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  1. #1

    State of Incorporation

    Folks,

    Just curious as to rationale for which states folks chose to incorporate in.

    Delaware has tax and protection advantages, but I wonder how the local angle plays in?

    Clearly if I can save a few grand in annual tax I see an upside, I am just curious if there is a downside.

    Thanks,

    Simon
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  2. #2
    Join Date
    Jan 2003
    Location
    Chicago, IL
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    6,957
    You will then likely have to qualify to do business in the state the business will operate in and still pay taxes on revenue made in that state. I found it easier to just incorporate in the state you're operating in, but there may be a decent tax break depending on the state you're operating in. Some state's aren't big fans of foreign corporation, corporations incorporated in another state.
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  3. #3
    Join Date
    Aug 2000
    Location
    NYC
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    6,623

    Re: State of Incorporation

    Originally posted by nyrsimon
    Delaware has tax and protection advantages,
    Does it, for you? It may, but a lot of people say that because they've heard it (and the Delaware Department of State is better at marketing than most corporations are), but if you look into the complications and exactly what the real advantages and disadvantages of Delaware (or Wyoming, or Nevada, or Arizona, or any of the other states that are popular and that market themselves in that way) you may find it's not really true.

    Delaware's advantages will primarily be attractive for large publicly held corporations. Some other states may be more attractive for small corporations, but in most cases for a small business corporation with just a few owners you're best option is to incorporate in your own state.

    We've talked about this a lot here. Here are a couple of threads worth reading:
    http://www.webhostingtalk.com/showth...hreadid=272204
    http://www.webhostingtalk.com/showth...hreadid=154160
    http://www.webhostingtalk.com/showth...threadid=33525
    Specializing in SEO and PPC management.

  4. #4
    Thanks for the comments and the links. Some good commentary.

    Simon
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    www.bestvaluewebhosting.com

  5. #5
    Join Date
    Jul 2004
    Location
    NYC
    Posts
    380
    You'll need a representative or an office in order to incorporate in another state. It makes no sense for small businesses to do that. The benefits would be minimal or non-existent.

  6. #6
    Join Date
    May 2000
    Posts
    488
    Do yourself a huge favor and get a lawyer and ask him - if the IRS comes knocking at your door, and you say - 'but the people in WHT said Delaware was the bestest', they will laugh and kidney punch you and take your wallet. Same with - but my buddy does it..then they will kidney punch you, and your buddy will as well for telling on him. A lawyers time will cost you, but if you're not prepared to spend the $$ for it, you're not prepared to own a business.

  7. #7
    Join Date
    Sep 2003
    Location
    New York
    Posts
    511
    Simon,

    I hope you do realize that you can't incorporate in Delaware unless you actually do business there (e.g. have an office or a physical location).

    There is a big misconception going on around this - for a small business, you should (and probably must) incorporate in your own state. For larger businesses, with multiple locations and larger (million+) revenues, it may make a difference.

    Which category to do you fall into?

    Boris
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  8. #8
    I hope you do realize that you can't incorporate in Delaware unless you actually do business there (e.g. have an office or a physical location).
    This is not an accurate statement. All that is required to incorporate in Delaware is to have a Delaware registered agent. Online incorporation services companies often provide registered agent services for an annual fee.

    The incorporating paperwork must state the name of the registered agent and the address of the registered office (which is the office of the registered agent). The registered agent is responsible for receipt of service of process and official correspondence from the State and then forwarding it to the company's last known address which can be in any state.
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