Ramon Answers Your Business and Income Tax Questions
1. What is the best state to incorporate a new business in the USA?
The best states to incorporate in the USA are Nevada and Delaware.
Some potential advantages of incorporating your business in Delaware include:
- Delaware’s business law is one of the most flexible in the country.
- The Court of Chancery focuses solely on business law and uses judges instead of juries.
- For corporations, there is no state corporate income tax for companies that are formed in Delaware but do not transact business there (but there is a franchise tax).
- Taxation requirements are often favorable to companies with complex capitalization structures and/or a large number of authorized shares of stock.
- There is no personal income tax for non-residents.
- Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be residents of Delaware.
- Stock shares owned by persons outside Delaware are not subject to Delaware taxes.
Some potential advantages to forming a corporation or LLC in Nevada include:
- Nevada has no state corporate income tax and imposes no fees on corporate shares.
- There is no personal income tax or any franchise tax for corporations or LLCs (but initial and annual statement fees and business license fees apply).
- Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be residents of Nevada.
One must remember that even if you incorporate in either of these states, you may be required by the state in which you reside to also incorporate in that state. Depending on where you are, this may require you to pay certain income or franchise taxes. Make sure to consult with a tax professional or a legal expert before going through with incorporation preparation.
2. What is the bet state for income taxes in the US?
There are actually 5. They are, in no particular order:
Texas, Wyoming, Washington, South Dakota, Nevada,
In these states you do not have to pay an income tax. However, regardless of what state you live, you’ll still have to pay a Federal Income tax.
One thing that people forget, is that even though you may not be paying an income tax, these states still need tax dollars to fund them and their projects. So where does this money come from?
Easy! From other taxes.
These no income tax states typically have a higher sales tax rate and higher property tax rates. The opposite can be said of other states that do have an income tax. Their property and sales tax rates are typically lower than their counterparts.
3. How can governments ward off corporate inversions in the future?
The easiest way would be to have 1. low tax rates so companies have an incentive to stay in their home country and 2. close any loopholes that allow companies to renounce their citizenship while at the same time still benefit from their home country’s tax laws.
Although they sound easy, in reality it would take focused and joint efforts from law makers, policy makers, and legal and tax experts to come up with a tax rate and plan that would be a win-win situation for governments and corporations.
Ramon Santillan is a Tax Accountant with over 13 years of experience with Federal, State & Local experience with deep knowledge of Fixed Assets. As a previous Big Four Tax Accountant as well as owner of a Boutique Tax Firm, he enjoys working on complex tax issues and does one-on-one consulting with clients ranging from individuals to Fortune 500 companies.
You can work with him by contacting below:
https://www.fiverr.com/taxhelp
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