In the process of forming a company, many entrepreneurs make a major mistake because they don’t even realize they have a choice. Business owners can incorporate in any of the 50 states or the District of Columbia. Since each of these 51 locations has unique tax benefits, startup costs and regulations, incorporating in a home state might not be in the best interest of a business.
PowerHomeBiz.com offers entrepreneurs some insight on what factors to consider when deciding where to form a company. To start, it’s important to investigate how corporations and LLCs are taxed in different regions. Does a chosen state impose an income tax on LLCs? Does it impose a franchise tax?
The source advises businesspeople to calculate a company’s projected revenue for its first years of existence and then evaluate states in terms of the amount of taxes an entity would be required to pay.
It’s also important to consider how friendly a state is to new business owners. PowerHomeBiz.com says some states have good reputations for business-friendliness, such as Delaware and Wyoming. Others – including California and New York – are lesser known for welcoming startup companies.
Regardless of where they incorporate, business owners can benefit from low filing fees if they employ inexpensive, online incorporation services. While state fees will still apply, online professionals can keep costs low.
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