprising, though, if you know a bit about Delaware's corporate laws. If you locate in Delaware and do not operate within the state, Delaware does not charge a corporate income tax. Even if you do operate within the state, your purchases are not subject to sales tax and any income is subject to a flat tax of 8.7%. The state maintains a Delaware Economic Development Office to help develop small business within state boundaries.

Their website,, is well maintained and contains links to nearly every source a small business would be interested in. The state provides funding schemes, gives guidance, and offers its support to any business that wants to establish within Delaware.

But if the east coast isn't your cup of tea, discerning westerners have their own tax haven in Nevada. No inventory tax, no personal or corporate income tax, and low payroll taxes combined with a low cost of living means Nevada has become on of the most attractive states of incorporation in the country. While the amount of resources available to businesses wishing to incorporate within state lines is not as numerous as in Delaware, the low, or non-existent, tax rates may make the extra work involved with getting a business of the ground in Nevada well worth it.


That isn't to say, however, that you are on your own. The Nevada Small Business Administration, in cooperation with the University of Nevada, Reno: College of Business, has an excellent online resource called the Nevada Small Business Development Center, which can be accessed at Among with a copious amount of information, the website has all of the forms, frequently asked questions and resources collected in one place, which makes your life easier. There are also tax dollars available for qualifying companies, which are typically Non-Profits, high tech start-ups, or businesses founded by groups like minorities and veterans.

Tax Savings

Taxes bite, plain and simple. They eat into your revenue and making doing business that much harder. Every state will typically try to sell itself as a great place for incorporation, but Nevada and Delaware both have shown that they are not full of hot air and empty promises.

I cannot stress how important it is to consider all of your options and consult with a professional before making a decision like this, but Delaware and Nevada are both consistently chosen as the home states for various businesses for a reason. Less money to the state means more for your business, and that increase in capital can mean the difference between failed and self-sustained ventures.

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