Delaware and Nevada are two states that are tax havens and are very business-friendly. Naturally, businesses weigh the option of incorporating either in Nevada or in Delaware.

Delaware has long been the base for many American industries. The chemical company DuPont is an example of this. Delaware has a long tradition of administering and applying corporate law. The experience of the courts in this regard attracts many businesses. The continuous updating of corporate law in Delaware is another aspect of the business regulatory culture of the state that corporations value. For financial companies and banks, Delaware offers total freedom in fixing interest rates. The presence of a large number of credit card companies in Delaware can be traced to this. Overall, the Delaware state machinery that interacts with corporations presents less of a bureaucratic attitude compared to their counterparts in other states.

Nevada has certain benefits to offer corporations that register in that state. There is no Nevada corporate or personal income tax. There is no franchise tax or tax on corporate shares. The annual fees of incorporation are negligible, and Nevada has no requirement to share information with the IRS. Very important for businesses is the fact that the state of Nevada has regulations in place that protect directors and officials of a corporation incorporated in Nevada from personal liability for illegal or unlawful acts committed by the corporation. The state has very lenient rules when it comes to corporate reporting and disclosure. Also, there is no proviso that directors should hold shares of that corporation. The state corporate rules also allow non-US citizens to be shareholders, directors or high officials of a corporation.

On a one-to-one comparison, it seems that incorporating in Nevada has more tax advantages since Delaware has corporate, personal income, and franchise taxes, which are absent in Nevada. Also, unlike Delaware and other states, Nevada does not share tax information with IRS. But this can also be problem for corporations registered in Nevada, since IRS audits Nevada corporations more frequently than it does corporations registered in other sates, including Delaware. There is also the aspect of relatively more corporate credibility attached to corporations registered in Delaware, compared to Nevada corporations.

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