Determine the State in Which You Want to Incorporate

November 19, 2014 in ,

Once your name is secured, you can move on to choosing a state. One of the first steps in becoming a small business owner is deciding where you’d like to incorporate your business. Whether you form a corporation, an LLC, LLP, Non Profit, C Corporation, or S Corporation, there’s no avoiding the filing fees of whichever state you end up incorporating in. Each state has different fees and regulations specific to that state.

Though a lot of entrepreneurs think it’ll be cheaper to file in whichever state has the least amount of fees and taxes (like Delaware for example) with the nickname of “the incorporation capital of the world” it has no corporate income tax and is known for having a very modern corporate climate and economic outlook) oftentimes, it’s easier and cheaper to file in the state your business is located in, simply because it can save you from everything that comes along with foreign qualifying.

You can find a master list of each US state here, including the economic health and business friendliness of each state along with specific tax/regulation specifications for each state.

Things to consider when deciding which state you’d like to do business in:

  • How your business entity will be taxed, either as an LLC or Corporation, or another type of entity
  • The cost of foreign qualifying (if you choose to go that route)
  • The economic health of the prospective state
  • The small business friendliness of a state

Make a list of pros and cons for the states you’re looking at and simply determine which state is the smartest economic choice is for you.

If you would like to do business in another state, you have the option of foreign qualifying. A foreign qualification occurs when a business would like to legally operate in a state that is not the state they created the formation in. A business owner can go about doing this by registering as a foreign corporation to gain authority as a legal business in another state. In most cases, registering is a requirement if your company plans on transacting business outside of the state lines where the business was formed.

The process of registering can be made easier by working with a company that can file the paperwork for you. All foreign qualification documents are prepped, needing only your review, and submitted to the correct office in the state you’d like your business to be foreign qualified.

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