What Are The Pros and Cons Of Incorporating In A Startup’s Home State?

Startup companies considering incorporation have many things to consider when deciding which state is most advantageous to incorporate in.  While the most obvious answer would be to incorporate in the state in which the startup initiated its business, entrepreneurs should explore all of their options to find the best solution to meet the needs of their business. The primary benefit of incorporating a business, or forming some other business entity, is the protection of personal assets in lawsuits. Business owners must consider whether the location they desire to incorporate sufficiently protects these assets. Almost all states require annual registration with the secretary of state’s office. Furthermore, potential incorporators need to consider franchise and income tax consequence and ease of incorporation, etc. and should do so with a competent and experienced startup attorney. The Silicon Valley business lawyers from Startup Company Counsel have experienced business attorneys dedicated to providing exemplary knowledge and services to their clients.

Incorporating a Startup in its’ Home State

One consideration for a company planning to incorporate is the ease of incorporating in the company’s home state. There is comfort in familiarity. The convenience of incorporating a business in its’ home state can tip the scales in favor of filing; the company can hire local attorneys to file the articles of incorporation, by-laws, and other necessary documents. Additionally, corporations can litigate business disputes locally if they are incorporated in their home state. Incorporating in a business’ home state is more desirable if there are few investors or stockholders. For example, the owners of a family business with no plans of expansion into other states should consider filing in their home state. One significant advantage incorporating a start up in its’ home state is that financial institutions generally have programs to help finance local business. Similarly, many local county and state governments loan money at favorable rates with favorable repayment terms to locally owned and operated businesses.

Incorporating a Startup Out of State

Incorporating out of state can be detrimental to the business, if not done correctly. There are many positive benefits to launching your startup in a foreign state. If the business operates in the home state but the owners incorporated in another state, then the business may be required to register in the home state and/or file a “doing business as” (d/b/a) certificate in the state in which they operate. Filing a “d/b/a” certificate or registering as a foreign corporation is an expense, as well as other fees and taxes, which businesses should consider in addition to the fees and taxes of incorporating the business. An experienced startup lawyer can help weigh the pros and cons to forming a foreign entity. One must also consider the cost of doing business in their home state. For instance, if the company is incorporated in Delaware but doing business in California, then the corporation must pay taxes in Delaware and California.

Entrepreneurs seeking to grow their business nationally or internationally can greatly benefit from incorporating in another state. For instance, many large businesses are incorporated in Delaware. Delaware uses a business-litigation model that resolves disputes with a judge who is well versed in business litigation rather than juries. Delaware’s business-friendly model helps companies resolve disputes more efficiently and equitably rather than leaving their fate to a jury uninitiated in complex business matters. Additionally, newly formed companies in the market for venture capital may need to incorporate in Delaware because many venture capitalists require the companies in which they invest to incorporate in Delaware because of their familiarity with Delaware corporate law.

Contact a Silicon Valley Startup Attorney Today

The skilled Silicon Valley Startup attorneys with Startup Company Counsel have vast experience in forming the business entities needed to successfully start a business. Startup Company Counsel will explore your various options for forming the right business entity in the right state for you. Call Startup Company Counsel today at 1-855-353-5377 or send an email to schedule a meeting to learn how they help you incorporate your business successfully.

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