How to Find State of Incorporation for a Company
How to find state of incorporation for a company can be a difficult decision for some new business owners.3 min read
How to find state of incorporation for a company can be a difficult decision for some new business owners. The state of incorporation for your business will be where you choose to form, establish, and operate your business. Furthermore, incorporation means that you will be operating either a C or S corporation. As such, any business that is incorporated is treated as a C corporation unless the business elects to be taxed as an S corporation.
Selecting a State
You have two options when selecting a state to incorporate:
1.Registering in the state where you intend on doing business
2.Registering in another state where you don’t intend to conduct a lot of business
People might choose to register in another state due to the benefits. However, while there are some benefits to incorporating out of state, it is generally more expensive. A foreign company that qualifies to do business in another state will be subject to that state’s tax and annual reporting fees.
Keep in mind that even if you register your business in a state where you will not be conducting a lot of business, you still must register in your home state where you intend on doing a majority of your business.
Before choosing which option to use, you should think about your long-term goals and objectives, and also determine where you want to conduct most of your business operations.
Most small businesses will register in the home state since it makes the most sense, and the business will primarily be conducted within the home state. However, larger corporations might need to incorporate in many states, particularly if the business is going to conduct its operations across state lines.
Factors to Consider
There are several factors to consider when incorporating, including the following:
1.Corporate laws by state, i.e., flexibility of such laws
3.Operational costs, i.e., ongoing maintenance and reporting fees
Benefits of Incorporating in Your Home State
There are many benefits to incorporating in your home state, including the fact that it is cheaper. Moreover, local attorneys are more willing to help you when forming your business in your home state, as they are more familiar with the local laws. Another benefit is the convenience of being located in your home state. You are familiar with your surroundings, the people, and the laws more so than in another state.
What to Do After Selecting a State
After you have selected the state where you want to incorporate, you will need to choose a business name. You can only choose a name that is available for use and not being used by another company. Furthermore, if you need to obtain registration in a foreign state, you should run a business name search to see if your name is available in that state too. If not, you will need to use a different entity name in that particular state when doing business there.
Next, you will need to obtain a registered agent who will receive legal papers on your corporation’s behalf in the event that a legal suit arises involving the business. This agent must be physically located in that sate where you are incorporating. Some states allow one of the owner’s to act as the registered agent, so long as he or she physically resides in that state. While you aren’t required to have a physical office in any given state, your registered agent must physically reside there – whether it is a personal or business residence.
Thereafter, you will need to formally register with the Secretary of State by filing the Articles of Incorporation. Once this document is filed, and the applicable filing fee is submitted, you will need to comply with all other filing requirements. This might include drafting corporate bylaws, submitting annual reports, registering for tax purposes, etc.
Before doing business, be sure to understand the difference between being taxed as a C corporation or S corporation. If you own and operate a small business, you might benefit from being taxed as an S corporation. As such, if you want to elect S corp tax status, you will need to submit Form 2553 on the IRS website.
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