California Business Lawyer Discusses What State You Should Incorporate In

August 22, 2016

You’ll be faced with numerous decisions as you form a new company. While you’re thinking about which entity type you’ll choose, it will benefit you to consider in which state your company will be formed. Many novice entrepreneurs are surprised that they have a choice. They figure that they must incorporate in the state where they are located. While this may be perfectly acceptable, there may be advantages to incorporating in another state.

Regardless of where you decide to incorporate, you’ll have to abide by the laws of that state. A California business lawyer can explain to you the any considerations you’ll have to weigh as you make this decision. Whichever entity type you choose, you’ll be required to pay ongoing fees to and file paperwork with the incorporation state. While it may look like some states boast lower filing fees and would thus make good economic sense, the reality is that if this is not the home state of the company, then extra fees for being a “foreign” entity may be imposed.

Business tax laws are another important factor to consider. It’s critical to understand which taxes your company may be subject to in its state of incorporation. Will an income tax be assessed? Are franchise taxes collected? Is a minimum tax standard applied? It can be extraordinarily difficult for an entrepreneur to assess these questions without the assistance of a California business lawyer.

If you talk with other entrepreneurs, then you’ll hear that there may be advantages from incorporating in a state like Delaware that has flexible business laws and a favorable tax climate. Nevada may be similarly advantageous. However, it’s critical to understand the benefits and costs of organizing in one of these states before doing so. Your best course of action is to consult with an experienced California business lawyer who has helped numerous clients choose the best state of incorporation for their company.

Many small business owners conclude that it makes sense to incorporate in their home state. This means not having to figure out the taxes that are due in another state and in the home state. It also means not having to appoint a registered agent in another state. Over the long run, home state incorporation makes financial and strategic sense for most small business owners; however, your situation may be different.

Call Fitzgerald Yap Kreditor at 949-788-8900 to learn more about what state you should incorporate in based on your unique business needs.