The advantages and disadvantages of incorporating in another state are hotly debated. We’ve seen a lot of other business-filing companies and services extol the virtues of incorporating in Nevada or Delaware, but the reality of the situation is a bit more nuanced. More often than not these other companies are trying to convince you of the need of their services and, while we could do the same, we want to actually help people, not just sell them something. For most businesses, incorporating outside of their home state isn’t a good idea. You have to contend with foreign qualification fees, regulations, licensing, and, to top it all off, the main state you do business in will probably still want to collect the same amount of taxes as they would if the business was formed in its borders. So the question inevitably shifts from ‘should you go to another state?’ to ‘in what cases would forming in another state be advantageous?’. Well, you’d typically want to form outside of your home state for the following reasons.
Today on the ABC’s of small business we’ll be covering the basics, and the benefits, of what it means to file for a withdrawal for your company.
We’re onto one of the trickier letters of the alphabet today in our ABC’s of small business segment, but it couldn’t be paired better than with the foreign qualification which answers the question of what a small business should do if they want to legally operate their business in a state that may not be the same one they created the formation in.
Foreign qualifications break down a little like this. If a business wants to operate outside of the state that they formed a formation with, they need to register their business as a foreign corporation in order to obtain that kind of authority. And in many cases, this is a requirement, especially if your company expects to transact business outside of the state lines that they were formed in.
Most business owners start their businesses with the hope that they will expand into other cities, states, and maybe even countries. This business growth is excellent for the economy, excellent for the business owner (is anyone against success?), and great for customers who want options closer to where they are. But moving a business into other areas can mean increased documentation and preparation on the part of the business owner. Continue reading