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Educate Yourself

Choosing Where To Incorporate

by Robert Kowalski

Choosing The Right Incorporation State

Once you have decided to incorporate or form an LLC, you need to choose the state for your new entity.

Naturally, for most businesses the choice would fall on their home state, i.e. the state where the company will do most of its business. This rule holds especially true for smaller businesses that will likely not expand significantly, or that do not want to conduct business outside of their home state, like shops, dealerships, etc.

As your business grows, and it appears that you may need to conduct business in another state, you can always register what is called a "Foreign Entity", or a "Foreign Corporation" - technically, a legal "extension" of your business in another state.

Not all businesses need to be organized in the state where you are currently located (especially if you are a foreigner and live outside of USA). Each state has its own legal requirements and registration procedures for new businesses wishing to incorporate. Certain states are famous as favorable homes for incorporating or forming an LLC due to their unique incorporation laws and favorable tax policies. The most notable are Delaware, Wyoming and Nevada.

Some Examples:

  • If you are looking to place your real estate assets under a legal entity like an LLC then it makes sense to incorporate in the state where those assets are physically located. It is generally recommended to put each real estate asset in its own LLC in order to limit the liability of each property to itself.
  • For those entrepreneurs looking to form a corporation or LLC for their new ventures (like online businesses, or technology start-ups), choosing one of the more favorable states (like Delaware, Wyoming or Nevada) might prove to be a wiser choice. That is especially true if some or all shareholders and/or employees are not located in the same state, often the case with Internet-based businesses.
  • Home-based businesses would often enjoy many tax benefits related to maintaining an office in your home, therefore, with some exceptions, it would usually make sense to organize your home-based business in your home state.
  • Some specific needs require specific choices as far as organization goes. An example of such specific need would be estate planning. If you are looking for ways to protect your children and spouse from enormous estate tax liability when you go to a better place, there are incorporation tools offered by various states (such as "Close Corporations", "Close LLCs", etc).
  • Other examples include some more exotic types of entites like Series LLC or L3C - Low-profit LLC (a cross between a nonprofit organization and a for-profit corporation). These types of entities are currently being offered only in few states.

To fully evaluate your incorporation needs and to choose the right state to form your business entity in it is important to consult your tax and legal advisors. Those specialists should have the knowledge and experience to help you evaluate your unique business needs and help you make the best choice.

READ NEXT: Incorporating in Delaware »

DISCLAIMER REGARDING LEGAL ADVICE: This article is not intended to provide any tax advice or direction. None of information contained on this web site is intended to constitute legal or other professional advice, and you should not rely solely on the information contained on the site for making legal decisions. When necessary, you should consult with an attorney for specific advice tailored to your situation.

About The Author Robert Kowalski is a seasoned incorporator and business filing specialist with over 10 years experience consulting emerging companies with their business filing needs. Robert served as the chief editor and one of the top contributors to Answers @


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