Choosing a Business Location — Legal & Practical Considerations
While it may initially seem like a small matter of preference, choosing the location to incorporate your business is a significant decision for tax, licensing, and regulatory purposes. Business laws vary greatly by state, and some states are known to be more business-friendly in their tax rates and registration requirements. Others offer more progressive forms of business structures, such as allowing certain forms of benefit corporations. Certain business locations may also be more amenable to your area of expertise or the type of customers you are trying to reach. Before deciding on a business location, you may wish to talk to others in your industry, corporate lawyers, and financial advisers to get advice on your business strategy.
Practical Considerations in Determining Location
As an initial matter, there are a variety of practical considerations that should be considered before finalizing a business location. You must carefully consider the product or service you will be providing and the customer base you are hoping to reach. For instance, a more urban business center may be a better fit for a dry cleaning location or day care center, since you are likely to tap into a base of business professionals eager to have services provided to them close to their offices. Conversely, a lawn or garden company would probably fit better in a more suburban location, where individuals are more likely to live in homes with property and lawn space.
Local zoning ordinances may limit which kinds of businesses can operate in a certain location or how those businesses may function.
After identifying a broad area or neighborhood that best suits your business, you will need to consider the more nitty-gritty details of certain locations. From a financial perspective, a primary consideration is rent and any additional maintenance expenses that may be tied to certain available spaces. As a business just starting out, you do not want to overextend yourself by putting too much of your finances into a rental location. Additionally, you will want to consider details such as the availability of parking for customers, walking traffic, nearby businesses, and any special physical requirements that your business may need. For example, if your business is in need of any electrical requirements, commercial kitchen equipment, or specific heating or cooling parameters, these will likely be priorities during your search.
Regulatory and Financial Considerations
In addition to locational concerns within your community or city, for some businesses it is also important to consider the state of incorporation. This is less of an issue for small companies or mom-and-pop shops, but if you are an experienced business owner considering a larger joint venture, or are contemplating a business model that involves interstate or overseas commercial activity, the state of incorporation can be important. For instance, if your business will be taxed at the corporate level, you will want to research applicable corporate tax rates, which can vary dramatically. Likewise, states have drastically different filing and registration processes for incorporation, as well as filing fees. Finally, there are more complicated jurisdictional questions that can arise when your business operates in one state but is incorporated in another. For more information about these issues, it is best to consult with a qualified corporate attorney.