Choice of state of incorporation
State of Incorporation. What is the best choice?
One of the first decisions a business must make is which state
of incorporation to select. It is not required to incorporate in the
state where your business operates; you can choose from any
one of the 50 states or the District of Columbia.
In making the decision of where to incorporate, three factors
typically are considered: the location of physical facilities, a
cost analysis comparing incorporating in the state of operation
versus qualifying to do business as a foreign corporation in the
state in question, and determining the advantages and
disadvantages of each state's corporate laws and tax structure.
The decision typically is between the state of operations and
Delaware. If the corporation is a closely held corporation that
does business primarily within a single state, local incorporation
is typically the best decision. The cost of local incorporation will
usually be less than incorporating in another state and
qualifying to do business as a foreign corporation in that state.
A foreign corporation that qualifies to do business in another
state is subject to taxes and annual report fees from both the
state of incorporation and the qualifying state. Thus, the actual
advantage of incorporating in a state with very low or no
corporate income tax is not as great as it appears, if your
business must still qualify to do business in its state of
operations.
For legal advice concerning the state incorporate, please consult
a professional attorney.
Give us a call anytime if you have questions at 1-800-891-7432.
