Entity formation - WY, NV, DE

November 19, 2024

by a searcher from Widener University in Jefferson Township, PA, USA

When choosing a state to form your entity, what are the advantage/disadvantages of WY vs. NV vs. DE? There are probably other states that offer equal benefits, but I know these 3 tend to be somewhat popular amongst business owners and their legal teams.

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Reply by a professional
from Allegheny College in Philadelphia, PA, USA

Hello fellow Pennsylvanian! Others may disagree, every fact pattern is different, and it would require additional analysis, but I do not find a significant difference between them. These choices only become important if you are soliciting outside investors that insist on DE formation, need one of these states for estate planning or asset protection purposes, or some other compelling reason that can be communicated. You will likely still be required to pay some form of taxes to the state where the funds were generated. And many states require a foreign entity to register once they begin conducting business in the state or commonwealth. Take PA and its approach to out of state entities for example: https://www.pa.gov/en/agencies/dos/programs/business/types-of-filings-and-registrations/foreign-associations.html

Typical disclaimer: not legal advice, not your attorney

Reply by a professional
from University of Michigan in Detroit, MI, USA

Hi ^redacted‌, it depends on your goals. Business owners often choose DE because the legal landscape is well developed and there is a strong community of service providers. But DE (or WY or NV for that matter) may not always be the best choice. If you're looking to operate in a specific jurisdiction, form your entity there. Otherwise, you'll be on the hook for multiple sets of franchise fees. And, additionally, you'll open yourself up to getting sued in multiple locations. Put differently, if you're buying a local business and only want to deal with lawsuits in the court house down the road, don't choose DE just because PE and large companies choose DE. I hope that helps. Of course, there is a lot that could be written on this topic. Feel free to reach out with further questions at redacted

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