Along with picking the right entity type for your business, it's important to consider which state to incorporate in.
For most small business owners, the choice is simple: they incorporate in the state where their company is physically located, known as 'home state incorporation.' However, there are good reasons to consider forming your corporation or LLC in certain other states, including tax advantages, streamlined judicial processes, and easier business filing requirements.
For example, many business owners choose to incorporate in Delaware, which is a favored business jurisdiction for the previously mentioned and other reasons.
Delaware is widely considered to be one of the nation's most business-friendly jurisdictions. There are a number of reasons to incorporate your small business in Delaware, including:
- Well-established and flexible business laws
- Low franchise tax on small businesses
- No tax on capital stock or assets
- No state sales tax
- A special business court (Court of Chancery) that minimizes the time and cost of commercial litigation
- No residency requirement for shareholders, directors, and officers of a corporation or members or managers of an LLC
