Which state should I form my business in?

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Which state should I form my business in?

I’m looking to start an ecommerce business selling apparel. I currently live in California but I’ll be moving to Tennessee in a few months. I’ve also heard that many business owners form their entities in Delaware for the friendly business climate. Which state makes the most sense for me?

Asked on December 18, 2018 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

Probably TN. Here's why:
1) The idea that DE is business friendly is mostly a myth, except in regards to large companies which face (or may face) complex issues: at this point, the law regarding corporations and LLCs is essentially identical in substance across the country, from state to state. DE's courts do have more expertise than most in complex corporate, etc. issues, so big companies find some advantage to incorporating there, but for the vast majority of businesses, there is no real difference between, say, CA and TN and DE, etc.
2) The above said, you are more likely to be sued (or to sue) in your home state than anywhere else. While the substance of the law regarding most issues you might possibly face in court will be the same state to state to state, some details do vary, as do the names of relevant cases, the numbers of the statutes and regulations, certain time periods, etc. You may as well incorporate, etc. where you will be, so that if you are sued--or sue someone else--any local attorney(s) you have will be likely to be familar with those details.


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