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Choosing a State for Incorporation

Many people choose to incorporate in their home state. However, if your home state has a high corporate income tax or high state fee, and your corporation will not "do business" in the home state, it may be wise to incorporate elsewhere. "Doing business" usually means more than just selling products or making passive investments in that state. It usually requires occupying an office or otherwise having an active business presence.

Delaware is a popular choice for incorporating because of its history, experience, recognition and pro-business climate. Also, Delaware does not tax out-of-state income. In fact, over half of the companies listed on the New York Stock Exchange are incorporated in Delaware.

Recently, Nevada has also gained popularity due to its pro-business environment and lack of a formal information-sharing agreement with the IRS. Nevada does not have corporate income taxes. Business filings in Delaware and Nevada can typically be performed more quickly than in other states.

Wyoming has also started to gain popularity after passing strong pro-business laws. It also lacks state income tax, and formal information sharing with the IRS.

Keep in mind, if you do incorporate somewhere other than your home state, you may have to pay additional fees and meet additional requirements. You may want to speak with an accountant or tax advisor before making a decision.

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