How is corporate citizenship determined for diversity purposes?

• A. The state of incorporation and the principal place of business (nerve center).
• B. The state of incorporation alone.
• C. The location of the company’s headquarters only.
• D. The state where the company has its largest market.

Answer: (A)

Corporate citizenship for diversity purposes is determined by two elements: the state of incorporation and the principal place of business (the nerve center). The principal place of business is where the corporation’s high-level officers direct, control, and coordinate its activities—that central management location, which is usually where the corporate headquarters sits, but not always the same as the physical headquarters. This two-part test, clarified in modern law, means a corporation is considered a citizen of both the state of incorporation and its principal place of business. The other options fall short because they rely on only one factor or on criteria that aren’t tied to how courts determine corporate domicile for diversity.