Can I Register a Business in a Different State?
Can I register a business in a different state than my residence?
You most certainly can register a business that way. There are no restrictions, but it is recommended that you register your business in the state where you intend to conduct business. Many businesses register in a different state because of the benefits for their business entity type in that state.
In some states, such as California, you cannot avoid paying taxes if you operate your business there.
California imposes a minimum franchise tax on all business entities in the state. If you are starting a business in California you may be surprised to learn that California business entities must pay a minimum franchise tax to the state each year.
For a startup and business operation in California, one needs to pay a minimum annual tax fee of $800. That sounds a lot, isn’t it? Now consider when you’re an online-based business with no office, store, or warehouse in your home state or anything that would otherwise require you to file a foreign entity – then it probably makes sense to register a business in any state of your choice. A foreign entity is an entity that is initially formed in another state.
You qualify for a foreign entity, meaning register a business in another state if your answer is YES to the following questions:
Do you have one or more employees in that state?
Does your business have a physical presence in that state? This can include a warehouse, distribution center, office, or storefront.
Do you take orders in that state?
Does your business have or plan to open a bank account in that state?
Does your business own or intend to purchase any property or real estate in that state?
Does your business earn revenue in that state?
Does your business pay any taxes in that state?
If any of the above applies to your business, or will in the near future, then you are likely considered to be a foreign business operating in that state.
Delaware, Wyoming, and Nevada are the best states in which you can apply for a foreign entity.
These states stand out, particularly for small businesses, due to their low tax requirements, business-friendly laws, and astute court systems. Furthermore, Delaware benefits from having a Chancery Court. The Delaware Court of Chancery is widely recognized as the nation’s preeminent forum for the determination of disputes involving the internal affairs of the thousands upon thousands of Delaware corporations and other business entities through which a vast amount of the world’s commercial affairs are conducted. Its unique competence in and exposure to issues of business law are unmatched.
Well, that’s all for now! We hope this information is valuable to you. Come back in the future for updates on this and other topics.
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Last Update: February 3rd, 2023