Common Mistakes

By now you are likely aware of the various reasons that make an LLC formation or incorporating your business beneficial and have probably decided to complete a business filing and formalize your business structure. In order to reap the rewards associated with your decision, you must get it right. Below is what we have found to be the 5 most common business filing mistakes made when either incorporating a business or going through the LLC Formation process. Keep in mind that making some of these mistakes could easily erase the very benefits you are after.

1. Forming a “skeleton” corporation. Filing the paperwork, paying the business filing fees and paying your taxes are simply not enough to receive the full protection and benefits that incorporating a business can provide. Failing to complete the process can result in the “corporate veil” of your company being pierced, resulting in personal liability for the owners. Depending on the structure you choose, here is a partial list of items, which can result in a “skeleton” corporation, if not completed properly.
   
   
   • Hold an organizational meeting of the Board of DirectorsCreate Bylaws
   • Elect Officers and Directors
   • Issue stock
   • Create a stock ledger
   • Open a business bank account, separate in every way from your personal accounts
   • Keep minutes of all Board of Directors meetings
2. Choosing the wrong business structure. Take the time to research your options. Your business entity can be dissolved and/or changed if you realize a mistake, but it is costly and time consuming. You should get your business filing right the first time.
3. Organizing the business yourself. It can be tempting to file your own company with the Secretary of State, but this scenario creates the most opportunities for errors. Professional business filing services and attorneys are generally the best choice.
4. Not forming a formal structure because the business is “too small”. Frequently, small businesses do not formalize the structure of their business. This will generally open the owner to unnecessary taxes and liabilities. An LLC formation may be right for a small business.
5. Not forming the business at the appropriate time. Not creating the proper structure for your business right from the beginning can create both tax and liability issues. It can also be more cumbersome to incorporate later, since all of the documentation related to the company will need to be changed. This applies to everything from stationary to bank records.