While the rewards you gain from starting a business tower over negatives like startup costs and other potential pitfalls, setting up an LLC slices the odds even further in your favor. Be careful though, as fails like forming an LLC out-of-state for the wrong reasons, choosing a poor name, or not filing semi-annual paperwork can muck up your business from the start. Here are a few lessons from setting up a limited company I wish I’d known from the beginning.
LLC’s in Vegas don’t always stay there.
Setting up an out-of-state LLC in places like Nevada, Delaware and Wyoming can be appealing, seductive and an unnecessary choice. Advertisements on radio, TV and the Internet try to make it seem like forming your business in-state is naive, but in reality it will probably save you time, money and paperwork. In fact, nearly every state makes you “re-register” where you engage in business activities like renting offices or getting a bank account. Let alone the double annual fees. While your particular business may benefit from an LLC in Vegas, just be aware there’s a huge industry making money by up-selling stuff you don’t need. If your state’s laws are like mine, that sweet LLC in Vegas may do everything but stay there.
Witty names, chains and automobiles.
My first business’s name is too embarrassing to repeat here and held me back from the start. Funny, memorable and unique, it was worthless. Unless you’re developing black-market toy-shaped fireworks, let people know exactly what business you’re in when registering a company. Keeping the focus on what you’re selling gives you an edge over well-meaning competitors who waste precious first impressions explaining witty names instead of unique selling propositions.
Even Billy Mays didn’t “Set it and forget it” when it came to LLC’s.
Late night infomercials spread the glory of everything from magic cleaning rags to real estate tricks that make everyone millionaires, but they don’t sell “Set it and forget it” LLC’s because that would go too far! Setting up a limited company means you have annual or semi-annual actions you must do or your business could face penalties. These actions include income and tax reporting but can also be forgettable stuff like filing a “Statement of Information.” Failure to file can result in late fees or even your LLC automatically shutting down.
As with everything worth doing, a little research and preparation can flip confusion on how to begin into a genuine head start. While there’s nothing simple about setting up an LLC or running a business, it is definitely doable. If you follow my advice on just these few issues you’ll be much further ahead than I was.