Limited liability companies have, in recent years, become one of the most popular legal structures for budding businesses wishing to bloom. The exact requirements of setting up an LLC may vary from country to country, but it is a relatively simple process. In most places, it can usually be done in an hour. It all depends on the complexity of your organizational structure.
Since most small business owners are not quite adept in taxation and business law, they usually make mistakes which have a lasting impact on their business. So if you are a small business hoping to set up an LLC, you must know the following mistakes before you ask someone how to start an LLC?
Selecting the Wrong Business Entity
A limited liability company is best for small businesses desiring liability protection along with minimal paperwork and formalities. You need to check the different types of LLC that can be registered in your country and choose the one that perfectly fits your needs and futuristic vision. You also need to consider the current standing of your business and your finances. LLCs are taxed, you should pay attention to details and see where you will be paying the least. Also if a business is run by partners dividing the profits, they should also consider an LLC option that has more flexibility in sharing profits and paying taxes.
Incorporating in the Wrong State
Different states in the U.S. have different regulations when it comes to forming an LLC. One may find a state attractive due to the number of successful businesses it has, but one size never fits all. For example, Nevada and Delaware are hot states for business. Delaware features the most developed, pro-business flexible statutes in the U.S. Nevada, on the other hand, gains popularity due to its low filing fees along with the lack of state corporate income tax, franchise tax, and personal income taxes. A small business might find all this very attractive, but actually these benefits are more suited to larger companies.
Not Having Necessary Business Licenses
You must remember that an LLC license is not exactly the same as a business license. Most businesses in the U.S. need to procure some form of federal, state, or local license. This even applies to a freelance writer who is working from home. Therefore, it is important that you should check with your county office or local city hall to know what kind of license you might be needing.
Not Keeping Your LLC Compliant
All of your applications are done and your LLC is formed. Is that the end of your job? Definitely not. Once your business is developed and registered, you also need to keep your business entity in compliance. Your corporate shield can be badly pierced if a plaintiff manages to show that you have not properly maintained your LLC. So make sure your LLC remains compliant to the regulations or you will lose it all.
Do you or have you ever owned an LLC?
If so, did you encounter any of these mistakes?
See ya later,