Making an LLC? Don’t make these 6 common mistakes
1. Don’t choose a name of an existing business.
It’s not worth it, you’ll likely violate the other businesses trademark and it may cause you other legal issues down the road. Before you incorporate your business name check out the Patent and Trademark office database, and do a thorough Google search.
2. Don’t forgo making corporate governance documents before you start operating your business.
Take some time and set up an (a) an operating agreement, and (b) a buy/sell agreement. Sure you’re starting a business with your brother that you love and everything is good now and will hopefully remain so, but you just don’t know what the future holds. Make it easier on yourself and plan for the worst. Trust us.
3. Don’t commit fraudulent acts. Your LLC will not protect you. The corporate veil does not provide you liability protection carte blanche. While we’re at it - don’t commingle your personal and business accounts because that could also cause you to lose your corporate protection.
4. Don’t forget to put the proper assets into your new entity.
After you form your LLC, you must be sure to place all assets that you intend to belong to the business into the business. You can do this through a bill for a sale or purchase of goods or an assignment for intangible property, or intellectual property.
5. Don’t forget to register trademarks, trade names, copyrights and other intellectual property.
This can cause you serious financial repercussions. A “federal trademark trumps a domain name” so you could potentially lose your company name and website domain in the event you lost your trademark after you were already in business.
6. Incorporating your business in a different state ( like Nevada or Delaware) for legal benefits. This is very rarely a smart move for a small LLC to do. Consider the cost of incorporating in two states, maintaining an agent, filing paperwork, and paying fees in both states. This sometimes makes sense for larger companies but most companies should incorporate in the state your business operates.