Starting, running, or incorporating a business are all exciting opportunities and one that many people undertake every year. However, in the excitement, it can be easy to make the simplest of mistakes.
Unfortunately, these can have repercussions later and affect the ability of your business to flourish.
That’s why it’s so important to get the right business type at the start, it can save you a lot of hassle and even unnecessary paperwork.
Check out these 10 common mistakes when incorporating and avoid making them yourself.
1. Company Name
The company name will conjure up images of the product and help to establish the reputation of your business. If you pick a name with sensitive words or have a typo you’re going to have to amend it. This will cost and show on the company file for all time.
2. Company Formation
As already mentioned, there are several different formats for incorporation and business startups. It’s important to get specialist help when choosing which path you want to take.
3. Share Allocation
The shares are more than just the ownership of the company; they also reflect the authority and dividend payments. You can and should select different classes of shares for different shareholders. It’s imperative to understand this fully before you incorporate.
4. Too Many Directors
A director has legal responsibility and not all shareholders or even employees need to be given this title. The title director is for those in charge of the company, not necessarily those running it.
It’s easier to add directors later as appropriate.
5. Excessive Quantity of Shareholders
A shareholder is entitled to some of the business profits. Think carefully before you give away shareholdings. It’s difficult to undo and a very common mistake.
6. Wrong Supporting Data
You need to provide an array of information to incorporate properly and legally. It’s important that you understand what documents are necessary and submit them with your incorporation application.
If you don’t you may slow down the process, or simply be refused the right to incorporate.
7. Appointing Minors
Company directors and shareholders must be at least 16. However, if they are under 18 you may have issues with your banking applications. It’s better to make sure all appointees are over 18.
8. Proper Documentation
In many cases, incorporating companies are run by family and friends. This doesn’t mean you shouldn’t ensure the proper documentation isn’t drawn up before you incorporate.
Just because you all get along now doesn’t mean it will always be that way, without proper documentation it can get very messy.
9. Not Considering The State
Many businesses simple incorporate in the state in which they are based. However, this is not the only option. It can be beneficial to incorporate in a different state, especially if you expand into more than one state.
Depending on your business type you may need to file licensing applications and complete tax registrations. These generally differ according to the state, you need to file the right documents or you won’t be able to legally trade.
Don’t forget that this is just to get you incorporated. Ideally, you need a business plan to show the direction you want to take your company in, it will increase your chance of success.
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