How to Select a State for Incorporation
By Nikki Nelson, Customer Service Manager, BizFilings
As you decide whether to form a corporation or LLC, also consider options for the state in which you will incorporate. The cost, taxation and corporate laws vary from state to state, making some states advantageous for certain small business owners.
Choosing your home or another state
Incorporating your business in the state where your company is physically located is called home state incorporation. No matter if your business is a C corporation, S corporation, limited liability company (LLC), limited liability partnership (LLP), limited partnership (LP) or nonprofit corporation, you must pay filing fees to the state when incorporation documents are filed, and will be subject to ongoing requirements and fees imposed by that state. Some business owners mistakenly think they will save money by incorporating in a state with low fees, even if their company is neither located nor conducts business in that state. Keep in mind that companies incorporated in one state but doing business in another state(s) must register to transact business (foreign qualify) in those state(s).
When deciding your company's state of incorporation, research those states' corporate or LLC statutes to determine if any may be best for you.
Delaware and Nevada are two states in which some small business owners opt to incorporate a business. They offer unique advantages for certain types of businesses.
Some potential advantages of incorporating your business in Delaware include:
Some potential advantages to forming a corporation or LLC in Nevada include:
Remember, if you form in Delaware or Nevada but you transact business in another state, it is likely that you will have to foreign qualify your business in that state.
For questions about the best state of incorporation for your business, or to determine if you need to foreign qualify in another state, consider talking to an attorney.
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