Principal Place of Business

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What is a Principal Place of Business?

A corporation’s principal place of business is defined as the place where a corporation’s officers direct, control, and coordinate business activities. It has been also called the "nerve center" of a corporation and is normally the corporation’s headquarters. Depending on individual state laws, corporations are usually required to designate their principal place of business with the Secretary of the State.

Test

In order to determine the principal place of the business, courts consider two questions:

  1. What state has the largest volume of the corporation’s operations?
  2. What state has the highest number of the corporation’s top executives?

If the answer for both questions is the same, then that state will be the principal place of business. If the answers differ, then courts will look at which state maintains the substantial preponderance of the operations.

Why is This Important?

Principal place of business is important for jurisdictional purposes and will be used to determine the location of a lawsuit. Issues of this nature should be handled by an experienced corporations lawyer.

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Last Modified: 07-25-2013 11:22 AM PDT

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