Attorney Robert W. Olson, Jr., founder of Incorporation.Law.Pro™, has been forming corporations, partnerships and LLCs since
1987. Mr. Olson graduated from Dartmouth College (1981) and University of Southern California Law School (1984),
holds the highest attorney ratings of 10.0 Superb from Avvo® and 5.0 AV®
Preeminent™ from Martindale Hubbell, and in 2012, 2013 and 2014 received the #1 Avvo® Rating
in the United States for Corporate & Incorporation law. Protect yourself from the IRS and plaintiff
attorneys by avoiding the Top Ten Incorporation Mistakes:
Choosing the wrong entity.
There are business, legal, and tax reasons to be considered when choosing a business entity. Particular entities are not permitted
in some states for certain occupations and businesses, or the apparent tax and limited liability benefits of the chosen entity are
illusory. Sometimes, the best entity is the sole proprietorship, where no formal entity formation is even required! While I have
provided a cursory tax review and comparison of the various entities in the menu to the left, business and legal considerations also
must be taken into account.
Choosing the wrong name.
The name may already be taken, or otherwise conflict with common law rights of competitors, or prior filings for fictitious business
names, state entities or federal trademarks. The name may also be illegal for your profession. Don’t put yourself in the position of
having to rebrand your entire business by failing to check for legality or a prior conflicting name usage.
Choosing the wrong time.
Filing your entity at the wrong time of year, or failure to choose the right non-calendar tax year (if available), can cost you
$2,000 or more in additional taxes and other costs.
Choosing the wrong state.
Paying taxes and annual fees in more than one state is not necessary if you do business in only one state, but this is required if
you incorporate in a state other than the one in which you do business. Companies promoting Delaware and Nevada corporations rarely
explain this expensive byproduct of out-of-state incorporation.
Choosing the wrong tax status.
Sole proprietorship, partnership (LLC), S corporation and C corporation status may all be available, and it is essential to
consider their relative burdens and benefits. Nobody wants to pay unnecessary taxes.
Failing to obtain professional tax
advice. Mistake No. 6 begets Mistake No. 5. Get tax advice from a qualified and experienced tax attorney or CPA, not from your
neighbor or the internet. Tax advice is specific to your specific personal and business situation, and general statements about tax
preferences cannot be relied upon in individual cases.
Failing to complete required
documents and filings. Making all the right choices does no good if all the documents and filings aren’t completed. You also need
to have proof that you filed the document if the government loses it (which happens more than you might think).
Failing to complete annual
filings and minutes. Incorporation duties do not end with the initial filings. Annual maintenance and proper business practices
are necessary to keep your entity in conformity with state and federal law, and to maintain the tax benefits and limited liability
protections available to your type of entity.
Having a CPA form the
corporation. Forming a corporation is the practice of law. CPAs are trained in tax matters, but not in legal matters, and
invariably there are one or more necessary legal documents that are not completed and/or filed. It's like hiring a dental
hygienist to perform your root canal.
Having a legal document center
form the corporation. Using a CPA to form your corporation is bad, but using a legal document center is far worse. I have had to
repair innumerable corporations formed through one of these companies, and every single time the total client cost exceeds the cost
had I been hired to complete the entire corporate formation. "An ounce of prevention is better than a pound of cure."
If you would like to consult with an Incorporation.Law.Pro™ attorney to discuss and complete your incorporation or LLC
formation, please see below for an attorney working in your state:
If your state is not hyperlinked, please click here.
21 East Carrillo Street | Santa Barbara, CA 93101 | 888.963.1120
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