By Lane V. Erickson, attorney
I often have clients ask me which state they should set their business up in. More often this question is, which state should I incorporate in? Many people wanting to set up an LLC or corporation have heard or read on the internet that states like Delaware, Nevada and Wyoming can offer business benefits beyond what most states can offer. So where do you set up your business or corporation? My advice and counsel is that unless you own, or plan to own, a business that is large and doing business in many states, it is almost always best to set up you business in the place where you already live. There are 3 main reasons for doing this.
1. THE COSTS OF REGISTERING A BUSINESS
If you incorporate your business in a state that is different than where the business actually does business, you will be required to register your business in every state where you actually do business. This registration process requires filing an application with the correct governing body in each state. This is usually the Secretary of State’s Office. The costs for registering your business in each state are different. In Idaho it currently costs $100 to register a business, regardless of whether is it a domestic (in state) or a foreign (already registered in another state) business. In other states the costs are usually much more.
Without getting into all the details about various taxes in different states, it is sufficient to say that all states don’t tax corporations equally. This is one of the main reasons that larger corporations often do incorporate in Nevada, or Wyoming, or Delaware. However, unless your entity is large and producing a good deal of revenue, it is almost always easiest and simplest to incorporate in the state in which you live for tax purposes. Keep in mind that taxes are not only those for income, but also may include sales tax for goods that may be sold directly to the public. The different sales tax rates for each state might be a compelling reason for you to determine which state it is that you want to incorporate in. However, again, it is almost the easiest to keep track of the sales tax that you generate in the state in which you are living.
3. REGISTERED AGENTS
The third and final reason incorporating in the state in which you live is the best idea, is because of registered agents. A registered agent is the actual real person who is legally responsible for receiving notices on behalf of the corporation. For example, if a corporation is being sued the lawsuit has to be served upon a real person. The registered agent is the person who is listed in the governing state agency’s records as the person who will receive this kind of notice. If you incorporate in your own State you are capable of being listed as the registered agent for your own business. However, if your corporation was registered in a different state and you operate your business in Idaho then you will be required to hire an individual to serve as your registered agent in the state in which your corporation was incorporated. Additionally, when you register your corporation as a foreign entity in Idaho, you will also have to list a registered agent here. For this reason, it is almost best and easiest for you to register your business in the state in which you live, and to name yourself as the registered agent for your business.
If you would like to create a corporation of an LLC, we can help. Call us toll free at 877-232-6101 or 208-232-6101 for a consultation with Lane Erickson and the Racine Olson team of Business Law and Real Estate attorneys in Idaho. You can also email Lane Erickson directly at firstname.lastname@example.org. We will answer your Idaho Business Law and Real Estate questions and will help you solve your Idaho Business Law and Real Estate problems.
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