Incorporating Out of Your Home State

This is a recurring question from people calling to our offices: Does it really matter where I incorporate my business? or Where should I incorporate my business? and this answer is yes. It does really matter.

First of all, you should incorporate in the State where your office is physically located. If you incorporate in another state such as Delaware, Nevada or Wyoming, you may need to submit an application to qualify as a foreign corporation or LLC in the State where you are located. This tends to be more trouble than it is worth for a small busines.

Through our life, we have seen entrepreneurs making big mistakes, thinking that they would save money in taxes by filing in "tax heavens" like Delaware, Nevada or Wyoming. Later, when they  realized about their mistake, they ended dissolving the foreign company or filing foreign qualification documents in their home states. In both cases, their errors turned out to be good business for us.

A number of years ago, there were some pretty motivating reasons why you might want to incorporate in States like Delaware and Nevada. However, times change and so do State laws. For companies that are privately owned (closely held), there are no substantive differences anymore between the corporate laws of States. If you incorporate for the purpose of owning and operating a business, the general rule is that you should incorporate in the state where your main business office is located.

For large corporations the answer is different. Nearly half of the corporations listed on the New York Stock Exchange are Delaware corporations. Many of these corporations conduct business throughout the US and abroad. They must, of course, conform to the laws of any jurisdiction they enter, but they have no problem to file foreign qualification documents in each state where they operate.

Active Filings can assist you in qualifying your corporation or LLC in any state of  your choice. Our foreign qualification service will provide you more information about how to expand your business.