• October 2018
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Incorporation: What are common mistakes to avoid when setting up an LLC?

The number one mistake people make when forming an LLC is failing to hire a lawyer. Ideally, legally forming your company is not a DIY endeavor. Whatever money you think you are saving by not hiring a lawyer to help incorporate your business is far less than any costs you may incur without having had any legal guidance if something goes wrong with your business down the road.

Another big mistake is not knowing the laws of the state (and/or country) in which your business is being incorporated. In the United States, corporate law is not uniform and each state has its own quirks and nuances; so careful attention must be made to the business laws of the jurisdiction in which your business is legally formed. This includes securing the correct business licenses. Thus, using form incorporation documents you find through an internet search is a really bad idea. A lawyer will be able to guide you as to the best place to incorporate your business.

Problems may also arise if you do not take some time researching and planning. For example, before you incorporate, you need to make sure the name of your business is not already being used in the state you are incorporating. You also need to make sure you have a reliable accounting system in place and a plan for maintaining any and all records related to your LLC. You never know when you will have to put your hands on this information. In addition, you should set up a bank account that will be solely for your LLC and separate from all or your personal funds. LLCs are a great means to protect your personal assets when problems arise with your business, but not if you are commingling business and personal funds.

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