You’re Incorporating Your Business Where?

Image by: Eric Fischer
By Charles Lewis

Looking for a place to park your LLC? Need a new home office? Looking to save some money on your tax bill by moving your whole operation to a more business-friendly state?

And of course you want the place with the lowest tax rate and permanent scoliosis from bending over backwards for business interests, right? I thought so.

But before you decide what state to start that company in, there are a few things you need to consider, such as what corporate/ownership structure will the new company use. Some states are better for sprawling C-corporations, while others are just what the one-man show ordered.

Should You Stay Or Should You Go?

While an out-of-state strategy will work for publicly held LLC and C-Corps, consultants say that private small businesses are still better off sticking with incorporating within the state they live and operate in.

You also need to consider the public relations implications of an out-of-state move, even if it is only on paper. If the public got wind that Michigan’s Finest Tomatoes was actually based in Delaware, would Detroit Rock City be as receptive to that brand?

I don’t think so.

Foreign Affair

And please understand that incorporating your corporation in a different state than the one you are doing business in has potentially devastating tax implications, depending on the location of your office and other factors.

You most likely will have to gather a “foreign qualify” from the states that you are not incorporated in to operate there.

But every business plan is different and every situation should be evaluated on its own details.