[usakos]

Both states equally offers the most advantageous conditions of taxes, but Nevada offers more privacy than Delaware.

So the question is;

Why choose to incorporate in either of these states; better yet, why choose Delaware over Nevada or vice verse?

[usakos]

"The corporate veil in Nevada has been pierced only twice in the last 26 years, and both cases involved outright fraud."

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To start, because any statement of fact like the above ("The corporate veil in Nevada has been pierced only twice in the last 26 years, and both cases involved outright fraud.") should be cited, here are those cases:

Lorenz v. Beltio, Ltd., 963 P.2d 488 (Nev. 1998).
LFC Mktg. Grp., Inc. v. Loomis, 8 P.3d 841 (Nev. 2000).

Now, an analysis to begin the discussion:

In light of the above statement, why would one choose Deleware over Nevada?

First, I question the validity of the statement above. I used a search likely identical to that used by the individual who made the statement, which is evident in the fact that it returned results in support of the statement. However, the search only reveals cases which were appealed from the original District Court decision. Therefore, there were likely other instances in which the corporate veil was pierced in Nevada, but where no appeal was made based on the clear fraud, unity of interest and ownership, or other reason for the piercing. Thus, I think that the above statement is likely a little misleading.

Even if it WERE accurate, there is another reason why Deleware would be preferred over Nevada for incorporation. Although a search (described above) reveals only two instances of corporate veil piercing in 26 years, it also reveals that there were only SIX appeals involving corporate veil piercing in the same 26 years. Think about that one. Aside from the fact that the corporate veil was pierced in 33% of the cases appealed, this statistic points to the real reason for incorporating in Deleware rather than Nevada: Deleware has some of the most established case law in the country. This means that when you incorporate in Deleware, you know what to expect in terms of whether your corporate veil can be pierced based on how Deleware's courts have ruled in the past.

There is my analysis of why Deleware might be preferable to Nevada for incorporation. Additionally, this should also serve as a lesson: Don't take statements, especially uncited or unreliable statements, at face value. Dig. Find out where they come from. Taking the original statement at face value might cause people to incorporate in Nevada rather than Deleware, and I think this analysis clearly shows that this might be an unwise decision based on an unreliable statement.

[geoffw]

jmenq2,

Unfortunately in this case you are wrong.

I run a successfull import office furniture distribution business called "Simplicity Office Systems", that I built up over the last 3 years. We currently do over $4M in sales per year. At 21 years old, Ive been through setting up warehouse distributions in both Nevada and Delaware.

Our main office is in Las Vegas, NV where we have 40,000 sq.ft of warehouse space and our East Coast office is in New Castle, Delaware where we have 22,000 sq.ft.

In my experience, setting up our operation in both states was of equal ease, however, Nevada has 6 benefits that FAR outweight Delaware:

1. The state provides Immense tax abatements and, refunds, and grants for small businesses. (i.e., For every new employee I hire, Nevada pays for their training and all resources that they use such as computers...).

2. Nevada has NO state income tax OR corporate tax. (Delaware DOES have state income tax, but no corporate tax.)

3. We are an import business, everything we distribute is imported from China. Container Shipping to Nevada takes 18 Days and $2600. Shipping a 45' container into Port of Wilmington, DE takes 35 Days and costs $5000. Go Figure!

4. Nevada's Privacy laws are significantly stricter than Delaware's. It is almost impossible to get information about the owners/shareholders of a company incorporated in Nevada. In Delaware, it is public information.

5. Las Vegas is the most visited tourist destination in the United States. This means that flights coming into Vegas are DIRT CHEAP from anywhere in the USA. I can fly in any customers, clients, partners here and not flinch about flight costs.

6. Las Vegas is also the Tradeshow capital of the USA. In my industry, the biggest and best tradeshow is located 15 minutes from my office. No Flights, No Hotels, Just drop off and setup our own booth (NO MANDATORY UNIONS!!!).

The only advantage Delaware has over Nevada is that warehouse space is 40% cheaper, labor/wages are cheaper, and utilities are cheaper.

Just my experience,
-Geoff Warner

[usakos]

Geoff, this sounds like a good thing to organize the LLC in Nevada.

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Originally Posted by geoffw

jmenq2,

Unfortunately in this case you are wrong.

I run a successfull import office furniture distribution business called "Simplicity Office Systems", that I built up over the last 3 years. We currently do over $4M in sales per year. At 21 years old, Ive been through setting up warehouse distributions in both Nevada and Delaware.

Our main office is in Las Vegas, NV where we have 40,000 sq.ft of warehouse space and our East Coast office is in New Castle, Delaware where we have 22,000 sq.ft.

In my experience, setting up our operation in both states was of equal ease, however, Nevada has 6 benefits that FAR outweight Delaware:

1. The state provides Immense tax abatements and, refunds, and grants for small businesses. (i.e., For every new employee I hire, Nevada pays for their training and all resources that they use such as computers...).

2. Nevada has NO state income tax OR corporate tax. (Delaware DOES have state income tax, but no corporate tax.)

3. We are an import business, everything we distribute is imported from China. Container Shipping to Nevada takes 18 Days and $2600. Shipping a 45' container into Port of Wilmington, DE takes 35 Days and costs $5000. Go Figure!

4. Nevada's Privacy laws are significantly stricter than Delaware's. It is almost impossible to get information about the owners/shareholders of a company incorporated in Nevada. In Delaware, it is public information.

5. Las Vegas is the most visited tourist destination in the United States. This means that flights coming into Vegas are DIRT CHEAP from anywhere in the USA. I can fly in any customers, clients, partners here and not flinch about flight costs.

6. Las Vegas is also the Tradeshow capital of the USA. In my industry, the biggest and best tradeshow is located 15 minutes from my office. No Flights, No Hotels, Just drop off and setup our own booth (NO MANDATORY UNIONS!!!).

The only advantage Delaware has over Nevada is that warehouse space is 40% cheaper, labor/wages are cheaper, and utilities are cheaper.

Just my experience,
-Geoff Warner

Thanks for the post. These are great observations. However, I don't know that I am wrong (although I don't know that I am right either, as the right or wrong of it depends on the given business' situation).

The one thing that I think you are missing is that the discussion wasn't regarding where to locate your facilities, but rather where to incorporate your business, which is entirely different. You needn't have a physical presence in DE, for example, to incorporate there. You could have, say, your headquarters in NV but incorporate in DE.

Therefore, your analysis of some points aren't exactly on point:

1. I would have to think that a business incorporated in DE and physically located in NV would still be able to receive the same training and resources from Nevada, for example. (You'll have to check on that.) So there may be no advantage to incorporating in NV v. DE for this purpose.

2. I'm not familiar with the tax law issues, so I can't comment here.

3. This is an invalid point also, as you needn't be physically located in DE, and thus have shipments from China sent to DE instead of NV, to incorporate in DE.

4. I am unaware of NV laws. Can you provide some support for this? I'd like to read about it.

5. Again, because you can be physically located in NV but incorporated in DE, this point is irrelevant.

6. See #5.

Aside from the issues above not really being relevant to the issue, I think there is a little more to it than simply stating that NV is better for incorporation than DE, such as the legal issues discussed in a previous post. If you could reply with information about the privacy issue, I would greatly appreciate reading about it. Thanks.

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Still waiting on that info.

[Khyth]

Originally Posted by jmenq2

Still waiting on that info.

I know this post is a little bit late but I'm looking at the same decision. So far, from what I understand, Nevada used to allow stock holders to be anonymous but no longer allows that.

Nevada requires members of corporation to be listed in a publicly available directory but Delaware does not.

Delaware provides information about members of a LLC to the IRS while Nevada does not. However, since the names are publicly available, it's kind of meaningless.

Assuming you're just incorporating in the state and not actually doing business there, the tax issues aren't particularly important as far as I can tell.