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Best state to start a business: California vs. Nevada. vs. Wyoming

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Choosing a state to register your company in the US is one of the most crucial stages before starting your American venture. Keep reading and find out more about the pros and cons of forming an LLC or Corp in Wyoming, Nevada, or California.

How is the process to register a company in the United States?

The process of opening a company in the United States requires the entrepreneur to choose one of the states of the country to register the business. When making the choice, many entrepreneurs face a series of doubts, after all, each American state has its own laws and taxes.

In the United States, there are both federal and state taxes. Also, besides from income tax, there are other tributes to be paid by companies, such as annual reports or franchise tax.

Before understanding how these taxes work, it is necessary to understand the differences between the types of companies (LLC and Corp) and what the laws are for each of them.  

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LLC and Corp: What’s the difference between them? 

With an LLC or Limited Liability Company, there is no requirement to pay income tax at the corporate level, but at the individual level. The partners are responsible for paying taxes after distribution, but the LLC companies must, mandatory, distribute profits at the end of the year among the partners.

In case the LLC is the ideal modality for you and you do not intend to have a physical operation in the United States, a tip is to register your company in states which do not charge the State Income Tax – state tax – for individuals. So, you don’t have to pay this tax.

On the other hand, the Corporation requires payment of Federal Income Tax at the corporate level; at the state level (State Income Tax) the percentage varies according to the chosen state, and some states, such as Wyoming, do not have this charge. This is a modality that brings advantages, for example, for businesses that intend to be traded on the stock exchange.

However, C Corp entrepreneurs need to deal with double taxation, as partners pay taxes at the corporate level and then later when profits are distributed to shareholders. In this second moment, as an individual.

Wyoming, Nevada, and California: which one should I choose to register my company? 

Despite attracting a lot of attention, mainly because it is home to many technology companies and startups, California has high rates when compared to other states. Along with Hawai’i, Oregon, Minnesota, New York, and New Jersey, California has one of the highest rates in the United States for the State Income Tax. That’s why several companies, such as Apple and Google, that operate in California are actually incorporated in Delaware.

On the other hand, Wyoming and Nevada have the advantage of not requiring the payment of State Income Tax for individuals and corporations. In the case of Wyoming, the annual renewal is also lower and can be a good option for business owners concerned with reducing their fixed costs. In these two states, there is also confidentiality regarding the information of the company’s partners, unlike in Florida, for example, where the information is public.

Know more about business formation in the US

Check out Glboalfy’s all-in-one business formation plan that includes Registered Agent services, Virtual Address, bank account, and +US$200,000 in rewards and discounts.

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