STATE OF INCORPORATION. 

So now you have decided that it is time to incorporate your business. The next question you should ask yourself is where? This brings to mind the importance of the state of incorporation. The great news is, businesses can be incorporated anywhere in America, regardless if your business operates in a different location, even outside the United States. This is a legal and acceptable practice.

Delaware is the most preferred state of incorporation.

Why is important to incorporate the business in this state? Why is it so attractive to businessmen? What are the advantages of incorporating in the state of Delaware?

• First of all, there is no corporate tax for an incorporated business with main operations outside of the state. With this provision, Delaware provides a very favorable business environment.
• Second of all, in Delaware, the corporate law is separated from other types of judicial system. It has a well-organised process and can provide security for companies doing business there.
• Third, stocks certificates are not subjected to tax in Delaware.

The state of incorporation in Delaware provides a win-win situation for both the business and the owners.

However, the bad news is, it does not always work for all types of business. A good advisor will tell you that incorporation out of state by small businesses will have some slight reservations. But, if you are still inclined to do so, do know that if your business operates in a separate state or outside the country, you will be considered a foreign corporation. When a foreign corporation does business in another state, other than where it is currently incorporated, the business is required to secure an authorization and this might cost you money for fee payment.

But let's say you have decided to incorporate your company in another state, other than Delaware, what advantages should it possibly bring for you?

• It is cost-productive. Setting up a physical business office requires tons of capital. Thanks to incorporation, you can still do business out of state. You only have to have representation there. It reduces your expenses and the hassle of having to set up your office.
• The tax laws are very flexible for an incorporated company operating outside of the state.
• If you get sued, incorporation protects you from being personally liable by the state's laws.

Choosing the state of incorporation is not going to be a quick decision. Some decisive thinking has to be factored in. It will probably be best to study how the state operates its tax laws. It would be better for you to consult an expert, like an attorney or a certified public accountant, to help you weigh your decisions.

Some components in the business sector believe that if a state has adopted the Model Business Corporations Act (as written by American Bar Association), it will be even more advantageous than choosing to incorporate in Delaware. But even so, the laws in Delaware continue to be more filtered and refined, to fit the common business man. It will be interesting to see how these developments affect business set ups in the future.