Where Should You Incorporate?
You can legally incorporate in any state in the union or in the District of Columbia. However, you must have a registered agent and registered office in most states in order to maintain a corporation. You do not necessarily have to incorporate in the state in which you are physically located. In fact, some states, for example California, charge very high minimum taxes on corporations that are organized under their laws. Sometimes, these fees can be avoided by incorporating in another state.
Historically, many companies have incorporated in the state of Delaware. The reason for this has been that Delaware laws have historically been very flexible. This is why you see many large, publicly held corporations having Delaware as their state of incorporation. Today however, the advantages of incorporating in Delaware are not as obvious because many other states have liberalized their incorporation statutes.
Nevada has also become a haven for incorporation because of its flexible corporate laws and favorable tax consequences. For most small businesses who operate primarily within a single state, you will likely find it most advantageous to incorporate in your own state. You must also be aware that if you do business within your state, your state will require you to register to do business within your state, even if you incorporate under the laws of another state. Foreign corporations that register to do business in the state will be subject to all of the local taxes and laws, and must pay additional filing fees to register to do business. Therefore, it will usually make sense for businesses to incorporate in their home states.