Should I Incorporate in Delaware, Wyoming, California, or My Home State?

🎯 The Real Question: Where Do You Actually Do Business?

If you Google "best state to incorporate," you'll see Delaware, Wyoming, and Nevada everywhere. For most founders, the real question is simpler: Where do you actually live and operate, and do you really need investor-grade Delaware infrastructure?

🔍 What is "Nexus" and Why It Matters

Nexus means a sufficient connection to a state that triggers legal obligations—registration, taxes, compliance. You typically have nexus if you:

• Have a physical office, warehouse, or retail location in the state
• Have employees or contractors regularly working in the state
• Store inventory or equipment in the state
• Derive substantial revenue from customers in the state (varies by state and industry)
• Hold professional licenses or registrations in the state

👥 6 Business Archetypes: Which One Are You?

The right state depends heavily on your business model. Here are the core archetypes:

🏛️ Delaware: Still the Gold Standard (But Not for Everyone)

Delaware is home to 66% of Fortune 500 companies and the majority of US venture-backed startups. There are real reasons for this—but also real costs and real alternatives emerging.

✅ Why Delaware Dominates (The Real Advantages)

• Delaware General Corporation Law (DGCL) – The most sophisticated, frequently updated corporate law in the US, developed and maintained by corporate law experts. Stable, predictable, and well-tested.
• Court of Chancery – Specialized business court with judges (not juries) who have deep corporate law expertise. Fast decisions, decades of precedent, and predictable outcomes. This is exactly why investors love Delaware.
• Investor Preference – VCs, accelerators, and sophisticated investors expect Delaware C-corps. Standard legal docs, familiar case law, and streamlined due diligence all assume Delaware.
• No State Corporate Income Tax on Out-of-State Activity – Delaware doesn't tax income from goods/services provided outside Delaware. You only pay franchise tax (see below).
• Flexible Corporate Governance – Delaware allows single-director boards, flexible share structures, and advanced governance mechanisms that other states don't support.
• Separation of Legal Address from Operations – You can be incorporated in Delaware while operating anywhere in the world, giving you governance benefits without operational constraints.

❌ Delaware's Real Costs and Downsides

• Dual Registration for Most Businesses – If you actually operate in another state (office, employees, substantial activity), you must foreign-qualify there. Now you're paying: (1) Delaware incorporation + franchise tax + registered agent, and (2) foreign qualification fees + annual reports + registered agent in your operating state.
• Franchise Tax Can Be High – Delaware's annual franchise tax starts at $175 minimum but scales with authorized shares. For companies with millions of authorized shares (common for startups preparing for fundraising), this can reach $5,000-$25,000+ annually using the authorized shares method. The alternative "assumed par value capital" method can reduce this significantly if calculated properly.
• No Real Benefit for Simple, Local Businesses – A Florida contractor or California therapist gains zero practical advantage from Delaware incorporation—just added complexity and cost.
• Annual Report + Compliance – Delaware requires annual reports and franchise tax payments. Miss the deadline and you face late fees and potential administrative dissolution.

🚪 2024-2025 "Dexit" Drama: What's Really Happening

In early 2024, a Delaware Court of Chancery decision voided Elon Musk's $56 billion Tesla pay package. Musk responded by moving Tesla and SpaceX incorporations to Texas, sparking conversation about a corporate "Dexit" (Delaware exit).

💰 What Delaware Actually Costs

🎯 When Delaware Is the Right Answer

🏔️ Wyoming: Low Cost & Privacy (But Nexus Still Applies)

Wyoming has become the internet's favorite state for LLC formation, and incorporations have more than tripled in five years. There are legitimate reasons—but also dangerous misconceptions about what Wyoming can and can't do for you.

✅ Why People Love Wyoming (The Real Benefits)

• No State Income Tax – Wyoming has no corporate or personal income tax, so entities with no employees or operations elsewhere pay minimal state tax.
• Privacy / "Anonymous LLC" – Wyoming LLCs don't require member or manager names on public formation documents. Only the registered agent address is publicly visible.
• Extremely Low Fees – Formation costs ~$100; annual reports start at $60 (or $0.0002 per dollar of assets located in Wyoming).
• Strong Asset Protection – Wyoming's LLC statute includes robust "charging order" protection, making it harder for creditors to seize LLC assets. Often used for holding companies and asset protection structures.
• Business-Friendly LLC Law – Wyoming was the first state to enact an LLC statute (1977) and continues to maintain one of the most flexible and owner-friendly LLC laws.
• No Franchise Tax – Unlike Delaware ($300/year for LLCs) or California ($800/year), Wyoming has no minimum franchise tax.

⚠️ The Critical Nexus Reality (Read This Carefully)

Example: A Florida resident forms a Wyoming LLC for "privacy and tax savings." But if they operate the business from Florida (home office, Florida customers, Florida bank account), Florida considers them "doing business" in Florida. Now they owe:

• Wyoming: $100 formation + $60/year annual report
• Florida: $125 foreign qualification + $138.75/year annual report
• Total Year 1: $423.75 vs. ~$125 if they'd just formed in Florida

Wyoming lawyers and Florida practitioners explicitly warn about this: Florida residents using Wyoming LLCs for Florida-based operations must still comply with Florida law and registration requirements.

✅ When Wyoming Actually Makes Sense

💰 What Wyoming Actually Costs

🔒 The Privacy Advantage: When It's Real vs. Illusory

Wyoming's "anonymous LLC" feature is real—but it has limits:

📊 Wyoming vs. Delaware for LLCs

🌴 California: When the $800 Tax Is Worth It (And When It's Not)

California has a reputation as an expensive, hostile state for business. The $800 annual minimum franchise tax is real—but for many California-based businesses, it's unavoidable. The question isn't "Can I avoid it?" but "Should I add Delaware on top of it?"

💰 The $800 Minimum Franchise Tax: What You Need to Know

✅ When California IS the Right Answer

🎯 When to Use Delaware + California (Dual Registration)

💰 California Cost Breakdown

⚖️ Professional Corporations in California

🎯 The Decision: CA Only vs. DE + CA

🏠 Your Home State: The Boring (But Usually Correct) Answer

Modern small-business guidance from SCORE, the SBA, and mainstream advisors is remarkably consistent: for most local businesses, form your LLC or corporation in the state where you actually operate.

✅ When Home State Is Clearly the Right Answer

• Brick-and-Mortar Businesses – Retail shops, restaurants, medical/dental offices, salons, gyms, repair shops. If customers come to your physical location, form where that location is.
• Local Service Providers – Contractors, plumbers, electricians, landscapers, cleaning services. If you're licensed and working in one state, form there.
• Professional Practices – Doctors, lawyers, accountants, therapists, architects. State licensing boards often require in-state entities, and professional corporation rules vary by state.
• Real Estate Businesses – Property management, real estate agencies, house flippers. If your properties or clients are primarily in one state, form there.
• Lifestyle/Solopreneur Businesses – Consultants, coaches, freelancers working from home. If you're operating from your home state and not raising outside capital, form there.
• Businesses with No VC/Investor Plans – If you're building for cash flow, not an exit, and won't need complex equity structures, home state is simpler and cheaper.

💰 Cost & Simplicity Advantage

⚠️ When Home State Might NOT Be the Best Choice

🗺️ State-by-State Considerations

🌎 Texas, Nevada & The New Competition for Delaware

After the 2024 "Dexit" drama, several states launched initiatives to compete with Delaware's corporate dominance. Here's what you need to know about the emerging alternatives.

🤠 Texas: New Business Courts & Post-Dexit Positioning

Who Should Consider Texas:

• Companies with substantial Texas operations already
• Founders who live in Texas and prefer local incorporation
• Businesses wanting specialized court expertise without Delaware's franchise tax scale
• Post-revenue companies ($1M+) looking for favorable tax treatment

🎰 Nevada: The Long-Standing Delaware Alternative

Who Should Consider Nevada:

• Asset protection / holding company structures
• Companies with Nevada operations
• Businesses seeking privacy without Wyoming's minimal case law
• Firms that value established business courts but don't need Delaware's VC cachet

💡 Notable: Tripadvisor successfully re-domiciled from Delaware to Nevada in 2024. But Nevada still lacks Delaware's depth of corporate case law and investor familiarity. It's a viable choice for certain use cases, not a universal Delaware replacement.

🏛️ Oklahoma & Other States Entering the Game

Oklahoma also launched business courts in 2024 to compete for incorporations. Other states (Utah, Arizona, Georgia) periodically make reforms to attract businesses. Here's the reality:

🎯 The Bottom Line on "Elsewhere"