Top Mistakes Made by Entrepreneurs Forming an LLC

A limited liability company, or LLC, is a form of business that is provides limited liabilities to its owners. This institution has certain characteristics of both a corporation and a partnership, thus it is sometimes misinterpreted as a limited liability corporation.

LLC Mistakes

It is not always easy to start a business, and while forming an LLC entrepreneurs sometimes make certain mistakes. Some of them are:

Operating without having proper local business license

When you form an LLC, don't make these mistakes.
Don’t make these mistakes when forming your LLC!
Getting a proper license and permits is an important process that has to be handled with a fair amount of knowledge of state laws before forming an LLC. Too often, these are not done properly by the owners and they discover that they are not in compliance with the local business laws and policies. This results in paying of thousands of dollars as fines or back taxes, or even additional penalties, by the company.

Assuming unlimited liability protection under corporate veil

An LLC always affords liability protection, but that protection does not cover any criminal acts, fraudulent practices, or use of corporate funds for personal expenses. These can ultimately result in financial and personal criminal offences—and you could be responsible for huge penalties and punishment for going outside of the law.

Incorporating and not filing proper taxes and periodic papers to the state government

Every state follows its own laws to deal with taxes and periodic corporate paperwork for any business being conducted. During and after forming an LLC, the state demands updates on ownership, tax liability for the particular municipality, and also updated corporate records for the kind of business your organization is conducting. Sometimes, owners of LLCs fail to submit these required documents and thus ignore the state laws, which results in penalties.

Waiting to obtain international intellectual property protection

You may not know it, but your business automatically owns anything it creates: website copy, sales brochures, training videos, and so on. This is the case under the law.

However, registering your intellectual property with the US Copyright Office (or the US Patent and Trademark Office, as appropriate) is an important step in protecting those automatic rights: if someone else were to send in a registration before you did, everything gets a lot more legally complicated—and expensive. Your business’s intellectual property protection is in your hands.

Image courtesy of Toms Bauģis. Some rights reserved.

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