The Corporation or Business Operating in One or More States; Selecting the State of Incorporation - Chapter 16 - Advising Minnesota Corporations and Other Business Organizations - 2nd Edition

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CHAPTER 16
THE CORPORATION OR BUSINESS
OPERATING IN ONE OR MORE STATES;
SELECTING THE STATE OF
INCORPORATION

§ 16.01 Introduction

Corporations are often said to be a creature of the state. More
specifically, corporations may be said to be a creature of state law,
because there is little federal law that relates specifically to the
governance and internal policy making of corporations.1 Because the
legal fate of a corporation is left to each of the fifty states, rather than one
national government, many different sets of state laws impact on
corporations, not only during the formative and dissolutive stages of a
corporation, but also during continuing operations. Although a survey of
the differing state laws with respect to corporations is beyond the scope
of this work, a survey of the primary areas in which these laws may
differ is not. Presented below are several areas of corporate law where
states provide differing treatment.

For most smaller business entities that decide to operate in the
corporate form, selecting the state in which to incorporate is a simple
matter. Such corporations typically incorporate in the state where they
expect to conduct the majority of their business. However, when larger
corporations are formed,2 selecting the state in which to incorporate often
becomes a more complicated issue. This Section examines the
considerations surrounding the selection of a state in which to
incorporate.

Historically, corporations have had the right to choose the state or
states in which they incorporated, and many simply chose the state in
which they did the majority of their business. In order to minimize the
tax burden on the corporation, it was (and is) advisable to incorporate in
only one state, and there was little reason to incorporate in a state other
than that where the business was located.

In the latter part of the nineteenth century, some states began to
realize that attracting corporations to their state would mean increased
revenue in the form of corporate income taxes, corporate formation fees,
and the like. Delaware is perhaps the leading state to cater to
corporations, passing statutes designed to lend uniformity to the law of
corporations, lowering the fees that a business pays to incorporate, and
generally removing barriers to corporate formation in Delaware. In fact,

Chapter 16 The Corporation or Business Operating in One or More States: Selecting the State of Incorporation

§ 16.01 Introduction

§ 16.02 State Corporations Law

§ 16.03 Corporate Income Taxation

§ 16.04 Shareholder Welfare

§ 16.05 Piercing the Corporate Veil

§ 16.06 Products Liability Laws

§ 16.07 --Contributory and Comparative Negligence

§ 16.08 --Liability for Torts Committed by Predecessor Corporations

§ 16.09 Environmental Law

§ 16.10 State Laws Regulating Corporate Voting

§ 16.11 Officer and Director Liability for Actions of the Corporation

§ 16.12 The Meaning of "Doing Business" in Minnesota

§ 16.13 --Minnesota Taxation

§ 16.14 --State Jurisdiction over Corporations

§ 16.15 Out-of-State Revenue Streams and the Tax Laws

§ 16.16 Tax Treatment under Federal Law

§ 16.17 Corporate Ownership of Property

§ 16.18 --Corporate Ownership of Real Property

§ 16.19 --The Agricultural Foreign Investment Disclosure Act of 1978

§ 16.20 --Corporate Ownership of Personal Property

§ 16.21 Offices in and Contacts with Other States

§ 16.22 Use of Out-of-State Labor

§ 16.23 Use of Labor from Out of the Country

Roger J. Magnuson is a Partner at Dorsey and Whitney, LLP, where he serves as Head of the National Strategic Litigation Group and has practiced since 1973. He has been recognized as one of the top trial lawyers in the United States by major national and international publications, including Chambers International Guide to American Lawyers, which profiles the top 500 trial lawyers in the United States, Best Lawyers in America, Who's Who in American Law, and Who's Who in America. Mr. Magnuson was also recognized by a Journal of Law and Politics' survey for Judge's Choice "Wins Most Cases."

Some high profile cases that he has litigated include representation of the Florida Senate in the Bush v. Gore election controversy in 2000; and representation of the Plaintiffs in the widely publicized and studied Mall of America case. For several years he has represented, among other persons and entities, the Minnesota Twins and Major League Baseball principals and players in litigation; and has litigated national and local cases in federal and state court venues. He has appealed before the Supreme Court in a number of cases; as well as the Minnesota Supreme Court. He has authored several articles and 7 books.

Richard A. Saliterman is a Principal in Saliternan & Siefferman P.C., a full-service firm in Minneapolis established in 1976. Mr. Saliterman is a leading expert on corporate business matters, and is the author of several publications on business start-ups, franchises, and trademarks. Mr. Saliterman is the former National Judge Advocate for the U.S. Navy League, based in Washington D.C.

Contributing Editor:
Amanda Chang

Contributing Authors:
Alecia Anderson
Seth Back
John Baker
Shannon Berg
Constatin Burachek
Benjamin Carpenter
Ryan Check
Carl Christensen
Peter Fear
Michael Frasier
Aaron Hall
Catherine Hanson
Paul Harman
Amy Ithlan
Michael Kern
Chris Kuhlman
Brett Larson
Joshua Lederman
Karen Lundquist
James Magnuson
Jennifer Mead
Rao Menier
Heidi Miller
Rachael Moxon
Oliver Nelson
Scott Peitzer
Mitchell Skinner
Jonathan Stechmann
Lael Weinberger
Jonathan Wilson
Alex Zumbulyadis