First, the CYA – I am not providing legal advice. What I am stating is my understanding as a CPA and former CFO of a publicly-traded company. Before you take any actions, you should consult with counsel.

Two weeks ago I posted a Blog stating that a CA corporation generally cannot save taxes by incorporating in say Nevada. So now the question is “why would you incorporate in another state?”

The first answer is that the “home” state of a corporation is where many legal issues need to be decided. So many corporations incorporate in a “business friendly” state rather than the state in which the officers live. They then register in the state of the officers as a foreign corporation doing business in that state.

A second reason is that if confidentiality is important to you, in some states it may be easier to maintain the confidentiality of the officers and shareholders.

Lastly, it may be possible to shift taxes by legitimate means. For example, let’s say you are corporation with its operations based in CA and have material sales to the east coast. If you set up as a Nevada corporation, have a real operating office in Nevada and sign contracts in Nevada, you may be able to not pay CA taxes on them because they do not go thru CA. And your trips to the Nevada office in Las Vegas may be a tax deduction for you 🙂 .

The bottom line is there are some good reasons to choose certain states to incorporate in. Please consult with accounting and counsel in order to make sure you can legally accomplish your goals before do so.