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Selecting the Best US State for your Corporation

Which US state is the best location for my company in the US?

This page is part of our series focusing on USA

If you want to start a business in the US, you’ll be quick to ask yourself in which US state should my company be based.

Opinions vary on this, and it is not unusual for emotional factors to play a prominent role, more so than facts.

Our opinion is that your decision should be based upon which U.S. state offers you the best from both a practical and business viewpoint.

It makes no sense, therefore, to settle a business in Wyoming just because there is no state-level corporate tax. Sure, that’s okay if you’re a rancher; Wyoming is beautiful. But when it comes to business accessibility, presence, proximity to the market, recruitment of good staff, etc., such locations may have some clear disadvantages.

So start by asking yourself the following questions:

  • Which state or city do I like best?
  • Where are my customers based?
  • Where are the other major players in my industry (Silicon Valley, Wall Street)?
  • Where will I find my employees?
  • What is the image I want to present to the world through my choice of location?
  • How accessible is the location? From Europe? From other parts of the US?
  • Are the location costs (rents, wages, etc.) right when compared to my expected earnings?

Mount Bonnell reckons that by answering these simple questions you will have a 90% chance of situating your company in the right location.

The remaining 10% of business location involves what are known as special cases, which we will discuss later.

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Book an Expert Consultation on Building Your Business in the US, US Taxes and Moving to the US

Register seat and / or administrative seat?

It is quite common in the US, especially for larger companies, for that company to have its registered office in one Federal State and the actual company’s administrative headquarters located in another different state.

A good example of this is Facebook.

Facebook is a C-Corp registered in Delaware. But we all know that Facebook works out of Silicon Valley and has its administrative headquarters there. Many US companies, like Facebook, choose Delaware as their registered office because Delaware has the best reputation in the U.S. when it comes to corporate case law. This is because of Delaware’s long legal tradition, which has many case-law precedents.

Or take the case of Google, located in California. Californian tax and commercial law applies there, but since liability issues are an aspect of company law, these are negotiated and decided at Google’s registry office, in this case that is in Delaware.

To what extent this plays in the life of a smaller company is open to conjecture. In the context of this page we are helping you to decide whether your company’s administrative headquarters should be registered in one state and operate from another. These issues are best clarified during the initial phases of setting up your U.S. company.

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Do companies in Delaware and Navada really have to pay taxes?

On this page you will learn more about the taxation of US corporations.

If you’re more involved in starting up a US company, you’ll quickly find information indicating that the best U.S. states of residence for tax purposes are the states of Delaware and Nevada.

This is a myth.

It is true that many US companies are begun in Delaware and Nevada. But that is because company creation in both states is particularly easy and fast, and the ongoing administrative burden remains low.

However, neither Delaware nor Nevada offer Corporations any special tax benefits. In fact, Delaware charges a relatively high corporation tax. Nevada does not impose corporation tax, but there is a much higher tax at the federal level. Therefore, we would not recommend Nevada to set up in as, ultimately, many of the same tax benefits can be found in other states too.

So, on balance, and once having assessed your company and industry, we would advise against setting up your company in Delaware and Nevada.

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Special cases

There are four special cases or factors that need to be borne in mind when deciding where to locate your business.

Special case 1: Large companies

If you are wanting to start a large business in the US, one that will create hundreds of jobs, and plan to invest millions in the location, then it makes sense to think about government subsidies. These are readily available in the USA.

Texas, for example, is a state with some of the most generous government funding available.

 

Special case 2: Special industry (eg marijuana products, dietary supplements, etc.)

Anyone working in what’s known as a “specialty industry” such as those mentioned above then you may find you are limited in the site selection available, as many of these products are regulated at Federal level.

Incidentally, the same applies to insurance companies and financial service providers, as well as to manufacturers or distributors of certain medications. So, if you are in an industry that is known for a lot of government regulation then that aspect must be borne in mind when deciding where to locate.

Special case 3: Visa / Green Card (eg EB5)

One of the conditions for an EB5 visa is that you either invest $ 1,000,000 in any US operation or $ 500,000 in a rural operation of some sort.

If you choose this latter option, then, inevitably, it is going to limit your selection of location. Any visa planning must, therefore, must take this fact into consideration.  Consequently, this may become a question as to where or which rural area looks the most promising for your investment.

Special case 4: Takeover of a company

Those who plan to acquire a business should focus on choosing the right candidate when taking it over, less important is where that business is located. That is, of course, as long as the location does not interfere with any longer-term strategic business planning and, ultimately, the success of the company.

A good company in a “bad” host state is definitely preferable to a bad company in a “good” host state. Bear that in mind

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Seat states & locations recommended by us

As mentioned earlier, your U.S. location selection should be determined primarily by your business’s operational factors.
  • Where are my customers?
  • Is there a hub for my industry?
  • Where can I find the right staff?
  • Which location suits my image?
  • What do I want as a businessman?

 

Remember Mount Bonnell will support you in setting up your U.S. company anywhere in the US. The location of your company is immaterial to the service we provide.

However, if you ask for a location recommendation, we would suggest one of the following eight US cities. We have selected these according to their various aspects, such as accessibility from Europe, economic importance, and general attractiveness to clients.

Mount Bonnell knows each of these cities. At all of these locations we have the necessary network of local tax advisers, lawyers, virtual office providers etc. to make your business a successful reality.

So these eight magnificent locations are:

Austin, Texas

More information about starting a business in Austin, TX

Austin is the capital of Texas and the fastest growing city in the United States.

Austin is developing into a second Silicon Valley. Dell is based in Austin. IBM, Facebook, Google, Apple and several other tech giants now have large offices here. The chip of the new iPhone 7 is no longer manufactured in China, but at Samsung in Austin. So it’s no wonder that Austin is full of start-ups and venture capital firms.

Another major company from Austin is WholeFoods – the international organic food store chain. Austin just happens to be the organic capital of the United States. Eat Local and many other trending products live here with a passion.

Austin is a Green-Leftward leaning city, one full of students, in the middle of an ultra-conservative state.

Boston, Massachusetts

More information about starting a business in Boston, MA

Boston has always been seen as more reserved, more elitist even, than its neighbor New York.

Maybe that why so many hedge funds are located in Boston. One of the city’s best known is Bain Capital – a company founded some years back by Mitt Romney.

In terms of tax burden, nationally Massachusetts is somewhere in the middle.

Boston is world famous for Harvard, the well-known Ivy League university. It is from there that many economists and business theorists have come, the most famous today is probably Facebook founder, Mark Zuckerberg. Harvard continues and will continue to provide a constant flow of a new talent from students seeking to avail of its international, world-class reputation or graduating and put their learning into practice.

Looking at the cityscape, you can see Boston has its old town, with many houses in a Georgian style, reminiscent of London or Dublin. You can hear something of the Old World in the local accent. Boston is the U.S. city with the largest Irish-born population.

A rich mix to a city with a slightly elitist, academic air, one coupled with an innovative touch that makes Boston more than interesting for many entrepreneurs.

Las Vegas, Nevada

More information about starting a business in Las Vegas, NV

Imagine driving through the desert at night and seeing the lights of Vegas coming closer as the wheels are turning. An oasis of light beckons you…

Vegas is dominated by lights, lights that never dim. The casinos lure all to them with free drinks, as long as you are playing and playing and then playing some more. In this city it is always high noon no matter what the time.

Vegas is always the same temperature too – hot, like the sweat upon a gambler’s brow.

It’s here you will also find places like the Hofbräuhaus. This is a life size copy of the Munich original. With everything from brass music to Bavarian beer, you can party here until the small hours!

As you’ll find out it’s a hard town to sleep in – too much excitement, too much stimulus, just too much…

That’s Vegas: all a bit surreal.

But as for business what you need to know is that Nevada does not impose any Federal State tax. That lures many entrepreneurs from the nearby and more expensive California, way out into the desert where the tax regime is much more cooler.

Miami, Florida

More information about starting a business in Miami, FL

If you have seen the movie “Scarface” you may be forgiven for thinking that  Miami is all about mobsters. Think again. The city got a shower and a shave and is looking and sounding a whole lot better.

Miami is alike a beautiful woman who lures you with her charms. There is a magic to the place but a mystery too.

For tourists, Miami is a party city, and rightly so.

That said, today, a lot of business is being done in Miami. The scene is very international too. Of course, there are many Latin Americans, but also many Germans, Italians, Russians. A great number of wealthy people have moved to Miami or stay there for a good part of the year. So, in Miami, business is really being done everywhere, all year, often done in a relaxed atmosphere, mostly in a bar if truth were told.

For the unexpected, take a look around the Design District of Miami. In recent years, it has become an important center of creativity, with many design and fashion labels working out of here, often having come and set up from all over the world.

Then there’s the weather. It’s a heaven of sorts for north Europeans, especially in winter – from October through to March – the weather is a dream. It’s warm, dry, warm and dry, dry and warm, and never too hot.

You can stay in the pool almost every day. Okay the summer (April to September) is hot and stormy, and it rains daily, but the humidity is unlikely to be high. And remember this is the land of air-conditioning, so no need to worry.

New York City, New York

More information about starting a business in New York City, NY

More information about starting a business in New York City, NY

Although many Americans say that New York is not the “real” America, New York is the most American of all US cities. Abroad, the USA is often viewed as New York City – the Big Apple with a skyline that the word “iconic” was created for. Since 9/11 that identification has grown stronger not just abroad for many people across the States.

So now for the bad news: New York has by far the highest tax burden laid upon its citizens in the whole US, only California is near. In New York, a staggering 64% of the state’s total income tax is paid by just 80,000 people, and this in a city with over ten million inhabitants.

Of course, these 80,000 are the all-top earners, often working in the financial industry on Wall Street. New York City remains the city of finance, with Wall Street a mecca for global banking and financial industries – rivaled only by the City of London. You may have seen the “Wolf of Wall Street”? At that point the “wolf” was making 1 million dollars per month, and that was in an 80s recession. As the song says if you can make it here you can make it anywhere.

New York City is also a city of fashion, Vogue et al. It’s on a par with Paris. And nowhere are the restaurant critics tougher than in New York – they have to be such is the variety on offer.

Will your company fit into New York City’s heady mix of creativity and capital? If that is the case then New York, New York it’s so good they named it twice – and also that you named it as the location for your U.S. business.

San Francisco, California

More information about starting a business in San Francisco, CA

San Francisco, the Bay Area and Silicon Valley are still the center of the world when it comes to all things Tech.

And although California, in addition to New York, levies some of the highest taxes in the United States, the trend for attracting the brightest and the best appears undiminished.

This shows again that tax rate alone is not the most important thing when considering where to locate your business. This is, for example, especially so if you are not making much by way of profits as a tech start-up.

As with many Tech clients, California is still one of the most sought-after locations. The networking opportunities are phenomenal. Those working in that industry can find like-minded people everywhere – at Starbucks, playing golf, or at the beach. Take your pick.

Regardless of Silicon Valley, San Francisco always was and remains a great city. Not surprisingly, California is for many Europeans the epitome of the American Dream. The state’s sunlight is warm and the colors are deeper there, due no doubt to the pleasant dry air that comes from the nearby mountains that dominate the horizon wherever you look.

Unfortunately, the weather in San Francisco and in the far north of California can be cold and foggy, for some of the time at least. But the wine-growing region of Napa Valley is never far, and it is a great place for that company outing.

Washington, DC

More information about starting a business in Washington, DC

Washington DC is the center of world power. You really feel that everywhere in this city. Everywhere you look there are impressive buildings, monuments and memorials, all telling of the history of this great country.

Europeans can sometimes smile at American patriotism and power, but in Washington DC it is hard to avoid, or to be impressed by it.

The President may constantly be on TV but to stand in front of the White House, is a whole different experience. When you climb the steps of Congress, you realize that the world’s politics of the last hundred years has been decisively shaped one way or another from that building. You are walking through a living history in these streets.

In most people’s minds Washington DC equals government with a capital ‘G’. So many of those you meet work for the state whether as Federal employees, or working in industries related to them. Contrast that with a place like San Francisco, where almost everyone you meet has something to do with technology.

If you are looking for something worthy for your US company, something public-spirited then Washington, DC – the center of public service and power – is your city.

Wilmington, Delaware

More information about starting a business in Wilmington, DE

More information about starting a business in Wilmington, DE

Delaware was one of the original 13 states that formed the embryonic United States. History tells us that the Delaware’s representatives were the first to sign the United States Constitution in 1787. Delaware still proudly calls itself “The First State.”

That said Wilmington, the largest city in Delaware, is by American standards a very small town, only 70,000 inhabitants. It adjoins the much larger Philadelphia in the state of Pennsylvania, however

Despite its size, Delaware is the U.S. state with by far the highest number of registered corporations, many of them in Wilmington.

Why is that?

The main reason is that Delaware has the most favorable company law in any US state. Also, the Delaware Commercial Register provides an even higher level of confidentiality than most other US states.

That said Delaware offers fewer benefits than you may expect. The tax benefits are only really noticeable for large American corporations that are taxpayers in several states in the United States.

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Conclusion

We advise that where you decide to establish your business in the U.S. should be decided on practical considerations. There are certain disadvantages with specific locations such as high taxes, but these can be easily offset by the entrepreneurial atmosphere or access gained and by a fully functioning business strategy in some locations. Interestingly, conversely, this is rarely the case.

If you fall into one of the special categories listed above, site selection may be more complicated. This may require a fuller and more accurate analysis and cost-benefit estimation, just give us a call and let us talk you through this.

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FREQUENTLY ASKED QUESTIONS ABOUT TAXES, COMPANY FORMATION AND RESIDENCY IN THE USA (FAQS)

We’ve compiled over 150 of the most frequent questions and answers (FAQs) on tax, company formation, and residency in the U.S. in our knowledge base. You can visit our knowledge base here.

If you find that your personal questions have not been answered, book a telephone consultation here.

Book an Expert Consultation on Building Your Business in the US, US Taxes and Moving to the US

GET ADVICE ON TAXATION, COMPANY FORMATION, AND RESIDENCY IN THE U.S.

If you already have a project that you want to implement in the U.S., you will most likely have already dealt with the intense framework conditions in the U.S. Online, you can find a wealth of information on almost every subject. Though all this information is available, it is common for one to reach a point of confusion. There are too many aspects to consider simultaneously and the starting position can be complex.

To solve this mental knot and pave your way to success, jump on a 1-hour telephone counselling session based on taxation, incorporation, and residency in the U.S. In this conversation, we will discuss specific technical issues such as tax, U.S. corporations or LLCs. Or we can discuss any strategic options you are considering.

Moving to the States – lock, stock and business – is not simple, but it doesn’t have to be hard either. We have a lot of information on line for you, but the Mount Bonnell ethos is that personal touch so lacking in so many of today’s businesses.

Like the Texas of old, we are true to our word. And like the founders of the Lone Star State we intend to make things as easy as possible for the people we work with so give us a call. We’re waiting – expecting even – that call about a question or questions you feel embarrassed to ask.  Whether technical, financial or personal, don’t be shy. We have heard them all before, and, what’s more we enjoy answering them.

So what are you waiting for, book a consultation and let’s get started.

Book an Expert Consultation on Building Your Business in the US, US Taxes and Moving to the US