Determining Where to Incorporate

Recently I received an inquiry about entity choice for an individual who was not a U.S. Citizen and was considering their varying options of what state would be best for them to incorporate. Careful consideration of your incorporation options will do much to eliminate unnecessary state filing fees, state returns, notices, and annual filing fees. Below is the inquiry:

I have a client who lives out of the country and who is NOT a US citizen. He will be purchasing, selling and owner financing properties in the US and specifically in Georgia. He desires to set up an LLC to own and manage these properties. Friends of his have recommended a Delaware LLC since he does not have to be a US citizen to own/manage the DE LLC. I am not sure about the rules for Georgia, Florida or Nevada LLCs. His primary concerns are the ability to own/control the LLC as a non-US resident and the tax advantages/consequences of ownership

Below is my response:

I would not recommend a Delaware corporation as he would still have to register here as a foreign corporation doing business here in GA. Take a look at the below specifically regarding the issue you mentioned as well as a link on other incorporating issues for your review and edification. http://www.hiscpa.com/incorporating-articles.html  

Gwinnett CPA Advises Of Incorporation Pitfalls

Left to our own devices, we are often prone to make decisions that sound good on the surface only to soon learn that our shortsightedness has caused us more harm than good. Therefore, to avoid this from happening it is best not to be in a hurry to make the right decision, while striving to ignore an arbitrary time line or deadline, which does not exist. It is far more important to make good decisions with prudence and forethought that carefully evaluate all the relevant decisions and options than to hastily precede into turmoil.

There can be substantial advantages in incorporating in NV if you are striving for confidentiality, however, it will not lower your tax bill even a dollar if all of your operations and monies are earned in another state or states. For example, if your base of operations and employees have all of their operations in Georgia, a company will still have to register and pay income taxes in Georgia even if their corporation is legally incorporated in Nevada. If you are domiciled in Nevada and do business in another state, your corporation will still need to file as a foreign corporation in all other locations where it transacts business. From a practical standpoint what you would have done, is complicate your state income tax filings, increase your incorporation fees, and saved zero dollars of income taxes by incorporating in NV and doing business, having employees, and having office locations in other states.

Many public companies, those you can buy stock in on the open market, have incorporated in Delaware for the ease of handling stockholder/shareholder issues. For large companies with tens of thousands of shareholders , this might prove advantageous/beneficial, however for many companies there is no substantive advantage to be gained. You will still be subjected to paying income taxes and legally registering your corporation in all states where you transact business and earn its revenue. To help avoid unnecessary headaches, work with your attorney and CPA closely before making strategic decisions. This your best defense to avoid unhelpful filing fees, requirements, and complexities.

John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/  and for his latest book Overcoming Life's 9/11's: Job's Journey and a Voice of One: Nehemiah's Prayer visit http://www.john-dillard.com/ or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!