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Page 5 of 13 Where to Incorporate Your Business
Where to incorporate your business is as important as deciding which type of incorporation structure. Finding a state to incorporate in is as easy as filing in the state in which your business is located. However, there are other options.
Delaware is one of the most business friendly states, and also the one where most people choose to incorporate their business. More than 500,000 businesses are formed in Delaware just based on their looser regulations then most states. Over 50% of American publicly traded companies are incorporated there, as well as 60% of the Fortune 500. Nevada is very similar to Delaware in the loose incorporation laws. This attracts more business owners to Nevada because they offer some advantages that other states do not have. This includes allowing bearer stock, privacy to corporate participants, and they do not share information regarding your company with the IRS (Internal Revenue Service). It also helps that both Nevada and Delaware have no state income tax.
If you have a business in multiple states, or your state has high income taxes, then you could choose to do a double incorporation. That means you incorporate once in the state in which you live, and once in another state that does not have income tax like Nevada or Delaware as previously mentioned.
Aside from Domestic Incorporation, you have Foreign Incorporation. Depending on what business you have or where you will transact your business, you may need a foreign Incorporation. That does not mean however that you have to actually register in another country. With LLCs and US Corporations, if you are doing business only in your state then you have a Domestic Incorporation, but if you are transacting business in a state outside of your own state then you will be considered a Foreign Incorporation.
This means that you are registering authority for your business to make transactions and pay necessary state fees in other states. It also means that the state in which you are doing business in knows that you are operating within that state border. There is of course more paperwork to foreign qualify, but it is something you must do if you work out of multiple states. You will be subject to ongoing reporting requirements, taxes and fees in both your own state and the other state of qualification. If your business continues to grow then you will need to qualify each state as part of your growth. If you are considering this as a long term goal then you should consider this as a part of your future fees and the price of your growth.
To qualify in any state you must prove that you live there or have a business attorney or incorporation service file for you, which is what most people do when filing in Delaware and Nevada. If you have any concerns as to where you should file, or whether you need to file for Domestic Incorporation or Foreign Incorporation you should seek the advice of an attorney.
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