Why would a company in Alaska incorporate in Florida? Why
would a company in Alabama incorporate in Florida? Find out why with this great
Deciding Which State To Incorporate Your Small Business In
Once you’ve decided to incorporate your small business the
next step is deciding which state to incorporate in. A common misconception is
that businesses must incorporate in their state of operation. You can, in fact,
incorporate in any one of the 50 states and the District of Columbia regardless
of where your business currently operates.
It is perfectly acceptable to incorporate in a state other than your current
area of operation, but it is not always a good idea to do so. If your company
chooses to incorporate in a state outside its area of operation life becomes a
little more complicated. Your business becomes a “foreign corporation” in any
state outside of the state it is incorporated in. If a corporation is
"transacting business" in a state other than where it is incorporated, it must
register for a certificate of authority to transact business in the other state
or possibly lose access to that state's courts and face fines.
Registering for a certificate of authority, of course, costs money and is
only one step in the process of qualifying to do business as a “foreign
corporation” in another state.
There are advantages to incorporating in different states with regard to
corporate laws and tax structure. Delaware is by far the most popular state for
incorporation. Most of the fortune 500 companies are incorporated in Delaware.
Some of the most attractive features of incorporating in Delaware include:
1. Lack of corporate income tax for corporations incorporated in Delaware but
not transacting business in the state.
2. Delaware has a separate corporate law system that uses judges appointed
for their knowledge of corporate law as opposed to juries, whose knowledge of
corporate law is limited at best.
3. Shares of stock owned by persons outside of Delaware are not subject to
For a small business deciding weather or not to incorporate in Delaware it is
necessary to measure the cost of qualifying as a “foreign corporation” in the
state of operation versus the amount that will be saved by incorporating a small
business in Delaware. Typically it is not advantageous for small businesses to
incorporate outside of their home state as even small businesses are usually
required to pay corporate taxes in both the state of foreign operation and the
state of incorporation. If you’re not sure where to incorporate, visit
www.small-business-assistance.com. We can help you decide if the cost of
local incorporation will be less than incorporating in another state.
Jacob Wren operates Small Business Assistance (
http://www.small-business-assistance.com ) - a resource site for
entrepreneurs that offers advice on incorporating and an array of other small
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