As best I can tell, NV and WY are my best bets.
It will be an S Corp with the operating location in Chicago. I'm mainly looking for tax advantages, low filing fees and a general lack of "intrusiveness".

Anyone elaborate on the advantages of one over the other, or if any other states have special corporate advantages that one should consider?

Delaware for the best corporate protection, however monies earned in Illinois will still be subject their State corporate tax structure. Simply incorporating in a different State without the income being derived within that States jurisdiction doesn't mean diddly. My company is based in Nevada but I am still liable for taxes on income I earn in my home State.


Jimbo

I would highly suggest filing in the state you operate from. Unless you establish nexus in the state you incorporate in (office/banking/employees etc..) you could run into problems. Let's say you file in Nevada, as long as you have business in Illinois, you will need to file as a foreign corporation in Illinois also.

If you're just looking to save on taxes you should run the numbers beforehand. In Illinois for an S Corp, you're looking at a 1.5% property replacement tax of all profit, filing fees ~$200, plus a few grand for your accountant.

Sole Prop is the way to go if you don't have employees, don't need privacy or liability protection. Even though you're paying self employment tax on all profits, you can deduct half of it, which is most of the time cheaper than an S corp.

I'm not an accountant but have done some research in this topic. It all depends on your situation. Do you need liability protection? Do you have employees? What type of business is it? If there's a lot of money involved then consult a tax professional.

Great posts- definitely lots to chew on...

It's an online business. We will be providing coding and web development outsourcing to US companies and individuals at a discounted rate. Most of our employees will be out of the US, with a couple here. I'd say 3 or 4 domestic, including myself (I'm going to be an invested partner and lightly manage some operations, but this isn't my full time gig)

I was considering incorporating in a tax haven state and locating our servers there (it's actually a pretty light server load, so I could probably source that). I would effectively be managing it from Chicago as an operating officer and drawing a salary from the Wyoming company, but the "infrastructure" and company itself would be located in Wyoming/Nevada.

You would be saving 1.5% by setting up an S corp in a state with no corporate tax vs setting up Illinois, but you will first need to establish nexus there. That means having instate employees, office, and banking set up there. If one of your partners is in a no-corp tax state then have him set it up there.

I have an online business with servers in 4 different states. But because I am the sole owner, a resident of Illinois, accounting is done in Illinois, business address is in Illinois, etc... I am doing business with Illinois. At one point I was considering becoming a resident of South Dakota (flying over there to set up banking, rent an office, get driver's licenses) so I can set up an S corp there and thus save 1.5% as well as the 3% that IL takes for personal income.

There are tons of websites that push incorporating in WY / NV but they don't tell you the legal aspects. They don't have CPA or law degree (not that I do). This site below is a little better than others and has tons of info: http://www.nvinc.com/strategiesthatdontwork.htm

The same thing goes for forming an IBC (offshore company).... very hard to find non-biased information online.

I had the exact type of thinking you have now, but decided to keep things legit so I can sleep at night.