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Best State to Incorporate

Once the decision has been made to incorporate your business, one of the next decisions to be made is where to incorporate. This is an important decision because a corporation is formed under, and governed by, the laws of its state of incorporation.

Usually a corporation incorporates in the state where it will be conducting its business. If it incorporates elsewhere, it will have the added expense of qualifying as a foreign corporation in the state where it is doing business.

Corporations doing business in more than one state sometimes choose to incorporate in the state where their headquarters will be located. However, they may also choose a different state. Generally, a corporation will incorporate in a state other than where it is headquartered either to avoid certain statutory provisions of the state where it is headquartered or to take advantage of certain statutory provisions of another state.

The many corporations that choose not to incorporate where they are headquartered incorporate in Delaware. There are four main reasons for this:

  • Because Delaware’s corporation law grants management a great deal of flexibility in managing the corporation
  • Because its highly regarded Court of Chancery hears corporate litigation
  • Because of its large body of corporate case law precedents
  • Because of its modern and efficient filing office.

After the state of incorporation has been chosen, the process of organizing the corporation may begin. This process includes, among other things, selecting and reserving a corporate name, drafting, executing and filing the articles of incorporation, drafting and adopting the bylaws, and holding the organizational meetings.

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