Which is the Best State to Incorporate a Small Business
You might be holding an idea to incorporate a business. At the same time, you are tentatively keeping that idea while contemplating on where you should incorporate it. What do the experts say?
Find out from our guide when it is best to incorporate in your home state and when it is wiser to register it as a foreign corporation.
Business owners may incorporate on any state they like for as long as they comply with the rules of the articles of incorporation of that state. But for logistics purposes, it is wiser for business owners to incorporate on a state where they intend to conduct all or majority of their businesses. On the other hand, business owners might opt to incorporate in another state or more than one state to benefit from better tax treatment and more business-friendly climate.
The most obvious reasons for registering with a state where all or majority of the business is conducted are proximity to customers and cost savings. Imagine how costly and impractical it is to serve a niche market in one state while sitting on an office in another state? Not only it is inconvenient for you and the clients, it is also costly. In addition, you would have to pay additional filing fees, comply with new requirements, and prepare more paperwork because you would need to register your business as a foreign corporation. And so, unless you are an international player, a large publicly held corporation, or you intend to conduct business in more than one state, or have a better reason to find another domicile for your business, you better stick to home base.
The top reasons some businesses register in another state are: the other state has lower tax rate, and it has better laws governing the rights of directors, shareholders, officers and creditors. Most large corporations prefer to incorporate in the state of Delaware. They are choosing Delaware for its advance, flexible, current corporation statutes, extensive experience in corporate lawmaking, and modern systems. It also has lower incorporation fees, and has income tax exemption for Delaware corporations operating somewhere else.
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