Common Mistakes by Entrepreneurs in the U.S.

23 August 2017

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Common Mistakes Made Before Starting a Business in the U.S.

It is quite normal to make mistakes while starting a new business. However, some of them may cost you time and money. In this article, you can get detailed information about four common mistakes for new start-ups.

The State You Start Your Business

This is actually the most common mistake for new businesses. You need to choose the best state for your business. Traditionally, Delaware is accepted as the best state for entrepreneurs. Therefore, it is the most popular for startups. We can also say it is the only option for venture capital investments.

The greatest advantage of incorporating in Delaware is that it has the most powerful corporate law system in the U.S. Therefore, Delaware is also the best state when it comes to property protection. You can build a solid wall between your personal assets and your business.

In some cases, you can simply change your state and get over this problem; however, some states do not allow such a change and you find yourself stuck in the state you first incorporated in. Winding up your business and starting a completely new one, on the other hand, may be expensive and time-consuming. So, you need to choose your state wisely in the first place.

Company Type

Another easily-avoidable yet common mistake is choosing the wrong company type. Generally, startups planning to collect capital starts a C-Corporation. If you want to collect capital, starting an LLC or a Non-Profit organization will not help you.

However, if you need to hold your personal assets and properties, the best option is to start an LLC.

If you start a new business, you should carefully think about which company type suits you the best. Please do not hesitate to get professional help about this.

Number of Stock Shares

It is quite important to sell the right amount of shares. If you hold more than you should, the amount of franchise tax you will pay will be more than necessary. On the other hand, if you hold less than you should, that means you need to make amendments in your Certificate of Organization, which is really expensive.

Name of the Company

Even though this seems like a small problem, the name you chose can bring about big problems for your business. You need to ask these questions to yourself before preparing the certificate of formation of your business: