When deciding where to incorporate a business, consider two main factors. First, the cost of incorporating where the business is physically located versus incorporating in another. Second, what are the tax ramifications in the state the business will incorporate.
Home state incorporation is defined as the business is incorporated in the same state as the physical location. Fees are paid to the state upon filing the business incorporation documents, and will be subject to fees by the incorporating state.
All corporations and LLC’s are considered foreign when conducting business in states other than the original incorporated state. A Certificate of Authority must be completed and filing fees must be paid in the state other than the home state. Foreign qualified businesses have ongoing requirements that must be met as well as fees imposed by the state of qualification. Each state has different laws, but generally transacting business means physical facility, bank account in that state, and employees in that state.
Taxation requirements vary and research should be done to determine each states corporate and LLC statutes. In addition, research should be done to determine taxes for a foreign -qualified business. Added costs are a main reason why sometimes it is not best to incorporate outside the home state. Small business with with one or a couple of owners find it best to incorporate in their home state.
Evaluating the first two years of projected revenue and what tax implications each state has will give a clear determination which is best. It is always best to seek the advice of an attorney with expertise in this field. This is not advice. Consult your own attorney.