Choosing The Best State For Your Corporation | Business Lawyer


Which State Should I Incorporate In?

Oct 5, 2020

Incorporating your company in the state where your business is physically located is known as home state incorporation. However, no matter if your business is a C corporation, LLC, LLP, LP, or nonprofit corporation, you must pay fees to the state when incorporation documents are filed. Moreover, you will be subject to ongoing fees and requirements imposed by that state.

Some owners mistakenly think they will save money by incorporating in a state with low fees, even if their company neither conducts business nor is located in that state. Get started today by speaking with a San Jose corporate attorney.

Some common assumptionswe hear from clients wondering where to form their business have included:

I should have formed in Nevada because even if my business is here in California, I won’t have to pay corporate taxes to the California franchise tax board.

The truth: Pay up. As long as your business operates in California, you will likely owe the California franchise tax. Besides, you may have unknowingly created extra expenses for yourself by forming your company in Nevada and operating it in California. Most likely, you will have to comply with registration requirements and filing requirements for both states and pay all the form filling and process agent fees.

I’m going to get a Delaware Corporation like all the big companies, that makes sense, right?

The truth: Sometimes. Delaware Corporation law is generally considered the most developed and flexible. That is because Delaware has worked hard to make itself business-friendly, so their office is convenient, knowledgeable, and easier to deal with than, say, California.

Things can also be done faster in Delaware. That being said, it really depends on what your business is doing or if you have specific concerns as to whether forming in Delaware makes sense.

Suppose you do form in Delaware, but you do business in California. In that case, you still have to register with California, pay the CA franchise tax, and comply with all other state regulations. So, the benefits of Delaware have to be weighed against the extra expenses of maintaining your corporate status by filing forms, paying fees, tax returns, and time spent. In addition, different types of corporate entities may affect your decision.

Carefully considering taxation, the approach to privacy, and even the courts in Delaware, Nevada, and California can help you choose the right state to incorporate your new business. Learn more about corporate insurance here.

Get Your Business Started Right

By reviewing each location with us, you can confidently proceed knowing you have made the best decision for your newly incorporated business. We can help you get started. 

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