Are you tired of spending countless hours wasting away in front of a computer in a company that you don’t even own? Perhaps it’s the right time for you to start a business to call your very own? However, you might have dreams of grandeur and perhaps you already have the necessary resources to start a corporation. If so, then don’t think about your choices and take that leap of faith.
However, all your excitement might lead to errors that might even cost you the entire corporation. So before your enthusiasm gets the better of you, here are the top 4 mistakes that you should watch out for when you’re creating a corporation.
Mistake #1 – Choosing the Wrong Business Entity
The three most common types of business structures in the US are S Corporation, C Corporation, and Limited Liability Company (LLC). These aren’t just your ordinary words that you can place right at the end of your business’ brand just for it to sound important. If you choose to add LLC, it’s a great structure for small businesses that want protection from liabilities but also want a minimal amount of paperwork and formality. If you choose a C Corporation, you’ll have to file the business tax report, which means this choice isn’t recommended for most freelancers. Then finally there’s the S Corporation, and this business structure is a pass-through entity for federal taxes. Also, an S Corporation is an ideal choice for small businesses that can qualify.
Mistake #2 – Putting in the Wrong State
A couple of the hottest states in the nation to put a corporation are Delaware and Nevada. Delaware offers some of the most flexible, developed, and pro-business environments in the US. As for Nevada, it’s become a popular go-to location for business entities because of its low filing fees, as well as the lack of state corporate income, just to name a couple of reasons. However, if you incorporate the wrong state in your filing, then you’ll be dealing with too many hassles that number more than the fingers on your hands and the toes on your feet.
Mistake #3 – Setting Up the Business Without the Required Business Licenses
Note that even though a corporation is still technically a business, they don’t have the same business license. Most businesses in the nation are required to get some form of state, federal, or local license. Check with your local government to see what business licenses are necessary for your corporation to run properly without getting in trouble with the law.
Mistake #4 – Your Corporation Isn’t Compliant
Once you’ve submitted all your applications, it doesn’t mean all your troubles are now over. You must now keep your business entity in compliance. If a plaintiff shows you that your LLC or corporation isn’t compliant, then your personal assets will become vulnerable.
Creating a corporation might be tough to begin, but know that the fruits of all your labor will pay off in the end. For more information on how to properly set up your business entity, check out https://windsorcorporateservices.com/glossary/.