🌐 STEP 4cc — WHICH STATE TO INCORPORATE IN

Home State vs Delaware, Wyoming, Nevada & More — What Actually Makes Sense for You

Quick note: This is education, not legal advice. Final choices should be confirmed with a CPA/attorney who knows your specific situation and state.

🌟 INTRODUCTION — Ignore the Hype, Understand the Strategy

If you Google “best state to incorporate,” you get:

“Always Delaware!”
“No, Wyoming is the secret!”
“Nevada is best for anonymity!”
“Never use your home state!”
“Always use your home state!”

It’s loud. It’s confusing. It’s often half true.

Here’s the reality:

For MOST small businesses and brand-new entrepreneurs, the best state to incorporate in is your home state.

But there are times when it makes sense to:

Use Delaware (especially for high-growth startups)
Use Wyoming or Nevada (for specific privacy/asset-protection goals)
Use different states for different parts of your structure (especially in real estate)

In Step 4cc, you’ll learn:

How states actually differ
When your home state is best
When other states might truly benefit you
What “nexus” is (and why it matters more than people think)
How this ties into real estate and tax strategies from earlier steps

By the end, you’ll know how to think about this decision like a wealth builder, not like a confused blog reader.

🧭 SECTION 1 — WHAT “STATE OF INCORPORATION” ACTUALLY MEANS

When you create an entity (LLC, Corp, etc.), you have to pick a state.

That state:

Governs your entity law (how LLCs/corps work legally)
Determines your annual filing/fees
Controls your reporting requirements
May provide different levels of privacy & asset protection

But here’s the key:

Your state of incorporation and your state of operation can be the same or different — but your state of operation always matters.

If you do business in State A but form your LLC in State B, you may end up having to:

Register in BOTH
Pay fees in BOTH
File reports in BOTH

So “cool” choices can create extra cost and complexity.

🏠 SECTION 2 — HOME STATE INCORPORATION (THE SIMPLE, OFTEN BEST PATH)

Let’s start with the default strategy:

Form your entity in the state where you actually live and do business.

✅ Advantages of Incorporating in Your Home State

Simplicity
- One state to think about.
- One set of laws to follow (for the entity).
- Easier communication with agencies and banks.
No “foreign registration” hassle
- If you form in another state, but “do business” in your home state, your out-of-state LLC/Corp usually must register as a foreign entity in your home state anyway.
- That means:
  - 2 states of fees
  - 2 states of annual reports
  - 2 sets of compliance headaches
Local recognition
- Banks, local customers, and local agencies are used to entities formed in that state.
Real estate
- If your properties are in your home state, holding them in an entity from that same state is often the cleanest approach.
Easier professional help
- Local attorneys & CPAs are familiar with your state’s rules.

❌ When Home State Is Less Attractive

Your state has very high fees and brutal franchise taxes.
You live in a very litigious environment and want extra asset-protection layers.
You know you’re building a venture-scale tech startup and plan on VC money and prefer Delaware.
You’re building a large, multi-state real estate or online empire with a strategy that benefits from a special state.

But for the VAST MAJORITY of first-time entrepreneurs:

Home state is the best starting place — lower friction, fewer moving parts, fewer surprise costs.

🧾 SECTION 3 — WHAT IS “NEXUS” AND WHY IT MATTERS MORE THAN “FANCY STATES”

You’ll hear this word a lot: NEXUS.

Nexus basically means:

A sufficient connection to a state such that the state can tax you or regulate your business.

You may have nexus in a state if you:

Live there
Have an office there
Own property there
Have employees or contractors there
Store inventory there
Regularly meet clients there

Here’s the catch:

Even if you form an LLC in Wyoming, if you actually DO business in Tennessee (for example), Tennessee still wants its piece.

That usually means:

Tennessee treats your Wyoming entity as “foreign,” and
Requires you to register in Tennessee as a foreign entity
And pay TN’s annual fees, taxes, reports, etc.

So forming in another state does not let you magically escape your home state’s:

Taxes
Requirements
Fees

This is one of the biggest misconceptions online.

🧱 SECTION 4 — DELAWARE: WHY EVERYONE KEEPS TALKING ABOUT IT

Delaware is famous as “the place to incorporate” for big companies.

🧠 Why Delaware Is Popular (Especially for Larger Companies)

Business-friendly laws
Delaware has a highly developed body of corporate law that is predictable and well understood.
Court of Chancery
A special court focused on business disputes.
Judges are experts in corporate law.
Cases get handled quickly and professionally.
Favored by investors
Many venture capital firms PREFER or even REQUIRE that a startup be a Delaware C-Corp.
Why?
- Standardization
- Predictable law
- Easy to structure complex stock arrangements
Well-known corporate structure
Lawyers, VCs, and big money people are used to Delaware docs.

✅ When Delaware CAN Make Sense for You

You are building a high-growth startup that intends to seek ANGEL or VENTURE capital.
You plan to issue multiple classes of stock, options, etc.
You know you’re playing the “Silicon Valley” style game, even if you’re not physically there.

In that scenario, a Delaware C-Corp is often the “standard template.”

❌ When Delaware Probably DOESN’T Make Sense

You have a local service business.
You’re an online coach, consultant, or freelancer.
You’re just getting started.
You’re not raising VC or doing complex corporate structures.
You’re a small real estate investor (not institutional size).

Because:

You’ll still likely owe taxes and fees in your home state due to nexus.
You’ll be adding Delaware’s annual reporting + registered agent cost on top.

Takeaway: Delaware is awesome for big, investor-backed corporations. For early-stage, solo, or local people, it’s often unnecessary complexity.

🏔️ SECTION 5 — WYOMING: PRIVACY, LOW FEES & ASSET PROTECTION

Wyoming has become very popular for LLCs.

🌟 Why People Like Wyoming LLCs

No state income tax
Low annual fees & simple reporting
Strong LLC asset-protection laws
- Strong “charging order” protection
High privacy
- In many cases you don’t have to list owners publicly (depending on current law)

This makes Wyoming attractive if:

You want anonymity (for example, not wanting your name on public property records).
You want strong asset protection.
You’re building a holding company for assets that span multiple states.

⚠️ The Catch: Nexus Still Matters

If you:

Live in Tennessee
Work from Tennessee
Serve clients in Tennessee

…and you just form a Wyoming LLC but operate entirely from Tennessee:

Tennessee will still treat that business as having nexus.
You may need to register the Wyoming LLC as a foreign LLC in Tennessee.
You’re now paying:
- Wyoming fees
- Tennessee fees
- Possibly two sets of annual reports

So forming in Wyoming only, without considering your real-world operations, can double your compliance without real benefit.

✅ Where Wyoming Can Truly Shine

As a holding company that owns other LLCs in different states.
As part of an asset-protection strategy, possibly combined with trusts (with professional guidance).
For people with multi-state assets who are comfortable with the extra complexity.
For online-only businesses with no strong physical nexus (but you MUST confirm how your home state treats this; some states are aggressive).

Takeaway: Wyoming is powerful for privacy & protection, especially for holding companies & advanced structures, not necessarily for your first “I’m starting a side hustle” LLC.

🎰 SECTION 6 — NEVADA: NO INCOME TAX & STRONG PRIVACY REP

Nevada has a reputation similar to Wyoming:

No state income tax
Historically strong privacy
Business-friendly environment

Like Wyoming, it has been marketed heavily as:

“Form your LLC here and pay no taxes!”

But again… nexus.

If you’re working, living, owning property, or having employees in another state, THAT state will still want its share.

✅ Nevada May Be Useful When:

You live there or actually operate there.
You want to combine Nevada entities with a broader asset-protection strategy.
You have multi-state businesses and professional guidance.

❌ Nevada Is NOT a “Magic Bullet”

Forming there does NOT exempt you from taxes in your home state if you’re really operating there.
It can add compliance costs if you still have to register at home.

Takeaway: Nevada is similar to Wyoming in concept: interesting for advanced planning, less relevant for most beginners whose business is obviously tied to their home state.

🧱 SECTION 7 — REAL ESTATE: WHERE THE PROPERTY IS OFTEN CONTROLS THE GAME

Real estate is special.

Usually, the state where the PROPERTY is located has strong say over:

How liability works
How lawsuits happen
How judgments are enforced

That’s why many real estate investors:

Use LLCs formed in the state where the property sits, even if they personally live somewhere else.

Example:

You live in Tennessee.
You buy a rental in Tennessee.

Common, clean approach:

Form a Tennessee LLC to own the Tennessee property.

If later you buy:

One property in Tennessee
One in North Carolina
One in South Carolina

You might:

Use a Tennessee LLC for the Tennessee property
A North Carolina LLC for the NC property
A South Carolina LLC for the SC property

Optional advanced layer:

Create a Wyoming holding LLC that owns each of those state-level LLCs.
But this is next-level and usually comes later, not at property #1.

Why Not Just Use One “Fancy” State LLC for All Properties?

Because:

If a tenant sues in Tennessee, the Tennessee courts will consider the Tennessee laws anyway.
If your out-of-state LLC is not properly registered, you can run into serious legal issues.
State-specific rules about foreclosure, landlord-tenant law, etc., all apply based on where the property is.

Takeaway: For real estate, form entities where the properties are located, then consider advanced layers (like Wyoming holding companies, Series LLCs) once your portfolio grows.

🌐 SECTION 8 — ONLINE BUSINESS: WHERE ARE YOU “DOING BUSINESS”?

Online businesses feel like they’re “everywhere” and “nowhere” at the same time.

So where do you “do business”?

Generally, states (and the IRS) look at things like:

Where you live
Where your office is
Where you manage the business from
Where your employees or contractors live
Where inventory is stored (for e-commerce)

If:

You’re a solo online coach, YouTuber, or course creator
You live and work from Tennessee

Then Tennessee is usually your primary “nexus” state, even if your customers are in all 50 states.

In practice, this usually means:

Your home state is the most logical place to form your first LLC.

Later, if:

You begin storing inventory in multiple states
You hire employees in specific states
You open offices or coworking spaces in other states

You may need to:

💼 SECTION 9 — COSTS, FEES, AND ONGOING REQUIREMENTS

Every state has its own:

Formation fee
Annual report or renewal requirements
Franchise tax or equivalent
Penalties for non-compliance

Things you must account for:

📌 Formation Fee

One-time (when you create LLC/Corp).
Could be low (like $50–$100) or higher (several hundred).

📌 Annual Report / Franchise Tax

Most states require an annual filing.
Some states charge a minimum franchise tax or fee each year (e.g., California’s famous $800/year minimum).
Some are low-fee. Some are not.

📌 Registered Agent

If you form in a state where you do not live, you must use a registered agent (a service that receives official mail and legal notices).
Usually costs $100–$300/year.

This means:

If you form out of state and have to register in your home state as a foreign entity, you can easily end up paying double fees and double agent costs.

🧠 SECTION 10 — PRIVACY & ANONYMITY CONSIDERATIONS

Some people don’t want:

Their name on public business records.
Their name attached to property records (e.g., for personal safety or privacy).

States like Wyoming (and sometimes Delaware/Nevada) can offer more privacy by:

Allowing managers or registered agents to be listed publicly instead of owners.

But:

The federal government now has Beneficial Ownership Information (BOI) reporting requirements (under the Corporate Transparency Act).
You often still must disclose the real human owners to the government, even if not publicly.

So yes, public anonymity is possible in some structures, but the government still knows who you are.

Privacy is still a valid goal, just not an “I’m invisible” fantasy.

For you, as a wealth builder:

Privacy is a layer, not your entire strategy.
Protection, tax planning, and good documentation matter more.

🧩 SECTION 11 — HOW TO DECIDE: A SIMPLE DECISION FRAMEWORK

Let’s build a simple decision system you can reuse:

🟩 Step 1: Where Do You Actually Live & Work?

That should be your default entity state, especially early on.

🟦 Step 2: Are You Building a Venture-Backed Tech Startup?

If yes (you plan to raise VC/angel, equity rounds, etc.):

Strongly consider a Delaware C-Corporation.

If no:

You probably don’t need Delaware for now.

🟨 Step 3: Are You Mostly Local (Services, Trades, Local Business)?

Incorporate in your home state where you operate.
Focus on:
- Liability protection (LLC)
- Insurance
- Basic tax structure (LLC → S-Corp later).

🏡 Step 4: Are You Doing Real Estate?

Where are the properties?
- Form property LLCs in those states.
Later, for bigger portfolios:
- Consider a Wyoming (or similar) holding LLC if appropriate.
- Possibly Series LLC if your state supports it and your attorney/CPA agree.

🌐 Step 5: Are You Purely Online, Customers Everywhere?

Where do you sit and run the business from?
- That state is usually your best formation state.
Consider other states only if:
- You have multi-state employees/contractors/inventory, OR
- You’re deliberately building an advanced structure with pro guidance.

🧠 Step 6: Are You Chasing Hype or Solving a Real Problem?

Ask yourself:

Am I wanting Delaware/Wyoming/Nevada because it actually solves a problem
or just because it sounds cool/secret/elite?

The richest people in the world do not chase clever hacks at the expense of clarity.
They value simplicity, predictability, and scalability.

📚 SECTION 12 — CASE STUDIES: REAL PEOPLE, REAL STATE CHOICES

👩‍💻 Case Study 1 — Carla the Online Coach (Simple)

Lives in Tennessee.
Works from home.
Clients across the U.S.

Best move:

Forms a Tennessee LLC.
As profit grows, elects S-Corp status.
Keeps it simple — one state, one set of filings.

No need for Delaware/Wyoming because her nexus is clearly Tennessee.

🧱 Case Study 2 — Marcus the Real Estate Investor (Growing)

Lives in Tennessee.
Buys a duplex in Tennessee → Forms TN LLC #1 to hold it.
Buys a triplex in North Carolina → Forms NC LLC #1 for that property.

Later:

Acquires more properties in TN and NC.
After portfolio grows:
- Forms a Wyoming holding LLC.
- Wyoming LLC becomes the sole member of each property LLC.

Now:

Each property is in its own state-specific entity.
The holding company sits in Wyoming for added privacy/strategy.
He keeps all of this in sync with a good attorney + CPA.

He didn’t START with this; he grew into it.

🚀 Case Study 3 — Lila the Tech Founder (VC Track)

Has a high-growth SaaS idea.
Planning to pitch angel investors and VCs.

Her lawyer advises:

Form a Delaware C-Corporation.
Issue founder shares.
Later authorize stock options, preferred shares, etc.

Why?

Investors are comfortable with this setup.
Delaware law is predictable and optimized for corporate deals.

Here, Delaware makes perfect sense.

🧰 Case Study 4 — Dave the Contractor (No Nonsense)

Lives and works in Tennessee.
Remodels homes in Tennessee.
All jobs physically located in TN.