Deciding Which State To Incorporate Your Small Business In

Once you've decided to incorporate your smallcosts money and is only one step in the process of
business the next step is deciding which state toqualifying to do business as a "foreign corporation" in
incorporate in. A common misconception is thatanother state.
businesses must incorporate in their state of operation.There are advantages to incorporating in different
You can, in fact, incorporate in any one of the 50states with regard to corporate laws and tax
states and the District of Columbia regardless ofstructure. Delaware is by far the most popular state
where your business currently operates.for incorporation. Most of the fortune 500 companies
It is perfectly acceptable to incorporate in a state otherare incorporated in Delaware.
than your current area of operation, but it is not alwaysSome of the most attractive features of incorporating
a good idea to do so. If your company chooses toin Delaware include:
incorporate in a state outside its area of operation life1. Lack of corporate income tax for corporations
becomes a little more complicated. Your businessincorporated in Delaware but not transacting business
becomes a "foreign corporation" in any state outsidein the state.
of the state it is incorporated in. If a corporation is2. Delaware has a separate corporate law system
"transacting business" in a state other than where it isthat uses judges appointed for their knowledge of
incorporated, it must register for a certificate ofcorporate law as opposed to juries, whose knowledge
authority to transact business in the other state orof corporate law is limited at best.
possibly lose access to that state's courts and face3. Shares of stock owned by persons outside of
fines.Delaware are not subject to Delaware taxes.
Registering for a certificate of authority, of course,