Question

Regarding chapter 36, please do some outside research and provide guidance as to which states are favorable for incorporation and why. You should look at the issue from various perspectives such as management, legal issues, takeovers, etc.

The book is "Business Law" (edition 10) by Henry Cheeseman

Answer 1

Four states which are most favourable for incorporation and the reasons for their preference over others:-

1. Delaware - This tiny state is house for more than 8500000 businesses because of various variables. more than 50% of publicly traded companies and more than 63% of fortune 500 companies are located in no other than Delaware because of its business friendly environment. Some more reasons for its popularity are :-

a. No sales tax are imposed by the state of Delaware thus making it most favourable in terms of taxes point of view.

b. Easy access to legal guidance because of well developed courts.

c. Very popular destinations among banks because of its feature of allowing a higher cap on amount of interest which they can charge from borrowers.

d. It is also the first state and thus bound to be developed faster than other states.

e. Its proximately to many close destinations like New York city, Baltimore, and Washington DC makes it naturally the most popular destinations among businesses and people.

f. Separately established courts for resolving business disputes makes it very attractive destinations.

g. Investor friendly corporate law attracts many investors to invest thus, automatically leads to flourishing of businesses as far as capital is concerned.

h. If you are seeking venture capital financing business, it is easy to start here, also this leads to benefit for startups.

2. Wyoming - Wyoming is another popular destination for businesses because of various reasons :-

a. First of all Wyoming government charges no corporate and personal tax thus attracts both corporates and employees.

b. Corporation do not have tensions relating to state taxes and are only responsible for federal tax.

c. Business to customer transactions on gasoline and groceries are exempt from tax thus attracts business from grocery sectors to run their businesses.

d. Wyoming doesn't enforce capital gain tax.

e. Wyoming has most scenic locations and beautiful landscape.

f. it is free from hustle and bustle like other states and entreprenuers can work in a peaceful environment and can focus on their work more effectively.

g. Wyoming state does not incorporate franchisee tax at all thus leads to ease of doing business.

3. Florida - Florida has following advantages for doing businesses :-

a. There is no state and individual state tax in the state of Florida, thus leads to more disposable income.

b. Also to help companies to avoid paying additional corporate tax, florida exempts S corporation from paying state tax.

c. Florida is considered to have best online business infrastructure throughout the country such as searchable database of documents and online filing within few seconds.

d. Full of opportunities in the city of Miami and Orlando.

e. It has comparitively warm weather thus no halt in work in winter due to snowfall as in case of other states.

4. Nevada - it has following business friendly environments :-

a. It is popular business destination because of extremely low taxation and its commitment to privacy.

b. No corporate and individual taxes.

c. Their business court system is one of the best thus minimizing time and cost of those who have been summoned.

d. Laws for issuing shares is very liberal and law grants directors control over the value of these stock.

e. Las Vegas is a metropolis with cultural activities and various entertainment activities.

f. Compare to other states it has a lower cost of living thus not only it attracts manpower but also reduces cost of operating business.

g. It has a very low annual fees to maintain LLP ans corporation.

h. It do not have any franchise tax at all.