| A must read before you form your corporation. | | | | you just get a mailbox?") |
| We've talked to literally hundreds of business owners | | | | 8. Forming an entity and hiring independent contactors |
| over the years. If there's one thing we've learned | | | | and employees WITHOUT knowing the rules. (It |
| beyond the shadow of a doubt from those who have | | | | makes a difference as to which states you'll need to |
| been sued, needlessly poured money down | | | | foreign register.) |
| bottomless tax or expense holes, or whose | | | | 9. Forming an LLC taxed as a partnership WITHOUT |
| businesses have failed, it's this: NOT ONE was excited | | | | having an "official" partner . (Maybe the IRS won't |
| over the few bucks they saved by using a low cost | | | | notice...) |
| incorporator -- or worse, flying solo -- to incorporate or | | | | 10. Selecting an inexperienced or disreputable company |
| establish an LLC for their business. | | | | to help you form your entity. (There's no excuse for |
| Years and untold dollars later, they sorely regret the | | | | not checking references with the BBB, local |
| hard work, stress, and many, many lost hours of time | | | | professional organizations and testimonials.) |
| with family and friends -- consumed instead by | | | | 10 Costly Mistakes After Entity Formation: |
| lawyers, bankers, accountants and creditors, while | | | | 1. NOT completing corporate AND LLC formalities |
| picking up the pieces of the wreckage from a | | | | (Yes, LLCs should have them too!) 2. NOT completing |
| devastating lawsuit or bankruptcy. | | | | the LLC operating agreement (Unless you've got a |
| All those losses could have been prevented by proper | | | | lemonade stand, it's essential) |
| planning with the right company to support them. All | | | | 3. NOT properly capitalizing the entity, and especially |
| those losses were the indirect, and sometimes direct | | | | not being crystal clear with partners about your |
| result of "penny-wise, pound foolish" thinking. They've | | | | capitalization (A disaster waiting to happen!) |
| learned (the hard way) the value of having a company | | | | 4. Putting LLC Members on payroll vs guaranteed |
| like NCP to be at their side, constantly guarding against | | | | payments (Do you know the advantages?) |
| missteps and roadblocks. | | | | 5. Forming an LLC taxed as an S corporation and |
| We hear the same basic horror stories told over and | | | | having the incorrect operating agreement (A subtle, but |
| over again. And while we'd never say "we told you | | | | effective nuance that must be handled properly.) |
| so," we've learned from them as well. Let us share | | | | 6. NOT completing a buy sell agreement for the |
| with you the 20 most common mistakes they've | | | | partners (Again, being crystal clear will save your |
| made, both before and after their entity formation: | | | | sanity.) |
| 10 Costly Mistakes Before Entity Formation: | | | | 7. Falling behind on employee payroll taxes to the IRS |
| 1. Forming an LLC and NOT knowing how it's taxed | | | | and your state (This will cost your business dearly -- at |
| (Are you a single or multi-member LLC? Will you be | | | | best .) |
| disregarded for tax purposes, taxed as a partnership, | | | | 8. NOT meeting with your CPA to set up a chart of |
| a C-, or an S-corporation?) | | | | accounts (Running your business off a checking |
| 2. Forming an LLC for real estate and NOT knowing | | | | account balance is a fast track to bankruptcy.) |
| which is best. Is the property investor vs. dealer? | | | | 9. Registering your domain name to your operating |
| (Make the wrong choice, and be doomed to a life of | | | | entity (This may account for 70% or more of your |
| unnecessary taxes.) 3. Forming an LLC and having it | | | | lead generation-a huge asset at risk.) |
| managed by Members instead of Managers (A sure | | | | 10. NOT obtaining the proper business licenses (Being |
| way to lose flexibility and control) | | | | out of compliance can punch gaping holes in your |
| 4. Forming an S corporation and NOT knowing the | | | | bottom line.) |
| shareholder rules (Imagine discovering years later that | | | | We at NCP pride ourselves on conscientious, |
| you've violated an S corporation shareholder rule -- | | | | well-informed expertise to help you avoid these costly |
| and that you now owe years of expensive C | | | | mistakes. We take the time with you to ensure that |
| corporation back taxes.) | | | | we understand every relevant aspect of your |
| 5. Forming an S corporation when your company | | | | company, and diligently do our homework so that |
| anticipates future value (There must be a better | | | | you're fully prepared for whatever the business world |
| approach... and indeed, there is!) | | | | throws at you. Remember, you get what you pay for! |
| 6. Forming a C corporation to take advantage of fringe | | | | Don't wait until January to get started! Incorporate |
| benefits when your business doesn't fit the C | | | | before the end of the year and get a head start on |
| corporation model. (Can you spell nightmare?) | | | | tracking your Schedule C for 2007. Waiting until the |
| 7. Forming an entity in Nevada and NOT knowing | | | | last minute is a sure way to show up on the IRS 's |
| when to foreign register, and for what reasons. ("Can't | | | | radar! |