Transcribed from: https://tracyfirm.com/adam-s-tracy-explains-the-state-of-incorporation-fallacy-decision/
Where should I incorporate? What state? I get this question five times a week. What state is better, what state helps me? What state has a better tax regime? Why should I incorporate in Nevada versus Delaware? Right? And the reality is the answer is completely over hyped. There couldn’t be a bigger misunderstanding in terms of what states have certain rights and privileges that others don’t. Your traditional states are like Delaware, Nevada. And then recently you had places like Wyoming and even Florida that have kind of come on, and almost offered cheaper incorporations as sort of a revenue stream for the state in question. But when you’re talking about running a crypto related business, what’s really relevant isn’t what state you incorporate in, but it’s what state you reside and operate from. So, obviously New York has the BIT license requirement. If you’re talking about state money transmitter laws, like Wyoming, which is a popular state to incorporate in, has some different capital requirements for operators of Bitcoin related businesses typically exchanges, right? But at the same time Wyoming is a very small state, and you’re probably not operating from there, statistically speaking. So, you really don’t have to worry about the laws. So the reality is you can incorporate in like a Wyoming and then operate from Illinois, and you have to worry about the laws of the state that you are actually operating from. Right? And if you want to operate in another state then you’ll have to worry about the laws pertaining to cryptocurrency or money transmission in that state, right? But if you can find your activity to a certain state or the nature of your activities such that you can deem every transaction you effectively encounter to occur in that state, which by contract you definitely can, then you only really need to concern yourself with the laws of that state. So to answer the question, you know, I’m a big proponent of cost, right? Like when I look at Delaware, you’re looking at almost $1,100. When I look at Nevada, they hit you with this business list, which takes their $150 Corporation and makes it almost $800, and you don’t really get a great deal of benefit from that. Right? I mean, there’s some speed and convenience elements to Nevada that make it very cogent, like in terms of having a robust online platform and quick turnarounds of formations which to a large extent can make it worthwhile. But, you know, from a legal perspective, you look at a state like Wyoming, which is really just pattern, its corporations code against the Nevada code, which in turn was an amalgamation of Delaware — the original sort of corporate Hub — and then all the case law that has developed which makes Delaware an attractive place to incorporate. But if you’re looking for convenience and sort of speed, Nevada’s great. If you’re looking for the same legal protections and not keen to pay thousands of dollars a year, especially when you start increasing number of shares in your paid-in capital or the tax your yearly franchise tax can go through the roof, then look at Wyoming. You can incorporate online immediately. It’s $100 cost, and you get the same protections and privileges as Nevada. So, you know, but at the end of the day, any state is pretty much on par with all others. I think the difference is very overstated, and I think you have certain states that have a reputation, but the reputation is a bit overstated for what they really get. So when you’re talking about a crypto-based entity, look first at what the particular cryptocurrencies (if there are any) laws are in that state and even to the extent and how they’ve interpreted things like money transmission license applications for exchanges in bitcoin ATM networks, things like that, look into those which a lot you can get with a simple Freedom of Information Act request that sends to the right Bureau. They’ll give you copies of the application, you get a sense of it, but don’t let the alleged preference of one state over another guide your decision for a crypto-based entity because there’s simply nothing compared to it. We’ve got to rely on the state that you’re from.
If you have any questions regarding where to incorporate, be sure to contact attorney Adam S. Tracy.
A former competitive rugby player, serial entrepreneur and, trader, attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
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