Monday, December 12, 2005

In Which State Should You Incorporate?

Last week, I sought an answer for a client who was planning to open businesses in more than one state. Part of the question focused on which state, then, should her corporation be registered in.

I found some information in a book we have in our collection. Here's an excerpt of what it says:

"So what state should you incorporate in? It's my opinion that you should incorporate in the state where you are doing business. That is, where your office is located. There are only two reasons to incorporate in another state - first, if you are going to have offices in many states, and second, for tax planning. If you are going to have offices in more than one state, Nevada makes a good choice because it is 'friendly' to corporations. Also, since Nevada has no state corporate income tax, you can lower your taxes by shifting income there from a taxable state. Needless to say, this is a sophisticated tax strategy meant for those with large tax bills and a good CPA.

The bottom line . . .
It's best to incorporate in the state where you are located when you first start out. If you get offices in other states later, you can relocate your corporate headquarters then. Besides, if you incorporate in another state, you'll have to register the corporation in your state as a 'foreign' or out-of-state corporation doing business in your own state."

from How to Form a Corporation, LLC or Partnership in New York. Brown, Dean W., Corporate Publishing, Inc., 2000, p. 24.

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