Companies formed in the United States choose one of the two registration options: home state registration or out-of-state registration. They are categorized based on the state(s) where registration and operation occur.

3.1.1. Home State Registration

Home state registration, also called domestic registration, refers to the practice that a company registers and operates business in the same state. It is usually the simplest and most convenient choice, particularly suitable for small, local enterprises, and people who intend to conduct business in the state they reside in. Community stores and services provided to neighboring areas constitute the majority of such businesses. These prospective business owners are familiar with the state regulations, customer needs, competitive situations, and logistics. Some people may have already established a valuable network for the business to hatch. In addition, being a resident in the state has already qualified some basic requirements for business formation, such as a physical address in the state and the proof of identity. Many states allow individuals to act as their own registration agent if they are residents of the state. This can save agent fees when individuals are able to handle the registration process themselves.

Although running business in the resident state is preferred, a specific business may have to be located in a different place. For example, running a beach house hotel requires a state with a seashore, tour guiding services need to be in places of interest with sufficient tourists. In most of these cases, small business owners either move to the state where the business plans to operate or hire a registration agent in that state to file the home registration. Major advantages of home registration include easier filing, lower cost, and simpler tax reporting structure. Requests for a business license are usually submitted within the company registration with no separate filing, application fee, or agent fee when professional agents are hired. Approval of the registration typically grants the right of operation in that state, as long as requirements in the specific business location are also fulfilled. For example, opening a food truck in a university city may require application to the school administration. In addition, since operating in a state other than the formation state may be required to file as a foreign entity, home state registration avoids such foreign qualification process and the associated fees.

3.1.2. Out-of-State Registration

Out-of-state registration means a company registers in one state but operates in another. When out-of-state registration is selected and the business activities in the other state meet that state’s statutory definition of “doing business”, companies must “foreignqualify” in that state. There are apparently many disadvantages associated with out-of-state registration. First, it means double filing with double application fees, one to a state to form the business, the other to a state for the operation license. If agents are used to handle the application process, two agents in the two different states need to be hired. In addition, both states’ laws and regulations need to be studied and followed. The maintenance efforts are doubled, such as annual report, tax filing, and keeping up with the regulation changes in both states. These requirements increase the compliance complexity and reduce administrative efficiency. Despite the extra costs and paperwork, out-of-state registration is still highly attractive to many medium-to-large-sized enterprises when the overall business gains including financial, legal, and strategic benefits outweigh the extra filing and obligation for foreign entities. This is especially true for companies which operate in multiple states, since out-of-state registration is non-avoidable. In every non-formation state where the entities conduct activities that constitute “doing business”, foreign qualification is required.

When selecting a state for business registration (formation) in the United States, the primary considerations include registration cost plus ongoing maintenance fees, tax rates, administrative flexibility, liability protection, and privacy. Other factors such as entity type (e.g. limited liability company, corporation, partnership), product category, operation scale, and strategic planning are also important to consider. The regulations in the operation jurisdiction also affect the choice. If the operation state has extensive requirements for foreign qualification, people may have to give up an apparently better registration state and choose home state registration in that operation state. This study compares state policies that influence the selection of a business registration state, without focusing on the impact from each company’s operation mode.

3.2.1. Registration Fee and Subsequent Maintenance Fee

A registration fee is charged by the government when a business unit is created as a legal entity. It is a filing fee to obtain a certificate of formation or articles of incorporation. Registration fees vary from state to state. Table 1 lists the initial filing fees in different states. For LLCs (Limited Liability Companies), the registration fees are usually a flat fee ranging from $45 (Arkansas) to $500 (Massachusetts). Tennessee’s fee is not a fixed amount, their LLC formation fee is $50 per member, with a minimum of $300 and a maximum of $3000 ([63]). For INCs (Incorporated, also called Corporations), many states’ charges are variable based on corporation stock. The minimum charges are listed here, which range from $45 (Arkansas) to $725 (Nevada). In Washing D.C., the filing fee is $99 for corporations with less than $100,000 capital and rises progressively with higher capital value, up to $1650 ([13]). Similarly, New Mexico’s filing fee ranges from $100 to $1000 based on the number of shares ([46]). In Massachusetts, $100 is charged for each 100,000 shares in addition to the first 275,000 shares ([56]). There may be other charges required in the business registration process. For example, in Alabama, one must pay a fee ($25 for paper form and $28 for online) to reserve a business name before filing a business formation ([3]). In Kentucky, a fee named organization tax is charged to corporations. This charge is $ 0.01 per share on the first 20,000 shares with a minimum of $10, $ 0.005 per share for the next 180,000 shares, and $ 0.002 per share on remaining shares ([28]).

Table 1. Initial filing fee for business registration in different states in the United States.

Note: Different sources ([77]; [33]; [21]; [31]) were consulted, but the final values were taken directly from the Secretary of State’s website for each state. These values were collected on July 16, 2026, and may change anytime. One should always consult with each state’s filing office for accurate cost at any given date. Fees for non-profit entities are not listed but are also available on the Secretary of State’s websites. Fees for online submission are listed here. For example, in Arkansas online filing requires $45 and paper filing requires $50 ([4]).

The registration fee usually costs less than a few hundred dollars, the impact is mainly on small businesses. Although the fee for big corporations may reach a few thousand dollars, the percentage per share is still low. Entrepreneurs look into the registration fees in different states, but since this is a one-time charge only and not a significant amount, it is barely a decisive factor for the owners to choose a registration state.

On the other hand, recurring maintenance fees are much more important. They are the charges required to keep a company in good standing. Most of maintenance fees come from annual report fee and franchise tax. Annual reports are used to keep the state’s business records updated and typically are accompanied by a small, fixed amount of filing fee. Table 2 lists the annual report fees required in different states. Most states charge flat annual report fees. Several states do not require an annual report fee, such as Alabama, Idaho, Minnesota, New Mexico, Ohio, South Carolina, and Texas ([52]). Some states (Arizona, Delaware, Mississippi, and Missouri) charge annual fees to INCs, but not to LLCs. Virginial is special in that for LLCs, no annual report is required, but an annual registration fee is mandatory ([73]). In Montana, if the annual report is submitted prior to April 15^th, the filing fee of $35 is waived ([39]). For LLC’s, a few states’ annual report fees are in the hundreds of dollars, with Massachusetts reaches as much as $500. In Tennessee, the annual report fee is $300 minimum plus $50 per member over 6 ([55]). For corporations, several states have variable fees. In Wyoming, the annual report fee is $60 or 0.0002 of assets located in Wyoming, whichever is greater ([78]). In Virginia, the annual registration fee starts at $100 and reaches $1700 for corporations with authorized shares over 270,000 ([73]). In Nevada, the annual list fee and business license fee ($200 for LLCs and $500 for corporations) are combined, no matter if the business is operating in Nevada or not. As a result, a total of $350 is charged per year for LLCs, while for corporations, the total cost starts at $650 and increases with the value of authorized shares ([43]).

Table 2.Annual report fee or similar annual administrative fee in different states.

Note: Different sources ([51]; [20]; [49]). were consulted, but the final values were taken directly from the Secretary of State’s website for each state. These values were collected on July 16, 2026, and are subject to change.

In some states, the business report and report fee are charged biennially, starting as low as $9 (New York). Table 3 lists the states which require biennial report fees. Corporations in Nebraska pay the biennial occupation tax with the report which ranges from $26 up to $23,990 ([40]).

Table 3.Biennial report fee or similar biennial administrative fee in different states.

Note: Different sources ([51]; [20]) were consulted, but the final values were taken directly from the Secretary of State’s website for each state. These values were collected on July 16, 2026, and are subject to change.

Franchise tax is another important cost to consider when choosing a business formation state. Franchise type taxes including business privilege tax, net worth tax, and corporate excise tax, are state-imposed fees charged annually for the privilege of doing business as legal entities in a state. Table 4 lists franchise tax and similar entity-level taxes required in different states. Their main difference from annual report fee is that these charges are not administrative fee associated with filing a report. They are tax-like charges to raise state revenue rather than keeping the state records up to date. They are usually paid to the department of revenue or department of taxation, rather than to the secretary of state like annual report fees. However, franchise type taxes are usually not income taxes, because they are based on net worth or capital stock, not based on profit. Even for a business losing money, it still has to pay the franchise type tax. Only about one-third of all U.S. states charge franchise type taxes, regardless of income (or profit). Georgia ($5000), California ($12,590), and Alabama ($15,000) have a relatively low maximum of this liability.

Table 4.Franchise tax or similar entity-level taxes.

Note: Different sources ([17]; [12]) were consulted, but the final values were taken from the websites of the responsible state tax authorities. These values were collected on July 16, 2026 and are subject to change.

Business owners often view franchise type taxes as a minimum fee to state, as they are charged regardless of the business operating status. Many argue about their necessity of existence. The Taxpayer’s Federation of Illinois calls franchise tax “an archaic outlier” ([61]). However, due to the huge revenues franchise type taxes generate, many states choose to maintain them. A good example is that Illinois’ repeal of its franchise tax was revoked during the COVID-19 pandemic period due to the state’s financial concerns. Although franchise type taxes are generally separate from an income tax, a few states have blended them to some extent. In California, the franchise tax serves as a threshold for the minimum corporate income tax. Washington, D.C., Massachusetts, and New York do not have separate income tax, the franchise tax already includes the income-based component, but it either sets a minimum or adds additional charge to the conventional income tax. In Kentucky and New Hampshire, franchise tax can be credited into income tax. Arkansas is unique in that the franchise tax is submitted together with an annual franchise tax report, and they are submitted to the Secretary of State, not the Department of Revenue.

3.2.2. Tax Rates

Another critical factor to consider when selecting a state for business registration is the future tax burden once a business is founded. This refers to the conventional income tax charged based on profit. All businesses in the United States are obligated to pay federal corporate income tax. For example, 21% (flat rate) of income of CCorporations is remitted to the Internal Revenue Service (IRS). This part of the tax liability is independent of the state selected for business formation. On the other hand, state tax rates vary significantly, choosing a state with lower business tax can help maximize profitability. It is worth noting that by default, LLCs do not pay corporate income tax, unless they elect to be taxed as corporations.

State corporate income tax is generally tied to where a business conducts taxable activities, rather than where it is formed. Multistate businesses may be subject to income tax in multiple jurisdictions based on nexus and income apportionment rules. If no income is attributable to the formation state, the state does not impose corporate income tax on the business. From this perspective, the tax rate is relevant to the selection of formation state primarily when home state registration is selected, meaning that the business is registered and operated in the same state. However, if an out-of-state business has the potential to generate income in the formation state, the state corporate income tax rate becomes an important consideration.

The majority of U.S. states levy a corporate income tax, which can be set either as a flat rate (e.g., 6%) or graduated rates (higher profit associates with higher percentage). Corporate income tax usually makes up the largest portion of state-level charges on businesses with strong earnings. Six states (Nevada, Ohio, South Dakota, Texas, Washington, Wyoming) do not impose a traditional state corporate income tax. However, only South Dakota and Wyoming are true zero corporate tax states, as the other four have substitute businesslevel taxes, as discussed in the section earlier on franchise type taxes. Among states that do impose a corporate income tax, the most common range is 5% - 7% of taxable corporate profit. Four states are considered high-tax states, they are California (8.84%), Illinois (9.5%), Minnesota (9.8%), and New Jersey (up to 11.5%). Alaska’s tax rate can be up to 9.4%, but most corporations pay considerably less there. Maine’s top rate reaches 8.93%, but most corporations pay 3.5% - 6%. States with low corporate income tax are North Carolina (2.5% flat), Missouri (4.0% flat), Oklahoma (4.0% flat), Colorado (4.4% flat), Utah (4.65% flat), Arizona (4.9% flat), Indiana (4.9% flat), and North Dakota (variable at 1.41% - 4.31%).

Comparing flat tax rates is simple, but comparing states with graduated tax rates is not straightforward; just reading the high end or low end may be misleading. The actual tax rate applied to a business needs thorough research. For example, Arkansas’ rate ranges from 1% to 6.5%, with the top bracket begins at a relatively low-income level (corporates with income over $100,000 pay tax at 6.5%) ([9]). On the other hand, although the range of Maine’s tax rate is higher, from 3.5% to 8.93%, the top rate does not start until income exceeds $3.5 million. Corporates with up to $350,000 income still pay the low-end tax rate of 3.5%, which is very attractive to small business owners ([35]).

Unlike the one-time business formation fees, income tax is a recurring annual expense, directly deducted from the profit. Therefore, a smart entrepreneur should be very familiar with tax rates at the state level and have a clear projection of the company’s future earnings. With that, the tax system of various states can be fairly compared for the eventual annual tax liabilities. It must be pointed out that tax structures are far from being a simple percentage rate, numerous factors can affect the tax liabilities, including a company’s legal structure and the applicable state regulations such as exemption, apportionment rules, deductions, and credits. Hiring qualified tax professionals may help evaluate the specific circumstances to make the best choice.

3.2.3. Administrative Flexibility

The impact of government support and legal literacy on business success has been underestimated by the public. In fact, government regulations not only determine how easy the entity formation process is, but also strongly influence how the business operates. Administrative flexibility has been increasingly prioritized by business owners over the upfront fees when selecting the registration location. States with clear and transparent corporate laws lead to less ambiguity in interpreting requirements, giving business owners confidence in business compliance. The time spent on learning rules, preparing paperwork, renewing license, and navigating restrictions on business structure upgrade are all burdens for entrepreneurs. In addition, the missed market opportunities due to delays, the need to seek professional assistance, and the risk of rework can add to overall cost of business formation and operation.

The most critical administrative burden is legal obligation. Given expensive and lengthy litigations, states that handle business disputes efficiently and fairly attract most companies to obtain insurance against future legal issues.

Complex and unstable regulations make it almost impossible for the entrepreneur themselves to keep up with regulatory changes, hiring professionals to interpret the rules and ensure compliance is becoming a necessity. Some states impose supplementary requirements on company registration, which are easily overlooked. For instance, Arizona and Nebraska require LLCs to publish formation information in a newspaper. In New York, this requirement is as detailed as publishing a company formation notice in two local newspapers for six consecutive weeks, followed by submitting proof of publication to the state government ([66]). Nevada requires a state business license for any business entity formed there, no matter whether it operates in Nevada or not ([44]). California requires newly formed LLCs and corporations to submit an initial Statement of Information within 90 days of registration ([8]). In Washington, an initial report with a filing fee is required within 120 days of the business entity’s origination. This fee is waived only if it is submitted together with the origination document ([75]). Any missed action or any submission not meeting the state requirements may cause undesired delays and can even halt business activities. For this reason, entrepreneurs and investors prefer states with fewer requirements and better business support.

Administrative flexibility also includes whether a state permits advanced corporate structures, such as series LLCs and statutory close corporations. In a series LLC, multiple internal divisions exist, each has its own assets and liabilities. Delaware is the first state allowing series LLCs. Now about 40% of the states have adopted this structure. With this option, multiple sub-entities can be established in the future as a business expands. A statutory close corporation is a corporation with less public features. It allows a small group of shareholders to directly operate the business entity. This structure allows for greater owner control and lower risk of outside influence, is a good choice for many family-owned businesses. As of 2026, only about 20% of the states permit statutory close corporations. The flexibility on business types allows company to choose the best format at the beginning phase and still be able to grow into the other category as the business expands.

3.2.4. The Extent of Inside and Outside Liability Protection

There are always risks associated with opening a business. Thus, before opening a business, the owner must understand inside liability protection and outside liability protection. Inside liability protection is the protection of an owner’s personal assets from liabilities and debts incurred by the business entity. Outside liability protection is the protection of a business entity from the personal creditors of an owner. Inside liability protection has been established for centuries. All states generally separate owner’s personal assets from business debts. Since it shields members from corporate debts, protecting personal assets from losses, investment and business formation have been significantly boosted. With regards to comparison among different states, the inside liability protection is fairly consistent, with a few nuanced differences in the governing rules. While outside liability protection, which protects business from personal issues, differs substantially from state to state. It is noteworthy that outside liability protection is much stronger in LLCs than corporates, as corporate shares are considered personal property which is not protected from the shareholder’s personal creditors. When a creditor with a judgment against a member attempts to reach their business, in states like Delaware and Wyoming, the creditor usually gets a charging order rather than taking over the business entity. In this case, the creditor only gets the profit distributed to the debtor-member but not the managerial control of an LLC. But in states like California and Colorado, a creditor may acquire LLC ownership interest, which puts the entire business under risk. As of 2026, about one third of the states do not allow foreclosure. In these states, a personal creditor cannot become a member of an LLC simply because one or more members of the LLC owe money. Another one third of the states do not provide strong outside liability protection, an LLC’s ownership or structure can be changed if one of more members are in debt. This could also lead to business dissolution. The last one third of the states are in between. Their laws are vague; the settlement depends on the circumstances and the court decision ([30]). When choosing a registration state for LLCs, the extent of outside liability protection is a key factor to consider.

3.2.5. Privacy Protection for Business Managers and Investors

Many people do not realize the importance of privacy protections for business owners and executives. They either assume all business owners’ information is inevitably public or think privacy only matters for famous individuals. However, privacy is far more than avoiding unwanted attention and distraction; it is a safeguard for personal security, asset protection, and business decisions. If business owners or executives’ personal information is publicly disclosed, they may face unnecessary scrutiny, persistent solicitation, intrusive inquiries or even become targets for identity theft and other fraud. Privacy protection reduces the visibility of the individuals behind business transactions, which helps preserve the confidentiality of acquisition strategies and investment activities, allows quiet entry to market, and ensures better negotiation power. Maintaining privacy can also reduce the risk of opportunistic or fraudulent lawsuits, thus avoiding legalized extortion. It is worth noting that privacy protection is mostly focused on LLCs not corporations where shareholders’ information is anyway not part of public records. Privacy regulations differ heavily among states. As of 2026, most states require companies to report member information during business formation, which makes the business owners’ personal information searchable by others. Only four states do not mandate public disclosure of members or managers when an LLC is formed ([37]). They are New Mexico, Wyoming, Delaware, and Nevada, with descending privacy protection. New Mexico is the most private LLC state, because it has no annual filing requirement, thus after business formation, the owners’ information is not released in the subsequent years either. Wyoming and Delaware require some level of recurring filing, such as annual report and franchise tax. Although the required filing does not directly disclose member or manager information, it creates potential channels for third parties to infer the identities of LLC owners. Nevada requires an initial list and an annual list of managers (but not all owners), so it is not truly anonymous as the other three above-mentioned states ([32]).

3.2.6. Other Factors

There are other factors to consider when choosing a business formation state, but usually they are not decisive. One constraint could be the company name availability. If a company name has already been registered in a state, no other entity may choose the identical name in the same state. Consequently, the owner has to change the business name or look for another state.

Since business registration regulations in the United States are primarily enacted at the state level rather than federally, and the out-of-state registration option is available, a proprietor can choose any state to form a business entity. The comparison of all 51 jurisdictions showed substantial trade-offs among formation costs, administrative flexibility, liability shielding, and privacy protection. No single jurisdiction consistently outperformed all others. A supplementary review of publicly available business-formation guides was conducted to assess how these trade-offs are resolved in practice, and which states are most frequently recommended for business formation ([19]; [15]; [53]).

The vast amount of existing data has pinpointed that when registering a company in the United States, three states emerge as the top choices for the majority of individuals and organizations: Delaware, Nevada, and Wyoming ([36]; [67]). Delaware currently hosts over 1.5 million registered companies. In fact, more than two-thirds of the companies listed in the U.S. Fortune 500 (the top 500 companies by total revenue) are incorporated in Delaware ([11]). Nevada and Wyoming also attract a significant number of companies ([71]). The key features of business registration in each of these three states are outlined below.

3.3.1. Delaware

Delaware’s primary advantage lies in its legal system. Delaware’s corporate laws are undisputably regarded as the most sophisticated in the United States. The Delaware General Corporation Law (DGCL) is renowned for clarity, predictability, and flexibility ([29]). The Delaware Court of Chancery specializes in business cases, with judges resolving disputes rather than juries. The state legislature reviews and updates corporate laws annually. Furthermore, the judicial process is expeditious, and legal costs are low.

For business registration, filing fee in Delaware is not the cheapest. It increases at different rates based on the number of authorized shares, with breakpoints at 20,000 and 200,000 shares ([16]). But Delaware’s office of the Secretary of State operates with high efficiency, which intrigues many entrepreneurs.

Typically, Delaware is not considered a low-tax state for potential business owners. Delaware’s corporate income tax rate is 8.7%, which is at the high side compared with other states. However, this tax only applies to companies conducting business within the state, people who incorporate there but only operate in other states would avoid such tax. Delaware imposes franchise tax. LLCs pay a flat fee of $300 per year while corporations pay up to $250,000 per year, which is a substantial amount. However, there are some tax benefits in this state, for instance, stock of Delaware corporations owned by nonresidents is exempt from Delaware taxation ([65]).

Delaware is one of the leading states for liability protection. It not only protects shareholders’ personal assets from corporate liabilities but also shields the company assets from members’ personal debt. In addition, Delaware is one of the top states with strong privacy protection. It safeguards investor’s privacy by maintaining a strict separation between corporate information and shareholders’ personal details.

A unique advantage from Delaware is the strong investor and venture capital (VC) acceptance. This is directly related to Delaware’s business-friendly corporate law and the excellent reputation of its business courts. Investors are comfortable with Delaware companies because they can better predict legal outcomes on corporate issues. Gaining a more advantageous position in potential economic disputes and resolving legal issues quickly and smoothly outweighs Delaware’s administrative fees, annual report requirement, and relatively high tax rate. Many investors prefer Delaware companies also because they are familiar with Delaware’s corporate structure. This will make potential acquisition or IPO (Initial Public Offering) smoother. Nowadays, many VC term sheets and private equity deals include Delaware incorporation as a condition ([5]). This gives Delaware a significant advantage as a state of business formation if a company has the potential to go public. In fact, many well-known companies, such as Amazon, Google, Tesla, Walmart, American Express, and Disney, are registered in Delaware.

Overall, the preference for Delaware as a business formation jurisdiction demonstrates the overwhelming importance of legal infrastructure in determining where businesses choose to register. For corporations pursuing outside investment, Delaware is the established standard for incorporation. For out-of-state LLC’s, Delaware also remains a leading option, due to its business-friendly legal environment.

3.3.2. Nevada

Nevada’s initial filing fee for LLCs is $425, more expensive than most states, as on top of the Articles of Organization fee of $75, it requires $150 for initial listing of managers and $200 for business license. For corporations, filing fees are even higher. The Articles of Incorporation fee for corporations is not a flat amount, it starts at $75 and increases with increasing value of authorized shares, with a maximum of $35,000. The business license fee of $500 for corporations makes the minimum formation cost reach $725, much higher than the filing fee in most other states ([43]).

Although Nevada does not levy a state corporate income tax, it requires annual list fee ($150+) and annual business license fee, even for companies not operating in Nevada. The cost for LLCs every year is a flat $350, while for corporations, the annual cost is $650 - $11,625 ([43]). Nevada also charges a commerce tax for all businesses with gross receipts over $4 million. Compared with typical income tax rates, the commerce tax rates of ~0.05% to 0.33% on gross receipts are relatively low, though ([50]).

Nevada is a state with strong liability protection, similar to Delaware. Their charging orders generally limit remedies available to personal creditors, protecting company assets ([42]). Nevada’s privacy protection for business owners is stronger than most states, but it is not a state with truly anonymous LLCs. This is because its initial and annual lists only require identification of managers or managing members, hence non-managing members can be invisible to public ([72]). Overall, zero state income tax and strong liability protection make Nevada a popular state for business formation. But the tax advantages are offset by extremely high registration fees, business license fees, and commerce tax.

3.3.3. Wyoming:

Wyoming is attractive to investors mainly because of low cost and high privacy. The $100 business registration fee and $60 (or 0.0002 of assets in state) annual report fee are relatively low. And there is no state corporate income tax, franchise tax, personal income tax, or business license fee in Wyoming. The sales tax rate is only 4% ([60]). In Wyoming, the names of company members and managers are not disclosed. In addition, Wyoming has business regulations friendly to investors. It is one of the states with strongest charging order protection, shielding personal creditors from taking control of LLCs.

3.3.4. Other States:

Although registration in a state does not guarantee physical operation in that state which adds tax revenue and job opportunities to the community, it still brings financial benefits (formation fee, franchise tax, etc.) and jobs (through in-state registration agents) to the local economy. In the long run, registering in a state increases the probability of operating in that state, which means more capital investment and job creation. Many states are trying to attract businesses by simplifying company registration process, reducing costs, and improving legal support. South Dakota and Rhode Island offer tax incentives ([54]; [59]), New Mexico and South Carolina have no annual report requirement ([18]), Connecticut and Mississippi are phasing out their franchise tax by 2028 ([42]; [38]), and Nevada is developing a specialized business court system ([41]). A few additional states of public interest were also studied, and their highlights are described below.

1) New York State

As New York being the largest financial center in the United States, the advantages of registering in New York State include easier access to capital, strong international reputation, and well-developed commercial law. However, high taxes and high fees are the obvious disadvantages.

2) Florida

Florida is attractive mainly for home-registered businesses who operate in the state. The key contributing factors include no personal income tax, the large and growing population, and business-friendly regulations. These advantages diminish if a company does not intend to operate in Florida. If only looking for a business formation state, Florida usually is not a top choice due to no specialized corporate court, relatively high initial and ongoing costs (with corporate income tax of 5.5%) ([22]), and low owner privacy.

3) California

California is the 4^th largest economy in the world and #1 in new business starts ([24]; [6]). This claim made by the Governor of California makes people think that California is the top choice for business formation in the United States. However, the claim only refers to business operation not business formation. Similar to Florida, registering a business in California may be beneficial only if the business operates there. This is because California maintains high taxes/fees and rigid regulations despite the proximity to venture capital. The process of setting up a company and maintaining compliance can be costly and time-consuming. California’s corporate law has less management flexibility and owner privacy than most other states. For example, California law requires corporations to have at least three directors (except for corporations with fewer than three shareholders), mandates cumulative voting for minority shareholders, and demands a Statement of Information that discloses information of key officers ([7]).