Part of the decision about selecting a business entity, whether a corporation or LLC, is choosing which state you would like to incorporate in. Different states have different costs, tax effects, and laws for corporations.
Home state incorporation is the choice to incorporate in the state where the business is physically located. You'll have to pay filing fees for any form of business when you file with the state, and there are annual or other regular requirements and fees.
Because of the expenses in some states, business owners might choose to incorporate in a different state that has lower fees—even one where the company doesn’t actually do any business. However, there is no guarantee that this will actually save money, because if a company incorporates in one state and does business in another, it must qualify as a foreign corporation in order to conduct business transactions there.
There are a number of factors you should consider when you are choosing where to incorporate your business. The corporate and LLC statutes will help you identify where is the best place. Consider these factors when choosing your state of incorporation.
The two most popular states for businesses to incorporate outside their home state are Delaware and Nevada. Each has a particularly favorable environment for incorporation for different types of businesses.Delaware’s advantages include:
Nevada’s advantages include:
While Delaware and Nevada offer these clear advantages, don’t forget that if you’re incorporating there from another state, you’ll still have to qualify as a foreign corporation in the states, including your home state, where you conduct business. Consult an attorney if you are uncertain where might be the best state to incorporate, weighing all the different factors.
Written and maintained by the LegalShield content team, covering legal and identity protection topics for individuals, families, and small businesses.
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