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What
State Should I Choose For My New Corporation Or LLC?
A corporation is what lawyers call a "legal fiction." It
is a fictitious person, separate and apart from its owners. An LLC
can be thought of similarly.
Corporations and LLC's operate only through people. A simple rule
of thumb is that the state where you live and work should be the
state of your corporation or LLC.
Watch out for those who tell you that you can "save in
taxes" by incorporating or forming your LLC in some state
other than your home state. The same goes for people who tell you
it is better to incorporate or form your LLC in some state other
than your home state because there are no state income taxes in
that other state. Believe me, if I could legally avoid California
state income taxes by having my professional corporation
incorporated in some state other than California I would be the
first in line and you could be right behind me! If it sounds too
good to be true, you can be pretty sure that it is not true.
Taxes, whether we like them or not, are here to stay.
Even though it might cost less initially to incorporate in some
state other than your home state, you must still obtain permission
to operate your "foreign corporation" in your home
state. That is called qualifying your foreign corporation to do
business in your home state. Once you do qualify, you are treated
pretty much like any other corporation or LLC formed in your home
state. You will have to pay taxes to your home state just like the
corporations or LLC's that were formed there in the first place.
The cost of incorporating a foreign corporation or forming an LLC
plus the cost of qualifying it to do business in your home state
is usually more than the cost of incorporating or forming your LLC
in your home state. Besides, operating a foreign corporation or
LLC in your home state without qualifying it to do business there
may also be a crime.
Even though there are some legitimate reasons to incorporate or
form an LLC outside of your home state, your best bet is usually
to incorporate or form your LLC in your home state.
If you would like to know more about which state to choose for
your new corporation or LLC call me at my toll-free number,
800-782-9051 or email
me your questions. We do our best to answer personally within 24
hours. |
