Limited liability companies are some of the common business entities even for individuals who want to start businesses alone or together with others. They have a ton of advantages and convenience. For example, the owner can choose how to be taxed, can enjoy the protection of assets because their personal properties are protected and so on.
Although the process of setting up an LLC is involving and complicated, those who wish to form these business types can work with LLC formation services like ZenBusiness and others.
However, as earlier stated, some people make some costly mistakes when forming LLCs. Here are some of those mistakes to avoid:
Not Keeping Your LLC Compliant
While some people think that their work in maintaining compliance of the LLC ends when the company is formed, there is still so much that needs to be done to maintain the corporate shield. If an entity can prove you have not complied to maintain the corporate protection, you could be exposed and have your assets at risk. For example, you have to separate the company’s monies and yours, submit your annual reports as required by your state of incorporation and so on.
Incorporating in the Wrong State
It would help to consider some factors when choosing the state in which to incorporate your business. Some of the most preferred states for incorporating LLCs include Nevada and Deleware. The reason Delaware has become many people’s favorite to incorporate their LLCs there is that it has some of the most-flexible, most-developed and pro-business statutes in the entire country. On the other hand, Nevada has low filling fees and no state corporate income, personal and franchise income tax.
Nevertheless, these advantages work in favour of large companies with more than 5 shareholders. If your business is small, you are better off incorporating in the state where the company has a physical presence. When you incorporate outside your state, you may face high costs like having to hire a registered agent and problems opening bank accounts.
Incorporating Without Relevant Licenses
Some people assume that incorporating or forming an LLC is equivalent to obtaining a trading or business license. However, the business must obtain a state, federal or local business license according to the legal requirements. Therefore, it would be best when you incorporate your company to find out what licenses your business needs and obtain them. While most business licenses are inexpensive to get, operating without them could lead to high fines.