It’s a new year, which means it’s time to leave the triumphs and troubles of last year behind, and instead focus on accomplishing a new set of goals in the next 12 months. But while dwelling too much on the past is unproductive in businesses (and in life), there are important things we can learn from previous experiences.
For instance, business incorporation can be a smart move forward for companies looking to grow, but knowing when and how to do it is not always easy. In these situations, locating the common traps and pitfalls to starting your own corporation can be a huge help in avoiding them.
Mistake #1: Incorporating too soon.
Many people rush into business incorporation to protect themselves against personal liability. However, there are a number of reasons why this isn’t always the best idea, one of which is that the corporate shield does not protect a business owner as much as you might think. Often, you can still be held legally liable for damages or even face criminal prosecution to answer for the misdeeds of your company.
Also, even though shareholders will receive some financial protection from debts acquired by their organization by incorporating, lenders typically require owners to sign a personal guarantee when applying for a loan, which negates this benefit.
Mistake #2: Choosing the Wrong Business Structure
There are three basic business structures in the U.S. apart from sole ownership. LLC is the simplest and most common structure by far. S corporations have more flexibility and can be treated like a partnership for tax purposes, whereas C corporations are generally for larger organizations with many shareholders. Choosing the wrong structure can drastically affect how much you pay in taxes and the amount of paperwork you must maintain.
Mistake #3: Missing Tax Return Deadlines
Falling behind on tax filings will lead to steep penalties and fines, and may even jeopardize your incorporation status. Each state has their own rules and requirements for submitting the proper documentation, and it can be difficult for more complex structures, like C corporations, to keep track of the mandatory deadlines.
Mistake #4: Failing to Seek Help
Nowadays, business owners have many useful resources at their fingertips, with online services that will prepare the paperwork for you and file it on your behalf. Even business incorporation can be filed in just minutes by going through trusted online services like MaxFilings.
Get a running start this year and avoid costly mistakes down the road by registering your business with MaxFilings today! Browse our main site or article database to learn about how online incorporation works and find out what other business services we offer.