When it comes to starting a small business, figuring out which state you should incorporate in is something that often comes up.
Even if you aren't worried about which state to choose, chances are good that at least one business person you know will ask which state you're filing your incorporation documents in. There are a lot of choose from, but most business owners just pick from three.
Aside from your home state, Nevada and Delaware are the most popular states in which to incorporate a new business. But do those states give your business any advantages?
Delaware is by far the most popular state in which to incorporate, and there are some good reasons for that. The First State has well-developed and flexible corporate statutes, and is generally seen as pro-business.
Nevada is also a popular choice because of its pro-business tax laws. The Silver State has no corporate income tax, no franchise tax, and fairly low fees for businesses filing paperwork.
But for most small business owners, the best choice for where to incorporate is the state where you live.
Even if you incorporate in another state, doing a lot of business in your home state means you'll still be subject to taxes, fees, and regulations that would have applied if you had incorporated in the state. The cost to file those documents and pay the necessary fees is in addition to whatever incorporation fees you paid in another state.
So if most of your business is conducted in your home state, incorporating in a different state will subject you to taxes and fees in both states without much benefit.
While big businesses can get a lot of benefit from flexible states like Delaware and Nevada, for small businesses the advantages aren't as significant.
Still, there are some situations in which incorporating in a different state can do a lot for your business. If you think you're in that group, talk to an attorney about whether it's worth it. Of course, it's always a good idea to get a legal professional to review your business documents and filings, no matter where you choose to incorporate your business.
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