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The quick answer is - usually in your own home state.
Why? It's simple - cost. The cost to incorporate as
you'll see is usually only several hundred dollars including
state fees. However, if you incorporate in a state other
than your own and do business in your own state, you
must then "qualify" or file for authority
to do business in your home state.
Why? Remember that a corporation is an artifical legal
entity which can do almost anything a person can do,
such as enter into contracts, open a business, own real
property, etc. Each state has a valid interest in protecting
their citizens. This is one of the reasons why they
require you to appoint a registered agent when you incorporate
- to ensure that there is a valid address where a state's
citizens can serve process if they are harmed and need
to take legal action. A state needs the same assurance
from a corporation formed out of state. It needs to
know that the entity was properly formed (the state
may require a "Certificate of Good Standing"
from the home jurisdiction) and who the registered agent
is. This information is disclosed in your Application
for Authority to Do Business (usually called the "qualification"
process.)
Bottom line - if you incorporate in a state other than
your home state, it will cost you an extra few hundred
dollars because you'll then have to qualify in your
home state (assuming you do business there.) Of course,
the extra few hundred may not mean much to you or you
may have a strategic reason for choosing to incorporate
in a particular state.
For example, certain states, such as Delaware, require
less information about the founders of a corporation
than other states and the added privacy may be important
to you. Delaware (more than 50% of the Fortune 500 are
incorporated in Delaware) is attractive for other reasons
as well. Delaware has an extremely well established
body of law, does not seek to tax income earned in other
jurisdictions, has an excellent, informed business court
in its Court of Chancery and is very pro-business. For
all these reasons, Delaware corporations are a known
commodity in business circles (particularly banking)
and are always well received.
If you choose to incorporate in a state other than
your home state - no problem. We can draft and file
your qualification papers at the same time you incorporate.
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