Choosing a State of Incorporation

Once you have chosen your location to set up your business, the next step is choosing a state of incorporation. You can incorporate in the state where you are doing business, or you can incorporate in another state. Incorporating in the same state as your business is cheaper. Sometimes incorporating in another state has more benefits, but will always cost more.

Choosing a State of Incorporation For Your New Business

You are not required to incorporate in the state where your business operates; you have the freedom to choose from any one of the 50 states or the District of Columbia.

The key thing to know is that you must be registered to do business in the state where your business is located. If you incorporate in the same state where your business is located, then this is automatic. If you incorporate in a different state, you will have to register your company to do business in the state where your business is located.

In making the decision of where to incorporate, there are two primary factors to weigh: your budget and your goals. The decision typically is between incorporating in the state of operations and incorporating in Delaware and registering the company in the state or states where the company will be doing business. If the corporation is a closely held company 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 company in that state.

A foreign company 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.

You may also look at this article For 3 Techniques for Finding Where to Start Your New US Business