Domestic Incorporation

Corporations. Choosing the optimal jurisdiction of incorporation is essential to a corporate strategy
which will reduce federal and state income taxes while protecting the assets held by the Entity. The
ability to reduce the tax exposure of the Entity should be considered when choosing where to
incorporate. By following the correct procedures, an Entity can be operated through the jurisdiction
of incorporation, even though you are not physically within that jurisdiction. The Corporation should
process all invoices, purchase orders, payroll, correspondence, and disbursements through that
jurisdiction. 

Nevada is now the preferred State in which to incorporate. In Nevada the shareholders of a
standard corporation may consist of any number of individuals of any nationality, and/or any number
of Corporations, including a Bahamas IBC Corporation. (Shareholder limits are imposed by the
Federal government through the Security Exchange Act of 1933.) Shareholders' identities are
protected in Nevada. Any individual or nominee, as a Director or Officer in a Nevada Corporation,
is protected from personal liability for acts committed on behalf of the Corporation. In Nevada,
there is no State Corporation Tax, Income Tax, or Inheritance Tax. 

Wyoming incorporation provides an additional benefit: a corporation may be designated as a
director or officer of the Wyoming Corporation. Wyoming incorporation also offers the same
advantages as Nevada: shareholders of a standard corporation may be any individual(s) or
Corporation(s), shareholder identities are protected, and officers are not held liable for Corporate
actions. Instead of filing a List of Officers, an Annual Report is filed with the Secretary of State's
Office; with this filing there is a State Corporation Tax of $25.00 (plus a graduated fee based on the
value of Corporate assets). Like Nevada, Wyoming imposes no State Income Tax or State
Inheritance Tax. 

California provides the same shareholder protection as Nevada and Wyoming. Shareholders
identities are not disclosed; officers are not held liable for acts committed on behalf of the
Corporation. In California, there is a minimum Annual Franchise tax of $800.00, as well as
applicable State Taxes. 

Delaware incorporation provides the same level of shareholder protection as well as limited liability;
shareholder identities are protected and officers are not held liable for acts committed on behalf of
the Corporation. In addition, Delaware does not require a List of Directors to be filed. Delaware
corporations are required to file an Annual Franchise Tax Report with a minimum tax of $30.00.
One significant advantage to incorporating in Delaware is its unique means of legal remedy; its
non-jury Court of Chancery has exclusive Delaware jurisdiction over legal matters pertaining to
corporate governance. 

Alternatives to Incorporation. Small businesses seeking to keep costs low should consider
organizing as a limited partnership or limited liability company (LLC). Both offer pass-through
taxation; taxes are passed through to the individual, thus eliminating the double taxation faced by
corporations. 

Limited Partnerships. Limited Partnerships combine the limited liability benefits of incorporating
with the pass-through taxation of partnerships. Limited Partnerships may be the best vehicle for
business formation if liability can be vested in one person, the General Partner. At least two persons
are required to form a Limited Partnership one General Partner and one Limited Partner. Each
Limited Partner is limited in liability to the amount of capital contributed, and items of profit and loss
pass through to the individual. Limited Partnerships are formed and managed by the General
Partner(s), and Limited Partners are not required for the organization. Limited Partners do not
participate in the operation of the partnership. Because partners' interests may not be freely traded,
Limited Partnerships should not be formed if liquidity of investments is desired. 

Limited Liability Companies. Limited Liability Companies (LLCs) are beginning to render
Limited Partnerships obsolete. Why? LLCs offer all of the advantages of Limited Partnerships,
including pass-through taxation, without being subjected to the limitations faced by Limited
Partnerships. Learn how Limited Liability Companies provide a number of benefits not afforded to
subchapter S corporations or limited partnerships. 

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