Companies have flexibility when choosing where to establish their domicile. As a result, several states actively compete for new business formations. The most popular, in no particular order, are New Mexico, Nevada, Delaware and Wyoming. Each state competes for a different part of the market and there are many misconceptions unfortunately.
The goal is to find the state which works for you. Below is a guide to how the states differ when it comes to price, privacy and asset protection. Everyone is different, but we find the low cost and simplicity of New Mexico often make the difference for business owners.
Here is a brief overview, with a lengthier analysis further down the page:
New Mexico: With NM, you enjoy all the benefits of an LLC at a fraction of the usual cost. New Mexico acknowledges the corporate veil and provides the same limited liability as other jurisdictions. What they don't require are high fees or annual reports. In other states, periodic reporting is really just an excuse to collect fees on businesses. New Mexico skips this step, saving you time and money.
Delaware: DE offers hundreds of years of well defined corporate case law to act as precedent. For large corporations such formalities are important. Small businesses do not benefit from these corporate laws however. The only difference most owners will notice are the significantly higher fees that Delaware levies on its companies.
Wyoming: WY is a haven for asset protection. There are a number of debtor friendly laws for those seeking protection from personal creditors. These protections come at a price, however. Wyoming's filing fee is twice that of New Mexico's, plus there is a $50 annual report which must be signed by someone. This means if you want true anonymity, then you are stuck paying for an additional nominee service to handle the filing each year.
Nevada: NV is similar to Wyoming in being a haven for asset protection. They have a well developed brand and their Secretary spends considerable sums on advertising the benefits of moving your company to Nevada. They have levered this brand value by increasing fees for eight straight years. This makes Nevada's LLC one of the nation's most expensive to start and maintain. The Secretary also requires a list of members and managers which they do not publish... yet.
Which of the above states appeals to you will depend on your situation. You may even select different states for different companies and operations. Large corporations will enjoy the familiarity of Delaware, asset protection specialists will utilize Wyoming, and those wanting a simple and inexpensive solution should choose New Mexico. Learn more about incorporating in New Mexico here.
New Mexico is best suited for small businesses, cost conscious investors and privacy minded individuals.
Price: New Mexico LLCs are the cheapest anonymous LLC in the USA. There are no annual reports which saves hundreds of dollars over the life the company. You only need to maintain a registered agent in New Mexico.
Privacy: Members and Managers are not listed. Only the Organizer (us) has to list their name. With no additional annual reports there are also no additional chances for your name to be exposed or nominee services to pay for. Learn more about New Mexico LLC anonymity here.
Asset Protection: New Mexico companies offer the same corporate veil as other states. This means you are not personally liable for the company's debt. Hence the "limited liability" in limited liability company.
With New Mexico, you enjoy all the benefits of an LLC at a fraction of the usual cost. Learn more on our page about incorporating in New Mexico. In other states, periodic reporting is really just an excuse to collect fees from businesses. New Mexico skips this step, saving you time and money. The state is not well suited for large corporations however. If you are a large company, then you should consider Delaware or Wyoming. Learn more about the advantages of a New Mexico LLC here.
Delaware offers over a hundred years of well defined corporate case law to act as precedent. They also have a dedicated court system for hearing business disputes called the Court of Chancery. This court system which ensures cases are heard quickly. However, if you a creditor is pursuing you, then the last thing you generally want is a fast track trial. They also do not have as favorable of asset protection laws. This combination makes Delaware ideal for large corporations, but not for small business.
For large corporations such formalities are important. It is also important to have a dedicated court system for complex matters. The only difference most small business owners will notice are the significantly higher fees that Delaware levies on its companies.
Price: There are several hundred dollars in fees, including a $300 annual franchise tax. The Secretary fee to change registered agents is $50. Again, large companies may not notice these fees, but small companies certainly will.
Privacy: Delaware allows anonymity and nominee officers. There are cheaper ways to obtain anonymity, though (New Mexico).
Asset Protection: Delaware companies offer the same corporate veil as other states.
You can obtain the benefits above for a much lower price elsewhere. Delaware has obtained a certain mystique because of the large corporations which reside there. However, you should not believe that Bank of America has the same needs as an entrepreneur.
Nevada limited liability companies are among the nation's most popular. This is due to great their asset protection features and even better marketing. Nevada remains one of the most popular states, but their sky high fees have many second guessing.
Price: There are several fees to start an LLC, not all of which the Nevada Secretary of State is up front about. You may be mistaken into thinking they only charge $75, but within 30 days of filing you must pay additional fee, e.g. members/managers list and a business license tax. The total for the two is $350 every year.
Privacy: The same as the other states, anonymity is allowed. However, a list of Members and Managers must be provided to the Secretary. There is nothing to stop them from releasing this information at a later date, or suffering from a hack which would disclose this information inadvertently.
Asset Protection: Nevada became popular because of its asset protection. They provide the same corporate veil as other states, but also provide asset protection from personal creditors. Assets inside the LLC are not as easily accesible to creditors as personal assets.
Nevada certainly earned its popularity early on. Years of continual price increases have eroded its value however. Having to spend $350+ per year before registered agent fees is an expensive pill to swallow. Those needing personal asset protection are often advised to consider Wyoming.
Wyoming companies have became popular as Nevada became less competitive. Wyoming does not market as extensively and is less well known. They also have a less developed financial system which can make establishing a bank account difficult.
Price: Wyoming charges $100, twice New Mexico, to form an LLC. They also charge $50 each year after and there has been talk of raising it.
Privacy: Wyoming does not list owners, managers, directors etc. There is an annual report which asks the name of the filer, thus necessitating the use of a nominee - further raising costs.
Asset Protection: Wyoming offers asset protection similar to Nevada.
If personal asset protection is important, then Wyoming is a better choice than Nevada. The difficulties with bank accounts can be a deal killer for some.
Want to know more about the various entities New Mexifo offers and the differences between them? Then visit our page on incorporating in New Mexico.