How to Choose Where to Incorporate
Think about where you do most of your business., Consider the potential impact on your community., Weigh your projected revenue against the tax breaks., Be aware that a physical presence is required., Incorporate as a foreign corporation if...
Step-by-Step Guide
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Step 1: Think about where you do most of your business.
The most sensible thing to do is to register your corporation in the state where you conduct most of your business.By doing this, you save yourself from having to set up a new physical location.
You can continue to do business in your state and you will not have to worry about making major changes. -
Step 2: Consider the potential impact on your community.
If you are thinking about setting up your business somewhere other than your home state, then you might want to consider how setting up in your home state might benefit it.
Not only would you be stimulating the economy, you might also have an impact on the people in your community.
For example, corporations are often more attractive to employees because of their ability to offer competitive wages and health insurance.Therefore, incorporating in your home state could provide jobs for many people in your community. , In some cases there may be a significant financial advantage to setting up shop in another state.
To determine if this is the case for your business, calculate your projected revenue for the year and consider how much money you would save if you were to incorporate in another state versus your home state.For example, if you anticipate a revenue of $150,000, but your state will collect 11% of that, then you would end up paying $16,500 in taxes.
Therefore, you might be tempted to incorporate in a state that would only charge 4% on your revenue because that would only cost you $6,000 in taxes. , If you choose to incorporate in a different state, then you will have to establish a physical presence in that state.
Otherwise, you will still be subject to the laws and taxes of your home state.For example, many businesses are attracted to Delaware because of the low cost of doing business there.
However, unless your business has a physical location in Delaware, you cannot reap the benefits of its corporation laws and low filing fees. , You may decide at a later date that you want to incorporate somewhere else because you are doing more business there.
If your business expands and you find that you are doing more business in a different state, then you can always register your business as a foreign corporation later on.
Keep in mind that there are fees associated with filing as a foreign corporation.Make sure that you weigh the costs of these fees against the potential benefits. -
Step 3: Weigh your projected revenue against the tax breaks.
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Step 4: Be aware that a physical presence is required.
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Step 5: Incorporate as a foreign corporation if necessary.
Detailed Guide
The most sensible thing to do is to register your corporation in the state where you conduct most of your business.By doing this, you save yourself from having to set up a new physical location.
You can continue to do business in your state and you will not have to worry about making major changes.
If you are thinking about setting up your business somewhere other than your home state, then you might want to consider how setting up in your home state might benefit it.
Not only would you be stimulating the economy, you might also have an impact on the people in your community.
For example, corporations are often more attractive to employees because of their ability to offer competitive wages and health insurance.Therefore, incorporating in your home state could provide jobs for many people in your community. , In some cases there may be a significant financial advantage to setting up shop in another state.
To determine if this is the case for your business, calculate your projected revenue for the year and consider how much money you would save if you were to incorporate in another state versus your home state.For example, if you anticipate a revenue of $150,000, but your state will collect 11% of that, then you would end up paying $16,500 in taxes.
Therefore, you might be tempted to incorporate in a state that would only charge 4% on your revenue because that would only cost you $6,000 in taxes. , If you choose to incorporate in a different state, then you will have to establish a physical presence in that state.
Otherwise, you will still be subject to the laws and taxes of your home state.For example, many businesses are attracted to Delaware because of the low cost of doing business there.
However, unless your business has a physical location in Delaware, you cannot reap the benefits of its corporation laws and low filing fees. , You may decide at a later date that you want to incorporate somewhere else because you are doing more business there.
If your business expands and you find that you are doing more business in a different state, then you can always register your business as a foreign corporation later on.
Keep in mind that there are fees associated with filing as a foreign corporation.Make sure that you weigh the costs of these fees against the potential benefits.
About the Author
Kyle Miller
A passionate writer with expertise in home improvement topics. Loves sharing practical knowledge.
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