If you are an aspiring business owner or startup founder, you are likely feeling overwhelmed by all the decisions you are required to make before you can finally launch your company. One of the most critical decisions you can make from both legal and financial standpoints is where to form your company.
The United States is arguably the most business-friendly country on Earth. However, businesses are subject to a host of regulations on both the local and state levels in addition to the federal level. This means that while your company will benefit from being a business based in the U.S., it will also be significantly affected (for better and worse) by the state in which you choose to incorporate.
Contemplating LLC Incorporation
It is important to understand that your limited liability company will be treated as “foreign” in any state in which you are not incorporated. This means that, legally speaking, you will likely not be permitted to engage in any activity considered to be “conducting business” in any state beyond your original state of incorporation unless you obtain something called a foreign qualification. The foreign qualification process will allow you to conduct business in a state that is not your home state of incorporation. However, even if you obtain foreign qualifications in all 49 additional states, your primary concerns related to taxation, structure and legal challenges will be tied to your home state of incorporation. As a result, it is vitally important to think carefully before committing to a state that will serve as the legal “home plate” for your company.
Which State Is Best?
There are a few primary considerations you should discuss with your attorney before committing to your LLC’s state of incorporation. First, think about where you will be conducting business. Will you be seeking to serve customers in other states online? Will you have physical structures and employees in multiple places? Traditionally, small businesses tended to incorporate in the place where they were primarily located physically. But now that the Internet has opened up opportunities for businesses of all kinds to seek customers located outside of a business’s physical home state, it sometimes makes sense to incorporate elsewhere.
For example, more than 50 percent of all Fortune 500 companies and more than half of all publicly traded U.S. businesses are incorporated in Delaware. The First State is a corporate tax haven and has very strong pro-business legal and regulatory cultures. In fact, the number of businesses registered in Delaware outnumber the residents of the state itself. As you can see, there may be reasons to incorporate outside of a state in which your business will be primarily physically located.
Formation Assistance Is Available
If you are starting a new business and are looking to formally register your company, please consider contacting the team at LawTrades. We have guided thousands of aspiring business owners and startup founders through the formation process. In addition, we have extensive experience helping new companies fundraise and finance their launch processes, protect their intellectual property, recruit top talent, draft necessary contracts, remain compliant with business-related regulations and create a viable legal strategy for their businesses overall.
No matter where you hope to form your new LLC, the team at LawTrades can provide you with valuable guidance and necessary legal assistance. Please contact us today with any questions you may have so that we can explain our affordable, efficient approach and advise you in regards to your available legal formation options.