Have You: Decided What State is the Best Home For You?

One of the top questions I get is, “Where should I form my organization?” Ironically, I use the availability of hot sauce and Whataburger’s as a determining factor for location. But clearly most of you want to be a bit more responsible than me and since there’s a ton of material out there already covering this, I’ll make it short.

The way this typically comes up is, “So, I was told I should incorporate in Delaware.” The driving force? Almost always a well intentioned soul volunteering something they read in a business magazine. But let’s take a step back. If you’re rescuing stray dogs in Southern California why form an entity in Delaware?

Typically, the inclination is to form an organization in the State a founder lives. And in many instances this is probably the best place to start. Who better knows the needs of their community? If services are local, this makes even more sense.

And to be clear I’m not saying there aren”t good reasons to register in Delaware where services are locally offered elsewhere, what I am saying is in the legal world there are such things as trends. The “jelly shoes” of law so to speak.

Many organizations do file in Delaware, Colorado (or other popular places like New York or Texas) but have specific reasons for doing so. Tax breaks or exemptions, favorable entity structures, an established law, etc. So if this is something you’re considering, look at the reasons why (specific to your organization and its needs) before you pull the trigger.

Look at your demographic, geographic scope, operation  chain, etc, etc, etc. If you want to create affiliates or corporate offices around the country registering in another State might be necessary. The same is true if you plan to have alot of dealings in other States. This is where an attorney is super helpful.

But also bear in mind multiple registrations can be tricky. Each time you register, you pay the State a registration fee. There may be annual fees tied to registration and you’ll still need to register in   the State an ED or founder lives if you plan on being active there. So it’s important to think about your financial capacity. Also, there may be periodic reports to keep up with and another set of tax laws to keep in mind day to day. I recommend sitting down and working the pros and cons before making any decisions.