How to Determine the Best Location to Incorporate
- 1). Consider the process for incorporation in a location. Each state provides for incorporation, but some are more inclined to provide greater speed and simplicity. Delaware and Nevada are known for offering the fastest incorporation and for offering favorable legal climates.
- 2). Research the effect of statues regarding takeovers. The possibility of a hostile takeover can be detrimental to shareholder value and free competition. Investigate the laws in each state under consideration to determine the effect of extreme statues.
- 3). Assess the political culture of the state. States associated with extreme political or judicial activism could be a deterrent to selection. Research conducted by Harvard Law Professor Lucian Arye Bebchuk and Alma Cohen of the National Bureau of Economic Research indicates that politically-sensitive states are less successful in retaining in-state companies or attracting out-of-state companies seeking incorporation.
- 4). Conduct research to find out what studies have discovered about relative tax structures. One survey, conducted by Tax Foundation economist Kail Padgett, indicates South Dakota, Nevada and Wyoming rank as the three states with the most favorable business tax climates.
- 5). Investigate the corporate liability insurance requirements. A general liability policy, which addresses items such as property or product related matters, is generally required for businesses. Specialized liability insurance, which covers items such as employment practices and actions of the directors and officers, varies in cost and coverage.