The idea of taking a business to the next step and incorporating may seem difficult, especially when there are a variety of things to consider, such as options as to what state to incorporate in. There is the belief or misconception that incorporating elsewhere like Nevada or Delaware will save businesses the high cost of taxes in California.
However, for small to mid-size businesses that is not often the case. Businesses operating in California which are incorporated in another state will still need to register with California as a foreign (out of state) corporation and pay some form of tax to this state regardless; now your business will need to follow state regulations for not one state, but two.
Let us not forget such costs as the managing of documentation for both states, possible out of state representation and travel expenses. There are also other matters such as privacy and protection of personal assets that should be taken into consideration. More often than not, incorporating outside of California just equals more paperwork, time and money spent, than the actual savings imagined. Those conducting the majority or all business in San Diego, should definitely incorporate in California.
Now, with conducting business in several states there is more to keep in mind. When dealing in multiple states, there are going to be taxes that need to be paid to each state involved. There are formulas to calculate the portion of tax that will be paid accordingly. There are also other legal matters to consider with larger companies. Sometimes, incorporating in Nevada or Colorado may be more beneficial to a business for a variety of reasons such, especially for larger and publicly owned businesses.
How to Incorporate Your San Diego Business
At the Cain Advisory Group we can assist you in understanding the options involved with incorporation. Please contact us at (858) 430-0155 so we may help answer your questions.