Where Is the Best State to Incorporate Your Business?

Nevada map

However, as a general rule of thumb, if your corporation or LLC will have fewer than five shareholders or members (a condition which applies to the bulk of small businesses), it’s best to incorporate or form an LLC in the state where your business has a physical presence. This means the state where your business is physically located, where any property owned is located, where your employees reside and where the shareholders reside.

In other words, unless your business has a physical office in Delaware or Nevada, it’s much easier and less expensive in the long run to incorporate or form an LLC in your home state.

Here’s one example that highlights the situation. Suppose Susan owns a soap-making business in Maryland and is considering incorporating in Delaware. However, what Susan doesn’t realize is that Maryland has rather strong rules pertaining to bank accounts. As an “out of state” business, she would need to get permission in order to open a business bank account in Maryland (even though she lives right down the road from the bank). And opening a bank account in Delaware won’t be so easy, either, without any kind of physical address in the state.

That’s just one particular (albeit very common) logistical challenge. There are countless other potential hurdles, not to mention added fees.

For example, when a business incorporates “Out of State” (for instance, in Delaware), there may be additional filings and fees in both the state of incorporation as well as the state where the entrepreneur lives and runs the business. These can include:

For the state where a business incorporates:

  • Appointing a Registered Agent in that state
  • Paying filing fees in that state
  • Filing annual reports in that state

And then, for the state of residence (where the business is physically located):

  • Appointing a Registered Agent in this state
  • Paying filing fees in this state
  • Filing annual reports in this state
  • Qualifying as a Foreign Corporation in this state
  • Paying taxes in this state

I can’t overemphasize that last point, as it is a common misconception among many small business owners that I talk to. When you’re just starting out, the tax burden can seem overwhelming. It’s only natural to be concerned about your taxes, and certainly those tax laws in Nevada are incredibly appealing.

However, just because you incorporate your business in Nevada does not mean those are the only state tax laws that apply to your business. While Nevada may not charge state income taxes for your corporation, the state where your business is physically located will come after you for those taxes sooner or later. Adding insult to injury, your tax liability may actually increase because you’re viewed as a foreign entity operating in the state.

Pretty soon, any benefits from incorporating in Delaware or Nevada are diluted when you add in all the extra fees and paperwork of operating out of state. Don’t fall prey to the hype over these business-friendly states. The benefits are really limited to larger businesses (ones with more than five shareholders).

As a small business owner, you’re already contending with enough paperwork and fees as it is. Don’t add more to your workload by trying to operate out of state. In this case, the simplest route of incorporating in your home state turns out to be best.

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State Cuts $50 Million In School, Municipal Funding

Gregory B. Hladky

Gregory B. Hladky Contact Reporter

Gov. Dannel P. Malloy’s administration announced $50 million in new cuts in state aid to municipalities Thursday, including a $20 million reduction in education funding that local officials said could result in school layoffs.

The announcement comes as a bitter New Year’s gift for financially hard-pressed cities and towns that are already halfway through their fiscal and school years. Administration officials said the cuts had to be made now to achieve the savings goals included in the current 2016-17 state budget.

Malloy’s budget chief, Ben Barnes, said he doesn’t believe the school funding cuts will result in local layoffs. “Certainly there is nothing about this that will force any of these communities into layoffs or cuts that would significantly affect students,” Barnes said.

Barnes added that he expects cities and towns will see “minor adverse consequences” as a result of the loss of state aid.

The school aid cuts for Connecticut’s 48 most distressed cities and towns, including Hartford, New Haven and Bridgeport, are capped at $250,000, and the funding reductions represent less than 1 percent of what those cities and towns are receiving in total state education aid.

Connecticut’s wealthiest towns are taking the biggest hits in school aid: Greenwich is losing more than $1.3 million, or 90.5 percent of its education cost-sharing money. Salisbury will see its school funding reduced by 81.9 percent and Sharon will suffer a 76.3 percent cut.

“What’s going on is a redistribution of the burden,” Greenwich First Selectman Peter Tesei said. “The perception of Greenwich is that it’s a super-affluent community. And yes, there’s affluence, but there’s also citizens living at or below state poverty levels.”

Darien’s school aid was chopped by $368,850, a 47.6 percent reduction.

“They’re whittling us down to zero, I’m pretty sure,” Darien First Selectman Jayme Stevenson said. “It’s challenging for Darien, like any town that drafts a balanced budget for July 1 every year and then to have to try to make midyear adjustments.”

The move was criticized by Senate GOP leader Len Fasano.

“This is yet another example of the Democrats’ budget continuing to fail our state and the need to change our approach to budgeting and begin addressing problems now,” Fasano said. “The administration has known since August that they would need to hold back these funds from municipalities. But they chose to wait until now to let towns know how much they would lose … making these cuts more difficult for towns to absorb.”

A similar budget reduction plan was floated earlier this year in which education cost-sharing grants for 28 of the state’s wealthiest school districts would be eliminated with many others being reduced. Under the plan, pitched by Malloy, the funds for the 30 lowest-performing school districts would have been spared. It was never approved after intense criticism from legislators and school officials.

“This is really horrible timing,” said Danbury Mayor Mark Boughton, who is also president of the Connecticut Conference of Municipalities. He said that reducing aid in the middle of a fiscal year means layoffs may be the only way many communities can immediately deal with the loss of funding.

“Education is one of the most important things we do,” Boughton said. “I was shocked to see that.”

Danbury is losing $250,000 of its $31.5 million in education grants.

“I’m going to have to tell our school superintendent he’s going to have to cut $250,000 or start laying people off,” Boughton said.

Barnes said he doubts Danbury will need to lay off school employees, noting that the aid reduction is .8 percent of the $31.5 million the city receives.

Betsy Gara, executive director of the Connecticut Council of Small Towns, said, “Towns facing cuts in municipal aid will have little or no choice but to delay or suspend critical projects and/or lay off personnel.”


State can no longer ignore pre-K education

Image result for State can no longer ignore pre-K educationWhen lawmakers meet next week, Gov. Steve Bullock will again be advocating for public early childhood education. Only this time his proposal has been pared back by some two-thirds, from the $37 million he sought in the last Legislature to just $12 million for pre-kindergarten education in the budget he is sending to lawmakers this year.

This is a no-brainer. Early childhood education has been shown to pay off with higher student performance in later years, fewer high school dropouts, fewer teen pregnancies and lower rates of drug and alcohol abuse.

Meanwhile, some Republicans, who hold majorities in both the House and the Senate, already have their eye on that $12 million for use as matching money to get more than $100 million in highway money.

That is a patently false choice. Indeed, we sorely need to invest in our roads and bridges. But that need not come at the expense of our children’s future educational success. Lawmakers are showing the same kind of myopic vision that failed us in the last session. Montana is in better shape financially than just about any state in the union. It will not be difficult for well-intended legislators with the best interests of the state at heart to find sufficient funds to pay for both bridge and highway improvements and the modest early childhood education program the governor is proposing.

This is more than just giving our kids a leg up in school. It’s an investment. Studies have shown that every dollar spent on early childhood education returns between $7 and $9 through increased economic activity and savings on spending on welfare and criminal justice.

Montana is dead last among states on early childhood education spending and one of only five states that do not offer a public pre-K program. And if passed by lawmakers, the $12 million will fund a program that is entirely voluntary. School districts need not participate, and parents will be free to opt out as well.

If your lawmaker does not support this common-sense addition to our state education program, demand to know why. There simply is no reason to say no to early childhood education.

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Turkey amps up fight against Islamic State group, sends more tanks and warplanes into Syria

Turkey on Thursday sent more tanks and warplanes across the border into Syria as part of its Operation Euphrates Shield, which aims to defeat the Islamic State group in its stronghold of Jarablus and restrict the spread of Kurdish YPG militia in Northern Syria. Turkish Foreign Minister Mevlüt Çavuşoğlu said, “We are determined to clear Daesh [the Islamic State] from the border,” according to Reuters.

Turkey, along with the United States-led International Coalition Air Forces, launched a joint operation on Wednesday, after a bomb attackkilled more than 50 people of a wedding party in Gaziantep on Saturday. Turkey holds the extremist group responsible for the carnage.

The government has asked the Kurdish militia to retreat to the east of the Euphrates river within a week, as the group had moved west of the river during a US-backed mission that succeeded in capturing the city of Manbij from the Islamic State group. Turkey’s hostility towards the militia, which is a vital component of the Syrian Democratic Forces, has put the West Asian country in an uncomfortable situation with the US as it considers the Kurdish group an ally in the region. The Syrian Democratic Forces is a US-backed alliance.

Turkish Defence Minister Fikri Isik said, “The Islamic State should be completely cleansed, this is an absolute must. But it’s not enough for us…The PYD and the YPG militia should not replace Islamic State there,” referring to the Kurdish Democratic Union Party, which is a Syrian affiliate of the Kurdistan Workers’ Party, and the People’s Protection Units group.