If you live in California and incorporate your business in Delaware, you will not have to pay California state income tax on the profits of your business. However, you will still have to pay California state income tax on your personal income, even if the profits of your business are incorporated in Delaware.
In addition, you will have to pay Delaware state fees for incorporating your business. These fees are higher than the fees for incorporating in California.
So, why would you incorporate your business in Delaware if you live in California?
There are a few reasons.
- Delaware has a business-friendly legal environment. The state has a long history of corporate law and its courts are known for their expertise in business matters. This can be important if your business ever gets involved in a legal dispute.
- Delaware has low taxes. The state has no corporate income tax and its personal income tax is relatively low. This can save your business money on taxes.
- Delaware has a strong corporate secrecy law. The state’s corporate law allows businesses to keep their ownership and financial information private. This can be important if you want to protect your privacy or if you are raising money from investors.
However, it is important to weigh the pros and cons of incorporating in Delaware before making a decision. If you are not sure whether or not incorporating in Delaware is right for you, it is a good idea to speak with an attorney to discuss your specific situation.
Here are some additional things to consider when deciding whether or not to incorporate in Delaware:
- The type of business you are starting: Some businesses, such as corporations and limited liability companies, are required to be incorporated in a particular state.
- Your personal circumstances: If you live in a state with high taxes, incorporating in Delaware can save you money.
- Your future plans: If you think your business may expand to other states, incorporating in Delaware can make it easier to do so.
Ultimately, the decision of whether or not to incorporate in Delaware is a personal one. There are pros and cons to consider, and the best decision for you will depend on your specific circumstances.
Here is a table summarizing the tax implications of incorporating your business in Delaware if you live in California:
| Tax | California | Delaware |
|---|---|---|
| State income tax on business profits | Yes | No |
| State income tax on personal income | Yes | Yes |
| State filing fees | Lower | Higher |
As you can see, there are some potential tax advantages to incorporating your business in Delaware if you live in California. However, there are also some potential disadvantages, such as the higher filing fees.
The best way to decide whether or not to incorporate in Delaware is to speak with an attorney to discuss your specific situation and to get professional advice.
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