Best States To Incorporate A New Business

Incorporate A New Business

Deciding where to incorporate your business is one of the first things you should do as a business owner.  While it may look like a simple and straightforward task, and your choice will mostly lean on starting your business in your home state, it may not be the best option. 

Considering different options for the different states to incorporate your business can help you make a good decision in terms of cost, taxes, corporate laws, and other factors that make some states better than others to incorporate your business. 

We help you find some of the best states to incorporate a business and things you should consider before making your final decision. Keep in mind that this guide applies to any business you plan to incorporate, whether it’s an LLC, a partnership, sole proprietorship, or a corporation.

What States Should I Form a New Business

With 50 states at your disposal, you need to compare different factors that can help you decide on the best state for your business. Here is what to focus on:

Doing Business in Your Home State

If you are very confident of running all your business errands in your home state, then incorporating it may be the best option available. Conducting business in a state means having its physical presence in the location, the employees, and properties.

If you go with this option, you will only need to meet your home state’s statutory requirements.

But if you run your business activities outside your home state, you will need to file an authorization to transact in the other state. This means additional fees, filing reports, and other administrative burdens.

State Taxes

Some states have a better tax environment than others. For instance, if you incorporate your company in the state of Delaware but do not transact any business activities there, then you will not have to pay any state corporate income tax. Also, if you are not a resident in the state, you are exempted from paying personal income tax.

These other states do not charge any corporate income tax: Nevada, South Dakota, Washington, and Wyoming. In addition to Alaska, Florida, and Texas. In addition to that, you are not subject to personal state taxes.

Investor and Public Cooperation

If you are looking to introduce different investors to help you start your business, you should consider where most investors prefer businesses to be set. Again, Delaware’s state makes a better choice if you want to start a large and publicly held corporation. It may not be worth it if you are just seeking to start a small business.

Otherwise, with investors more familiar with the structure and best states to put their money in, you may consider going their way.

Best States to Incorporate Your Business

  • Wyoming is ranked the best to incorporate a business based on its excellent standards in providing a tax-friendly environment regarding corporate tax and individual income tax.
  • South Dakota is second in the best states to incorporate a business due to its best individual sales tax environment.  Its unemployment tax environment has also improved over the past two years. As a result, made its way past Alaska to the second position.
  • Alaska with the unemployment tax environment becoming slightly worse in the state, Alaska lost its second position to South Dakota. It’s now third in the best states to incorporate a business. Despite the drop back, Alaska is still among the best states due to its leading individual income tax environment.
  • Florida has maintained the fourth position for the third time in a row. But it may find its way to the top three as its corporate taxes have been cut recently.  After being ranked 19th in the corporate taxes for the past two years, Florida found itself ninth in this area in the latest rankings.
  • Montana closes the top five list of the best states to incorporate a business. Although the state is known for not providing better individual income taxes and corporate taxes, it’s fifth in the list due to its relatively better individual sales tax, which is ninth in the list.


When you want to incorporate a business, certain factors are considered to allow you to enjoy some benefits. Compare different regulations from different states and how your business will operate to make the right decision.