When choosing a location to incorporate in, considering the incorporation laws in each state may be beneficial. You can either incorporate in the state you are currently conducting business in, or, you can incorporate in a different state. If you choose to incorporate in a different state, you will have to qualify to do business in that state, and incorporation services, filing requirements, and paperwork will most likely be involved.

Businesses that decide to incorporate in a different state than they are doing business are usually publicly-held corporations, or businesses that operate in multiple states. Incorporating in one state even though your primary headquarters is in another state can have tax benefits, and allow for management structure flexibility. It could cost a small business that only operated in one state more money to incorporate in a state other than the one they do business in. Finding out how much it will cost to incorporate in the state you’re currently doing business in versus the costs of registering as a foreign corporation may help you decide upon a location to incorporate.

Each state will have its own incorporation laws and fees, so research will mostly likely be required in the process of choosing a state to incorporate in. Laws will vary regarding the rights and responsibilities of shareholders and directors, as well as the rights of rights of creditors. Each state will also have a different tax rate.

Commonly chosen states

Some states may offer additional incentives and lower tax rates for business legal entity formations. The most common states to incorporate in are Nevada and Delaware.

Delaware is considered a popular state in which to form a legal entity because it offers inexpensive incorporation fees. The Delaware General Corporation of Law offers of 200 years of legal experience, and is one of the most advanced and flexible in the nation. Corporation statue and business laws are kept current, and the Delaware of State operates like a business rather than a governmental bureaucracy.

Nevada is also a popular state to form an LLC, S Corp or other legal entity. It offers incorporation services that are attractive and beneficial to business owners. Directors and officers may be nonresidents, stockholders can remain private, and a single person may hold all corporate officers. Nevada does not have an annual franchise tax, unlike other states.

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