Top 3 Mistakes Business Owners Make When Starting Their LLC

 

Starting your own business is an exciting time of life and depending on your career path, it might also be something that you never imagined for yourself. 

This is the case for many of us!

We start our careers with one thing in mind and the next thing we know, we’re starting something of our own. 

Wild how that happens, right?!

I remember when this happened with The Boutique Lawyer – after law school, I *thought* I would spend the rest of my life practicing law in the courtrooms. 

I mean after all I just spent the big bucks learning how to do just that, right? 😅

Well, as it turned out, there was a MAJOR need missing in the marketplace for business owners specifically and I set out to solve this need. 

And now, years later, here we are with a magazine, contract shop and tons of free resources to help business owners avoid some of the mistakes that I made!

If you’re like the many who have found themselves starting a business and truly have no idea how to do it, this blog post is for you. 

Save your Google searches and see below for the top mistakes to avoid AND learn how to do it right. 

Top 3 Mistakes To Avoid When Starting Your LLC

1. Forming an LLC with LegalZoom or something similar

This mistake is number one for a reason and it’s because it’s SO COMMON in the entrepreneurship world. 

And I honestly understand why – when you’re starting a business from scratch, it’s rare that you know all of the exact steps to take. 

So, insert the Google searches that typically look like this:

 

 

See the first person listed? Handy dandy LegalZoom. And no, they aren’t listed first because they are your trusted go-to’s for all things business. 

They just pay for ads. 🤪

Now, I’m not saying that LegalZoom can’t be helpful, but generally speaking they really aren’t going to be your best option for filing your LLC.

In fact, one of my customers used LegalZoom to form her LLC years ago and was never notified or informed that the LLC went inactive… thus her business was NOT being protected. 

Not to mention, the unnecessary fees they tack on for absolutely no reason. 

Oh, and the fact that the “advice” they give you isn’t actually legal advice…

Moral of the story here is this: filing for an LLC shouldn’t cost you hundreds and hundreds of dollars and you should absolutely file with a REAL legal institution (psst: like the government 😌).

So, what’s the solution?

Always form your LLC through your secretary of state’s website, which can easily be identified with .gov at the end of the web address. 

Doing so allows you to always know your filing status and it’s always very straightforward about when you need to register again to remain in good standing.

2. Mixing personal and business finances

Following filing an LLC through LegalZoom, the next place that people go wrong when starting their business is using their personal bank account for business purposes. 

Again, I totally understand not fully knowing what to do, especially if stepping into entrepreneurship wasn’t a part of the original plot for your life.

But here’s the thing: if you’re going to mix personal and business finances, it really does you no good to have an LLC in the first place.

An LLC’s main purpose is to protect YOU as the owner of your business. Consider it like separation of church and state – by separating business and personal assets, including your finances, your personal assets are protected from business-related creditors.

So, what’s the solution?

It’s simple and I promise it’s not as complicated or as time consuming as it may seem!

Open a business bank account and use that account solely for business purposes. 

Receive all client income to that account, pay yourself from that account, use that account for business related expenses, pay your taxes through that account, all of it.

3. Assuming that filing an LLC is a one and done thing

The final mistake that I see newbie business owners making when it comes to creating their LLC’s is thinking that it’s something you do once and never have to touch it again. 

But that’s sooooo far from the truth, my friend.

Your LLC requires annual maintenance and if you skip it, your LLC (aka your business) could be entirely dissolved by the state. 

And trust me, that process is NOT something you want to deal with. 

If you file your LLC through the state, you *should* receive an annual re-registration notice that guides you on how to remain in good standing. 

But as a good rule of thumb, never fully rely on the government to make sure that your business is taken care of – because while your business is YOUR baby, it’s not theirs and they aren’t concerned if you’re in good standing or not.

So, the simple solution here is to put a reminder on your own calendar and have it repeat annually so that you never forget to renew your LLC. 

And no, it’s not difficult to do. You can simply search for your LLC through your secretary of state, view the registration status and can very easily take the action you need to take when it’s time. 

How To Start Your LLC

Starting an LLC is one of the first steps most small business owners make when they get serious about protecting themselves personally from the debts and responsibilities of their business, so if you’re in the midst of becoming a business owner and have NO CLUE where to start, I’ve got you covered. 

In addition to avoiding the mistakes listed above, I want to make sure you know exactly what steps to take (without having to scour the internet for the answers) and make sure you do them LEGALLY. 

Since it can be one of the most confusing steps to navigate, I’ve wrapped up everything for you in one place in this free guide. 

CLICK HERE to get your own copy to be guided through all of the necessary LLC creation steps so you can do so with ease and confidence. 

Looking for ongoing legal resources? The Legalzine is our monthly digital magazine, created to help entrepreneurs protect and scale their businesses with real-world tools, templates, and strategies.