What are pros and cons for incorporating in Nevada vs Delaware if company operates in those states?

Because both states offer certain legal and tax advantages, it’s no surprise that over half of all Fortune 500 companies are formed there. With that said, you need to take a close look at your business and it’s objectives in order to figure whether to file in DE or NV.

Some businesses choose to incorporate in Nevada over Delaware because of its perceived looser corporate law, which is very protective of directors and board members. This lax law is especially attractive to businesses whose home state’ laws have an anti-management view and therefore seek greater protection in the state they incorporate in. The Secretary of State for Nevada provides a full list on its website of reasons why it “ranks as the top state for commercial filings and the benefits of doing business in NV, including the favorable tax structure.” Interestingly, the site also states that Nevada corporate law was “developed on the Delaware model” so it is safe to say that both states’ laws overlap each other in many regards.

On the other hand, Delaware dominates the incorporation landscape and is often an automatic default for new entities. It’s worth noting that Delaware has Chancery Courts which specialize in corporate law (without requiring a jury). And it’s true that Delaware offers C-corps many advantages, including not taxing royalties and other intangible assets, protecting the privacy of shareholder and director identities, and providing flexibility that favors directors and minority stockholders (e.g., cumulative voting) – all of which makes Delaware very attractive to VCs and companies planning to go public.

In you need further assistance incorporating your startup and evaluating in which state would be the best fit, please feel free to check out LawTrades. We offer free initial consults w/ top startup attorneys as well as quick and easy price quotes. You can also message me directly and I’d be happy to answer any further questions you have regarding your company’s formation.