Doing Business Out-Of-State? This Is A Must-Read!

man and a woman talking about their business out-of-state
Planning to form or incorporate your business out-of-state? Before taking your first step, here are some vital practical pointers you should consider.

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Choosing where to form and register your business is a big decision you should never take lightly. While common sense would dictate that you should do it in your home state, there are instances when that may not be the best option. Fact is, there are many valid reasons why filing your business out-of-state is actually the right way to go.

In this article, we’ll look at why some business owners choose to register or incorporate their companies in other states. Additionally, we’ll also share some practical pointers – such as which states are best for incorporation, how a registered agent can help you, and more. Read on!  

Why some businesses incorporate out-of-state

For the most part, incorporating in your home state is the logical step. However, as mentioned earlier, some take a different route for legitimate reasons.

Case in point, some do it for convenience and liability protection.

As long as you aren’t operating a state-only licensed business, it’s always possible to incorporate in a different state. Ideally, you should look for a state with business-friendly laws and tax policies. Doing so will allow you the advantage of protecting yourself and your personal assets, along with your directors and officers. This is mainly because upon creation, your corporation or LLC is considered as a separate legal entity from yourself.

What to know before incorporating your business out-of-state

As with most things, research is the key to setting up your business out-of-state. It’s important to do this the right way, since regulations and requirements vary from state to state.

In their official website, the US. Small Business Administration (SBA) reminds entrepreneurs:

“Your business location determines the taxes, zoning laws, and regulations your business will be subject to. You’ll need to make a strategic decision about which state, city, and neighborhood you choose to start your business in.”

female entrepreneur holding a sign business out-of-state
Image source: Ketut Subiyanto on Pexels

Of course, this doesn’t only apply to those establishing a physical office or store. The same can be said for any company choosing to establish their business out-of-state. Business owners need to familiarize themselves with state-specific fees, perks, and restrictions to make the most of their choice.

Again, requirements often differ from one state to another so it’s recommended that you do some research ahead of time. Government licenses and fees, along with local and state taxes, vary depending on your location.

As such, you want to look up local and state government websites to dig up relevant information. Try to find out if special tax credits are available for startups. In some cases, financial incentives and business loans are likewise being offered.

Alternatively, get in touch with a registered agent for advice.

Top states to incorporate in

According to The Balance SMB, 10 US states stand out among the rest for those planning to form LLCs. For the most part, these states are exceptional in terms of “individual income, sales, and property tax rates, as well as the legal environment for businesses and the LLC fees.”

usa flag business out-of-state
Image source: Steven Abraham on Unsplash

The site’s list features Alaska, Delaware, Florida, Indiana, Montana, Nevada, New Hampshire, North Carolina, South Dakota, and Wyoming.

Why some of the world’s biggest companies choose Delaware for conducting business out-of-state

For those not in the know, Delaware “continues to be the domicile of choice” for a huge number of Fortune 500 companies. In fact, 66.8 % of them have been incorporated in the First State, based on current statistics from the official Delaware.gov website. In addition, we learn that more than 1.8 million legal entities are incorporated in the state.

Among many others, some of the most easily-recognizable companies that have incorporated in Delaware include:

  • Amazon
  • Coca-Cola
  • DuPont
  • eBay
  • Facebook Inc
  • FedEx
  • Ford Motor Co
  • Google
  • Tesla
  • Uber Technologies
  • United Acquisition
  • Walmart
  • Walt Disney

Over the years, multinational companies and startup owners have seen the advantages of incorporating in Delaware, although they are headquartered elsewhere.

For once, legislators passed the Delaware General Corporation Law in 1899 to attract more businesses in the state. Required paperwork is also way simpler and completed faster here compared with other states. Besides, the Division of Corporations “offers a variety of services including 1-Hour, 2-Hour, Same Day, and Next Day Expedited Services.”

Another big benefit of incorporating in the state is that it is known as a “tax haven.”

For example, Investopedia tells us:

“If the business does not conduct its operations in Delaware, the state’s corporate income tax may not apply. Instead of paying that income tax, those Delaware corporations instead pay a much lower franchise tax.”

On top of that, Delaware has the Court of Chancery, which specializes in corporate-related disputes. Forbes describes the court this way:

“While the average civil lawsuit may take a number of years to resolve, Delaware’s use of judges instead of juries and prioritization of corporate-related cases means similar cases can be decided more quickly.

How a registered agent can help you

When doing business out-of-state, having a registered agent is a must. These experts can be a valuable resource as they represent you in your chosen state of incorporation. They will receive legal notices and state correspondences on your behalf. Moreover, they frequently update you about compliance filing dues, making sure you don’t miss any.  

Go check out registered agent firms to learn more about their services before incorporating your business out-of-state. 

Featured image: Evangeline Shaw on Unsplash

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