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For Want of a Nail . . .

Posted by Seth Elliott On December - 6 - 2010

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This article was first published as “For Want of a Nail . . .” on Technorati

For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail.

Allowing small undesirable situations to spiral and grow inexorably worse is particularly dangerous in Startup World. Take care of first things first, no matter how minor the details. One of those seemingly minor details is deciding where to form your business.

In the past, many entrepreneurs chose to incorporate in Delaware (or more recently Nevada) due to more favorable terms. However, many of these favorable terms are no longer relevant – or applicable to startups. For 99% of startups, registering in your home state is the best choice, allowing you to take advantage of low cost and regulatory ease.

Let’s take a closer look at some of the advantages of home state registering:

Low Cost. Fees to register a business vary depending upon your state of residence They can be as low as $41 (Kentucky) and as high as $300 (Texas). In 34 states it’s $100 or less to incorporate – and in 8 of those it’s only $50 (or less).

Ease. It’s never been easier to incorporate. In many states, you can actually perform the entire process online. Even when you need to submit paperwork, it’s relatively simple to do if you are a resident of the state. Additionally, by registering in your home state, you don’t need another physical address and/or a registered agent. Of course, you also avoid the need to obtain a foreign corporation business license in your state of operations. These facilitate the process – plus save even further on costs.

Home Field Advantage. Any future needs in regards to complex structures may require the assistance of an attorney. Home state registration enables you to use a local practitioner, which can prove less expensive and more manageable.

Intrastate Securities Law Exemption. If you raise angel financing, you may find an intrastate offering example useful. To qualify, a company must be incorporated in the same state where it is offering the securities and carry out a very significant amount of its business in that state. If you incorporate and do business in your home state, this could prove extremely valuable to you – saving significant resources in terms of management time, paperwork, and attorney fees.

Registering your business is simply an administrative detail. As trite as it seems, failure to address this formation requirement early may be costly later on.

With minimal thought, effort and expenditure, your new venture can be up and running in a matter of days – and in the future your kingdom won’t be lost for lack of a horseshoe nail.

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About the Author

I have spent the last 15 years advising entrepreneurs on starting and growing their businesses, as well as assisting in financing those growth efforts. I have also been an entrepreneur on several occasions myself. By writing this blog, I hope to provide actionable advice on how to achieve your goals and become more successful.

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