Where to incorporate a business? In which state? And why there specifically..? These questions come up quite often. After finishing this article I am sure you will have a greater insight into this subject.
What are the criteria for choosing a state to incorporate a company in the United States? It is sad when people do it based on unreliable, incomplete information, or on a "I was told so" basis.
Please note that this article is not about big corporations that need to raise investment from venture capital companies, but about small and medium-sized businesses - LLC companies with one charter member or an LLC partnership (company with several co-founders). We will discuss corporations and C-Corp tax form LLCs on an individual basis later.
In General, for non-residents of the United States, there are 7 tax-free States (no income tax states) and several so-called "hybrid" States in which you do not have to pay income tax and bother filling out a state tax return if your income is not from the state of registration.
While we’re on the subject, let’s look at taxes in general – another favorite issue of our clients. Firstly, there is no company turnover tax in the United States, which was known in the former Soviet Union (some of you might be surprised). Some people confuse income tax and sales tax, which should not worry you if you are not an individual but a company with a Resale License (especially selling through the Amazon Marketplace).
For example, if your LLC is registered in one of the following States: Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming (or C-Corp in Wyoming, Nevada, Texas, South Dakota, or Washington), you do not have to pay any income tax for the company.
Nevertheless, our favorite is the state of New Mexico. It has all the possible advantages for Non-US residents working on the dropship, wholesale and online arbitration system. For instance, if your business incorporated in Georgia, you must pay income tax of between 1% to 5.75% to the state, depending on the amount of profit. At the Empire State, this range will be between 4% and 8.82%, depending on the amount of profit. We won’t discuss the subject of residency or non-residency at this point, only the existence of state income tax or its absence.
In addition to material considerations, there are other criteria for choosing a state. In particular, the convenience and ease of processing documents for registration, license, submission of reports and "company renewal". In some States (for example, Florida), the process of registering a company and issuing a Resale License is very lengthy, and in the state of Wyoming, the address of the registration agent cannot be used to obtain a Resale License. The whole process is slow and complicated. In the state of New Mexico, company registration and registration of the Resale certificate takes place within 24 hours.
As such, I can recommend the state of New Mexico for retailers, wholesalers and Drop shippers. I prefer doing business there myself, as do most of my clients. In this state, you can quickly register a company and no additional fee is required for annual renewal (for example, in Delaware, only the state fee for company renewal will cost you a penny). If you, as a retailer or wholesaler, dealing with American companies - a Resale certificate is quickly issued in New Mexico. Another notable advantage is that the report on the Resale certificate can be submitted once every six months, and after a year you can easily change the report submission to annual.
Another indisputable advantage of the state of New Mexico is its strict adherence to discreteness and non-disclosure of the identity of the company's founder, which can only be obtained through the courts, and after proving the necessity of this information.
At my practice, I often deal with people who have chosen Delaware for registration. I always ask what exactly was the reason for choosing this State; they usually throw their hands up and say, "They suggested…"
At my practice, I often deal with people who have chosen Delaware for registration. I always ask what exactly was the reason for choosing this State; they usually throw their hands up and say, "They suggested…"
— No personal property tax. Sure, we, as Non-residents of the United States, will find this very useful.
— No legacy tax. Online businesses cannot do without it.
— Favorite State for venture capitals – a very important thing for those who do not look for them.
— Extensive network of corporate courts. Very useful for small businesses, like you have lawsuits for millions every day.
If my sarcastic tone was not very clear above, please read the following article about the dubious advantages of Delaware: https://bit.ly/3jB7A1s .
To sum up, having 12 years experience in company registration, I can confidently name the State of New Mexico among the others as the friendliest and most convenient state to choose for working on Amazon.
Questions about registration entity in US👇🏻👇🏻👇🏻