In What State Will You Form Your Business?

Welcome back to the second article in our business formation series. If you’ve been keeping up with our publications, you know that choosing a business entity is a pivotal decision for any business owner. Our previous article helped you understand the basic entities that are available. But one question remains: where will you form your business? Otherwise known as the state of formation, it is the state where a corporation, limited liability company, or partnership is created.

Your chosen state can significantly impact your business’s legal and financial future because every jurisdiction’s corporate system is unique. So, how do you determine the best state for formation? Let's explore the key factors to consider.

Factors to Consider When Choosing a Jurisdiction of Formation

Also known as the jurisdiction of formation, the state where you form your business entity will significantly affect its operations. For instance, state corporate income tax tends to vary depending on where you incorporate. For these reasons, you'll want to opt for a business-friendly state with tax advantages that can facilitate the growth of your venture. Here are the factors to keep in mind:

• Tax rates
  Business income taxes differ depending on the jurisdiction. Some states, like New Jersey, have high corporate tax rates but offer tax credits to specific types of businesses, facilitating significant tax savings. For instance, the Grow New Jersey Assistance program offers tax credits to businesses that create and retain jobs in the Garden State.

• Legal environment and court system
  Your choice of jurisdiction will also determine the regulations that govern your business, from contract enforcement to governance. For instance, Delaware is renowned for its comprehensive business law system.

• Business-friendly policies
  You want to form your company under a jurisdiction with accommodating and friendly policies for business formation. Favorable jurisdictions should have minimal red tape, a streamlined corporate filing system, and affordable fees.

• Registration compliance requirements
  As you may have inferred up to this point, the process of forming your company can differ depending on the location. The initial filing fees and ongoing costs to comply with local laws and obtain a business license also vary. California is known for its stringent reporting requirements, whereas states like Wyoming and Nevada have more relaxed requirements.

• Proximity to target markets and resources
  Is your state of formation close or within your target market? Will your company have access to the critical resources needed to operate? The market conditions of your jurisdiction of formation can influence your business operations.

New Jersey as a Business Jurisdiction

The Garden State offers several unique incentives that make it an attractive location for entrepreneurs looking for jurisdiction of formation. Here are some of the top advantages of incorporating your business in New Jersey:

• New Jersey is close to prominent economic hubs like New York and Philadelphia.

• The Garden State offers a variety of incentive programs, such as the Grow NJ Assistance program and the Sales Use Tax Exemption for qualifying businesses.

• New Jersey has a highly educated workforce thanks to its proximity to top institutions like Princeton and Rutgers.

Popular Alternative Jurisdictions

Here is a list of other well-known business incorporation jurisdictions in the US:

• Delaware- Arguably the most popular incorporation jurisdiction thanks to its favorable tax laws and court system.

• Wyoming- Preferred for its privacy benefits and relatively low fees and taxes.

• Nevada- This jurisdiction has no state or corporate income tax, making it an attractive business destination.

Conclusion

Our New Jersey business lawyers help you understand the different requirements, processes, and regulations for different jurisdictions of formation. Our goal is to help you make a decision that ultimately benefits your business and helps you achieve your personal and business aspirations.

Our next article will discuss the benefits of incorporating your business in Delaware versus New Jersey. Join us next time for more insightful tips on business formation guidelines for New Jersey business owners and managers. 

Are you wondering about any of the issues mentioned above? Please email us at  Info@staturelegal.law or call (732) 320-9831  for assistance.

At Stature Legal, our New Jersey business attorneys give business owners the clarity they need to fund, grow, protect, and sell their businesses.  We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®