How to decide which State is the most appropriate for registering a business ?

Selecting the best state for business hinges on more than physical location or proximity. Federal laws are the rule of the land, however there are particular states where the laws and set up process are far more conducive to business.

What to Consider When Registering a Business

There are multiple points that make one state more attractive or “business-friendly” than others. Usually, when registering a business, these considerations come down to a matter of “less is more” – in other words, the states whose laws and policies end up costing the business less in start-up and ongoing fees. Areas of consideration include annual fees and filings, impact on personal assets, franchise taxes, and state corporate income tax. The presence of investors and the legal and court system in that state should also be a strong consideration. Which of the states has the most favorable of these aspects? When registering a business, no one state will qualify in all areas – so companies will have to prioritize what’s important.

The Appeal of Certain States over Others

Upfront research is a must; look into states‘ corporate statutes to determine if they are most favorable for the kind of business the company intends to do. When registering a business, take time to consider the taxation policy and the restrictions imposed on foreign qualified business. For tax consideration, narrow down the research to two or three states. Then, set up a proposed revenue sheet for two states and calculate how much will end up going to taxes for the first few years. Delaware and Nevada are reputedly two of the most corporation-friendly states.

Just because certain states are attractive to businesses, doesn’t mean companies should jump to file there right away. A home state filing has to be done. If the company wants to then register in another state with low fees, but the company is not located there, nor does it actually do any business, they have to foreign qualify in that desired State. It’s more hassle than it’s worth and costs more money overall.