Choosing between New York, South Carolina or Delaware to start my online business?

Question

Hello all!

I have found a business partner in China and would like to start a online retail business with them. They currently have a sales office located in South Carolina, and the sales office represent the factory in China. I live in NY and been helping a few companies selling their products on online marketplaces. So now I finally have the chance to start my online retail company, but can't decide which state I should incorporate and set up my company.

New York - It's where I live and providing trainings and monitoring workers will be much easier for me. But from my past experience NY's sales tax is sort of complicated. Also the rent and workers' wages will be much higher.

South Carolina - I'm not too familiar with SC's tax laws toward online retailers (actually never been to SC). But I can imagine the expenses will be much cheaper, but I will have to constantly travel/stay there until everything is good to go.

Delaware - Been doing some researches online, and it seems like Delaware is one of the best state to incorporate in the East coast (I know Nevada is a great state to start, but it's way too far for me and my business partner).

I'm open to any suggestions! Thank you for your valuable time!

Answer 1

You should register in Delaware. It has laws that are the most friendly to business owners, to protect owners and provide predictability. The law that governs your company’s internal affairs is the law of the state of incorporation, no matter where your company does business. Therefore, you want to pick the state that affords you the best protection in limiting your liability and shielding your personal assets from creditors of the business. You also want predictability so that if a dispute arises involving owners of your company, you want some certainty about the judicial outcome. Many Fortune 500 companies incorporate in Delaware. Small business owners can also enjoy the benefits of Delaware as your corporate home on paper. See this infographic https://www.incnow.com/why-incorporate-in-delaware/ that summarizes the advantages of incorporating in Delaware.



A Delaware entity can be operated from any state within the United States. The question is what do you need to file with the other state(s) where you are doing business. This depends on your activities in those states. Generally, if you have a brick and mortar office, employees, licensing, or property in a state outside the formation state then you will need to “qualify” for authority to do business in the other state which is usually your principal place of business state (a.k.a. state of operation). Additionally, if your business requires special licensing occurring in another state or jurisdiction, you should also qualify in that state by filing a certificate of authority to do business in that state. The information about what types of activities require qualification and the forms can commonly be found on that state’s official Division of Corporations website. If requirements are not met in both the State of Delaware and the state of operation, the company may be conducting business without authority, which could result in statutory penalties from the state of operation and the inability to defend a lawsuit in the state of operation.



The types of activities which do not require qualification in another state involve simply selling products or services in a state without employees or an office there does not usually require qualification.

Delaware has no sales tax. Unlike most states, Delaware has no intangible personal property tax, which has been referred to as the “Delaware loophole”. No Delaware income tax has to be paid or filed, and a business license is not required if the Corporation or LLC does not do business in Delaware. You will still need to pay taxes where you transact business.

Answer 2

Domicile your company in Delaware and setup operations elsewhere. Just be careful about YOUR physical location and the sales tax implications...

Answer 3

Can I get more opinions on this? Thank you!