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- iHaveNet.com: Small Business Guide
Real Small Business
One of the first questions you're likely to face when you decide to incorporate is where to locate your corporation. You are not required to incorporate your business in the state where you're based; you can choose from any of the 50 states or the District of Columbia. However, in almost all cases, it is advisable for a closely-held small business to incorporate in its home state.
Several states -- most notably Delaware, Nevada and Wyoming -- are considered to be the most corporate-friendly because of their liberal incorporation laws and favorable taxes. Delaware, for instance, is the home of more than half of the corporations listed on the New York Stock Exchange because of the flexibility and protection it offers larger companies. Many of these benefits, however, are not applicable to small businesses, and most states now have corporate statutory protection comparable to Delaware's. Nevada, meanwhile, actively encourages out of state firms to incorporate there by having no corporate income tax on profits, no state annual franchise tax, and no personal income tax.
Even with these benefits, it can be more expensive and more of a hassle for you to incorporate your small business out of state. A careful analysis of the pros and cons can point this out.
Some of the issues you need to consider when incorporating your business include:
Having a local presence
You need to have a local presence in the state you incorporate in. If you don't have a physical presence in that state, you will have to hire and pay a registered agent. An agent acts as your legal representative in that state, and is authorized by you to make certain legal decisions. Be sure to build these fees into your analysis.
Taxes and fees
Cost these out carefully, because the benefits are not always what they seem at first. You will have to pay the annual franchise fee in the state where you incorporate, but that may not exempt you from paying fees in your true home state.
To do business in your true home state, you may have to register as a "foreign corporation" -- which gives you the authority to transact business in that state -- and still pay franchise fees as well as income taxes. This can take away the advantage of incorporating in a state with low or no corporate income tax.
Legal issues
It may pay for you to run a careful analysis of the advantages and disadvantages of each state's laws and tax structure as they relate to the needs of your business. In addition, should you be sued, you may have to hire legal counsel and defend yourself in the state where you are incorporated.
As with any legal decision, it may pay to seek the advice of your CPA or attorney. These advisors will be able to help compare the benefits of out-of-state vs. in-state incorporation, and assist you in making a decision that will best meet the needs of your company.
Small Business Guide
- Starting Up Your Business
- Coming Up With a Winning Business Idea
- Common Startup Mistakes
- The New Rules for Startups
- Business Incubator FAQs
- Naming Your Business
- Researching Your Business
- Your Personal Savings
- Registration, Licenses, and Permits
- Getting a Tax ID Number
- Fast-Growth Startup Resources
- Structuring Your Business
- Overview: Corporations
- State Offices of Incorporation
- Incorporate Out of State?
- Writing a Partnership Agreement
- Choosing a Board of Directors
- Basics of a C Corporation
- Basics of an S Corporation
- Basics of an LLC
- Basics of a Sole Proprietorship
- Basics of a Non-Profit Corporation
- Basics of a Professional Corporation
- Basics of a General Partnership
- Basics of a Limited Partnership
- Your Company's Public Relations
- Elements of a Successful Public Relations Campaign
- How to Use Your Press Coverage Effectively
- Press Releases
- How to Write a Successful Press Release
- Sample Product/Service Press Release
- Sample Commentary Press Release
- Sample Event Press Release
- Sample Tips Press Release
- Sample Personnel Press Release
- Effective Competitive Analysis
- Managing Purchasing to Maximize Cash Flow
- Top Six Pricing Mistakes Businesses Make
- How to Avoid Lowering Your Prices
- Bidding Basics
- Hiring Staff
- Creating an Effective Job Description
- Do You Know How to Pick Them?
- Little-Known Hiring Resources
- Classifying Contract Workers
- Tips for Successful Interviewing
- What You Can't Ask in a Job Interview
- New Hire Paperwork
- Small Business Insurance
- Types of Insurance for Small Businesses
- Small Business Insurance FAQs
- Insurance Resources for Small Businesses
- Home Office Insurance: Myths & Realities
- Small Business Resources
- Government Resources for Small Business on the Web
- Resources for Women Entrepreneurs
- Fast-Growth Startup Resources
- Small Business Security Resources
- Taking Time Off
- Your Pre-Vacation Checklist
- How to Take a Vacation
- Learning to Delegate
- Getting Away When You Can't Get Away
- Preparing for Tax Season
- Year-End Planning Tax Savers
- 10 Ways to Pay Less in Tax
- 25 Common Business Deductions and Expenses
- Avoid These Common Errors and Audit Triggers
- Understanding the Home Office Deduction
- Corporate Income Taxes Primer
- Employment Taxes Primer
- Sales Tax Primer
- Sole Proprietorships and Partnerships Tax Primer
- How to Get a Filing Extension
- Year-End Reconciliation
- Getting the Most from Your Accountant
- Developing Accurate Financial Projections
- Cash Flow
- 10 Ways to Help Increase Your Cash Flow
- Cash vs Accrual Accounting
- Bookkeeping and Record Keeping Basics
- Quick Ways to Get Through a Cash Crunch
- Projecting Cash Flow
- Cash Flow Triage
- Getting Funding
- Cash Flow Through Factoring
- Small Business Investment Corporations (SBIC)
- Traditional Funding Sources
- Non-Traditional Funding Sources
- Your Company's Credit
- How to Read a Business Credit Report
- Credit Terms Glossary for Your Small Business
- How to Protect and Improve Your Business Credit Rating
- Give Your Business the Financing Edge
- Employee Compensation
- Employee Benefits
- Bonuses: How To Be Fair
- Workers' Compensation Q&A
- Keeping Workers' Compensation Costs Down
- Payroll Management Choices
- Key Elements of Payroll
- Working with a Payroll Service Provider
- How to Create a Business Plan
Starting Your Own Business - How to Incorporate Out of State
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