I’m often asked this question from time to time about where you should incorporate your business. And honestly I usually respond back with the answer “in your home state.”
The reason being that you will have a better understanding of the state that you are in as opposed to you having to learn about another states laws when it comes to incorporating your business.
Now of course there are some benefits of incorporating your business in others states that can look really enticing. Things like cheaper taxes for the members of the company are always a big lure. In fact Delaware is known for their much more friendlier corporate laws. And I’ve seen some owners take a two step approach.
What’s the two step approach?
First they would incorporate their business in their home state.
Then in step two, as some time has past, they would actually incorporate in another state after they have had some time in business.
Is this a good way to do incorporation?
Doing the two step approach can mean that there can be some confusion later on down the road and who wants to deal with that. Paperwork, and changing any marketing materials associated with the change can prove to be a bit much.
In the end what should really determine your own particular answer to this question should be your planning. What do you want to achieve with your company in the long term.
It may be that in the short term it doesn’t really matter where you incorporate your business because your goal might be to sell it at a later date.
In the long run you may want to have a more stability for personal reasons.
You’ll have to be honest with yourself and you are doing your planning.
What do you think about incorporating in another state? Leave me a comment below.