Cost of Incorporating in Delaware rather than the Washington metropolitan area.
Delaware offers several advantages for incorporation. These include the Delaware General Corporate Law and the flexibility built into the corporate formation process. Delaware also does not charge an income tax for state income taxes. The costs of forming a corporation in Delaware are less expensive than most states. The initial charge can be as low as $89.00 and the annual franchise tax can be as $65.00. Delaware also allows a Serial Limited Liability Company. This entity allows different lines of business to be treated separately from each other from a liability standpoint.
However, I recommend that if you have a small business you should incorporate in the state where your business is located if you plan to conduct the majority of your business in that state. This is due to the issue of nexus. Nexus requires you to register in a state where your business is located. In other words, if you register your business in Delaware and your corporate offices are located in Maryland, you will be required to register your business as a foreign corporation in Maryland. You will still be required to pay all of the fees of a corporation that had originally incorporated in Maryland. Further, since you do not have an office in Delaware, you will have to find you r own registered agent in Delaware and pay them approximately $100 per year. In my opinion this creates an unnecessary headache.
The setup costs of a corporation in the Washington metro area vary significantly. Virginia is the most reasonable because it charges $75 to start your corporation compared to $150 in Maryland and $220 in DC. I usually try to expedite the filing process. In Maryland and Virginia the fee is $50 and in Washington DC, the fee is $100. This allows you to have the corporation approved in a week rather than waiting one to two months.
Beyond the first year, Maryland is the most expensive state. In Maryland you will have to pay an annual corporate fee of $300 and file a burdensome personal property tax return. In addition, if you do own personal property subject to tax you will also have to pay a tax to the county where your business is located. In DC you also have to file a personal property tax return, but your corporation is only taxed every two years and your fee is $250. Virginia only requires that you file a one page report notifying the state that you plan to continue your operations. The annual fee is $25.00 for non stock corporations and $50 for a limited liability company. For stock corporations there is a fee schedule.
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