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Where Should You Incorporate Your Business?

UPDATED: June 19, 2018

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While you can incorporate in any U.S. state you wish, there is no legal requirement that says you have to incorporate in the state in which you live and work. The rule-of-thumb is to incorporate in the state that your company has its principal operations, especially if your business is primarily within one particular state. However, there may be good reasons not to incorporate in your home state (e.g., other states have more flexible corporation laws, more tax benefits, or no corporate income tax).

Should I Incorporate in My Home State?

The general rule is to incorporate where you will do most of your business. This is particularly true for small businesses unlikely to conduct out-of-state transactions. If your business grows or you make changes that require you to work in another state, you can always register in that state. To understand the requirements for registering a new business, consult with the assessment agency, business services or similar business agency within your state government.

Should I Incorporate in Another State?

If you decide to incorporate in another state, you will be considered a foreign corporation and will need to register in that state before starting to do business there. For example, if you own a trendy ladies’ shoe store in Maryland and want to open another in Pennsylvania, you will need a Foreign Filing Certificate or Certificate of Authority for Foreign Corporation from the Secretary of State in the state where you would like to do business. Most states require that out-of-state corporations pay a filing fee in order to register as a foreign corporation. Depending on state tax law, you will have to account for your foreign corporation on your state income taxes or be required to report in both states.

Should you decide to incorporate in another state, the most prudent course of action to follow is to consult a business attorney to advise you of the features of state law regarding using the corporate form of doing business.

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