Things to Consider Before Incorporating in Another State
If you decide on a corporation as the structure for your small business, there are several things to consider in the process of incorporating your company. Among these considerations is the state in which you will incorporate your business. When selecting a state for incorporation, there are a number of things to consider, and the following list provides a guide to these considerations.
You’ve reached your limit.
Register now for FREE to read more!
If you decide on a corporation as the structure for your small business, there are several things to consider in the process of incorporating your company. Among these considerations is the state in which you will incorporate your business. When selecting a state for incorporation, there are a number of things to consider, and the following list provides a guide to these considerations.
- Number of incorporators
Be sure to look into how many people are required to start a corporation in a particular state. Some states allow just one person to serve all roles in the formation of a corporation, while others require different people to serve each role.
- Capital requirements
Check on the requirement of a state for the minimum level of capital needed to start a corporation. There may not be any such level in certain states, but others will have a minimum.
- Filing fees
Different states charge different amounts for filing the article of incorporation. Fees can range from $50 to $250, so it might be wiser to choose a state with lower fees, if possible.
- Corporate franchise tax
Much like the differences in filing fees, different states will have different rates for corporate franchise taxes, so it is worth considering what the annual rates would be for your corporation.
- Corporate income tax
In addition to checking on corporate franchise taxes, you should be sure to consider the corporate income tax rates. Also, since you may be incorporating in one state and operating in another, consider whether the earnings of your corporation in another state can be taxed in the state of incorporation.
- Location of recordkeeping
Check on whether the state of incorporation requires that you keep records and books in the state or whether the corporation is allowed to keep records outside the state. This would be a consideration if your company is choosing to incorporate in one state and operate in another.
- State courts
Look at the record of the state court system with respect to business cases to see if the courts are business friendly or if they have a record of deciding unfairly against businesses.
- Location of principal place of business
Another consideration if your company wants to incorporate in one state and operate in another is whether the state of incorporation allows you to have your principal place of business outside the state.
- Shareholder issues
Consider whether the state of incorporation requires that the names of shareholders be publicly disclosed, as well as whether there is a state inheritance tax on non-resident shareholders.
- Corporate bank account requirement
Some states require that corporations have a corporate bank account, while others, such as Delaware, do not. This may be a consideration for financial and accounting aspects of the company.
Source: QuickMBA (http://www.quickmba.com/)—An online resource for business administration that provides information on business law, entrepreneurship, and other areas of business; it is operated by the Internet Center for Management and Business Administration.
