You've made a decision. Your business needs to incorporate. Many excellent reasons lie behind your decision, not the least of which is the protection of your personal assets. Before you file in your current home state, consider the possibility of a "foreign filing".

No, a foreign filing to incorporate a business doesn't always equate to filing overseas or out of the country. The term is routinely used when an individual, much like yourself, incorporates his business in out of his own state of residence.

Why would you even consider this, you ask? Some states offer corporations more protection and benefits than others. If you don't already live in Wyoming, Nevada or Delaware, you may want to seriously consider filing in one of these three states.

Consider the state of Nevada for instance. It levies no corporate income tax on profits (nice!), it possesses no state annual franchise tax and it also has no personal income tax. Not a bad combination.

Advantages to incorporating in the small state of Delaware are so numerous that the majority of companies listed on the New York Stock Exchange list that state as their home.

And in Wyoming, there are low fees for incorporation, as well as the absence of state taxes for these business entities. Besides that, Wyoming has no inventory, franchise, or excise taxes.

But nothing in life is totally without disadvantages, now is it? And if you decide to do a foreign filing, here are some of the drawbacks. First, you need "a presence" in the state you incorporate. This means that you must have a legal representative who resides in that state. Sure, it could be your cousin, Vinny. But how many of us have relatives who live in Delaware?

You could hire a legal representative, but before you do that, be sure to do some research. Discover how much they charge, their overall reputation, what their fees include, and get references.

In addition to the representative, you have to consider if - or how much - all the taxes and fees incorporating in another state costs in the long run. As you surf the web searching for this information, you'll find plenty of firms to help you incorporate in one of these three states. And yes, they're plenty enthusiastic about it. And yes, they'll tell you all about the low or no tax requirements. But dig a little deeper.

Then dig a little deeper into your own state's requirements. If you incorporate in a state you don't live in, your home state may require you to file there as well - as a "foreign corporation." This probably means that you'll still be paying your home state's fees and taxes, too!

But that's not the only disadvantage. Let's say that someone does indeed sue your corporation. Yes, your personal assets are protected. Yes, by definition the individual or individuals will sue the corporation . . . whose presence lies out of state. The legal proceedings are not going to be conducted in the state in which you live.

Bingo! The legal proceedings will occur in the state in which the corporation lives. (And just for the record, a corporation under the eyes of the law has the same rights and privileges as an individual.) That means retaining an attorney who has the power to practice law in that particular state. And we haven't even talked about your need to travel to that state for any court appearances!

Incorporating your business is not a matter that should be decided overnight. Nor should you tackle this decision-making process alone. Get the advice of a good CPA and attorney - preferably ones who know your personal situation and business goals.

In addition, talk to individuals who have "been there, done that." If you know of anyone who has incorporated his business out of state, talk to him. Explain that you're in the same situation now. Ask him if he were to do it over, would he do it the same way?

Talk to those individuals who decided to file in your home state. Why did they choose this route? Were they at all tempted to file out of state?

Filing papers of incorporation is a big step filled with any number of major consequences down the road. While only you can make this decision, make sure it's a decision you've given some serious thought to.