[KieranMac]

I'm an attorney.

Delaware is definitely not the cheapest or even in contention for the cheapest.

Still, if you want to raise capital, the correct answer is DE C Corp. If you're not looking for external funding, any state will do. If you care about anonymity, do Nevada or Wyoming. If you don't care about anonymity, Colorado is actually a very good choice. Very simple, intuitive online filing system that accepts filings instantaneously. Filing fees as cheap as anywhere in the country. No need for an attorney (or LegalZoom or some other random service) unless you just don't feel like dealing with it.

Costs will likely be $50 to file, Registered Agent (as cheap as $30 per annum), and $10 periodic report fee annually every year you're in business. Colorado is even nice enough to send plenty of reminders on when to file that report if you give them an email address.

Since you're a US citizen, my instinct would be LLC taxed as an S corp. But confirm with your accountant!

Good luck!

[ValentineC]

Piggybacking on this.

If I'm a non-resident alien looking to incorporate the cheapest US-based company so that I can open a business bank account for credit card churning, would a Colorado LLC still be the the best choice for me?

[oldtownroad]

You’ll need an SSN to open most credit cards, it’s very difficult to get a credit card without residency. The business banks that specifically cater to overseas founders (like Mercury) make banking easy but that doesn’t extend to churning credit cards.

Edit: put simply, it’s very unlikely that opening an LLC will help you in obtaining credit cards as a non-resident.

[yieldcrv]

note: nevada lets you form entities with little information but demand the information 6 months later, which will be public

the only shady thing about this part of nevada are all the promoters advertising anonymity

[blovescoffee]

Why is the correct answer a DE C Corp if you're looking to raise?

[KieranMac]

It's just industry standard for capital raises. All corporate attorneys learn DE law when they go to law school and are expected to know it if they practice corporate law. A Colorado attorney doesn't know California law and a California attorney doesn't know New York law, but if they do corporate legal work, they're all expected to know how to deal with DE law.

Nobody knows Nevada or Wyoming law. I don't even think Wyoming attorneys know Wyoming law.

DE's court of chancery is also very sophisticated with respect to corporate legal issues. That makes it the venue of choice for investors, which means it has become the venue of choice for those seeking investment.

But in terms of states and their processes for filings, DE is a total pain in the butt. You have to pay an expedited filing fee just so that they can process your filing in less than a week. Their system is counterintuitive and clunky. You better like elevator music if you ever want to talk to a human. Sometimes they reject filings and just don't bother to tell you. It's all opaque and antiquated.

[jawns]

I'm a longtime Delawarean and in my past life as a journalist I wrote about why the state is such a corporate haven.

The short answer is that companies incorporate in Delaware to mitigate risk.

The slightly longer answer is that the Delaware courts that deal with corporate legal matters are much more predictable than comparable states. There is voluminous settled case law, and so when you incorporate in Delaware, it is a safe option, a known quantity, relative to other states.

That's why VCs and other investors want the company to be incorporated in Delaware. It's not just because everybody else is doing it; it's to mitigate legal risk.

When we look at consumer products, we sometimes consider the total cost of ownership. Maybe a pair of sneakers is not the cheapest, but it lasts longer than a budget pair, so it has a lower cost of ownership over the lifetime of the product. Delaware might not be the cheapest state to incorporate in, but it has the legal equivalent of a low cost of ownership over the life of the business.

[necubi]

Not an attorney, but as someone with a startup incorporated in DE—it's just the default. Delaware has very good and well-understood corporate law and a judicial system that is able to handle complex corporate cases.

If you're fundraising as a Delaware C Corp you will face no questions about that, but if you've done something else you will need to explain why to your potential investors (and they will probably push you to reincorporate).

[terminous]

Delaware Court of Chancery also holds the doctrine of shareholder supremacy, where execs actually have an obligation to maximize shareholder interests. Other states don't recognize it or allow balancing other stakeholder priorities.

[codexb]

There are limitations on the number of owners and the amounts and type of stock you can issue as other types of corporations. Delaware doesn't require you to disclose all owners and investors and they have a court of chancery that is business friendly.

[garrickvanburen]

many VC's require it, cuz it keeps their admin standardized.

[throwawayapples]

The Court of Chancery nearly always rules with the board (VCs) over shareholders (founders). VCs like that.

[devoutsalsa]

Some states are better than others. For example, California has an annual LLC tax of $800. There's no reason to pick California for a use case like this.

[PopAlongKid]

But if you are doing business in California, you are still liable for the annual $800 tax, even if your LLC is formed in another state.

[unixhero]

I was told that Delaware also has the best abonymity? Has Delaware been dethroned by Nevada and Wyoming in this aspect?

[glimshe]

Would Nevada/Wyoming be a good deal if they lived in the US? Let's say, living in Texas.

[toast0]

If your corporation will be deemed to operate in the state you live in, which it might, then it'll need to register there as well as its home state. The least hassle path is often to make the corporate home the same as your home, then you don't have to register in two different states, and you don't need to pay a registered agent, because you can do that, etc.

It's certainly a different question if you're likely to get funding, but it's not hard for a skilled attorney to re-incorporate your business as a Delaware corp if that's a condition of financing, just takes a bit of time to do the work, and maybe not much more time than incorporating in Delaware to begin with, and delaying hassle that you might be able to avoid is better than paying it upfront.

[throwawayapples]

Texas has a larger up-front cost (about $300 one-time), but no annual fees at all, no income tax for corporations or individuals.

Unlike Wyoming and Nevada, Texas does have franchise tax, but that is 0 until you exceed $1.23M in revenue, and it maxes out at .331% or .75% after that (https://comptroller.texas.gov/taxes/franchise/).

Delaware has all of these (personal, which wouldn't apply if you live elsewhere, corporate income tax, corporate franchise tax, minimum $400 annually). Wyoming costs only $50 to incorporate but has a $50 annual filing fee.

Also, you'll probably need to file foreign corporate status if you have employees in Texas but are incorporated elsewhere, which is about $700 (one-time).

[Spooky23]

If it’s a small company, you may notice the cost of registering the foreign corporation in your actual location.

Some people and tax authorities may draw an inference from states like Nevada with a reputation for shady companies in some industries.

[dataflow]

What happens if you move your home to a different state after incorporation? Do you potentially have to register the business in the new state as well as the old one it's already registered in?

[lannisterstark]

You don't in theory, have to live in the state you incorporate in, depending on type of 'corporation' and/or depending on agency availability.

[simonebrunozzi]

When did the OP say that he's a US citizen? Not sure I saw that.

[fragmede]

How difficult is it to change, in practice? If I've got an LLC or a corp in a different state, can I form a DE C corp and arrange to have that buy my whatever?

[NotYourLawyer]

It’s not a big deal. Startups do this all the time when they get bigger and want funding.

[actionfromafar]

Are you my attorney?

[KieranMac]

Nope.