Starting your own LLC is a big step. And a smart one. It protects your personal assets, gives your business structure, and sets you up for long-term success. But if you’re not careful, there are a few common LLC formation mistakes that can cause trouble down the line.
We’ve worked with thousands of businesses across the country. We see the same LLC formation mistakes pop up again and again. Here’s what to watch out for and how to avoid costly headaches from the beginning.
1. Skipping the Registered Agent or Picking the Wrong One
A registered agent is your official point of contact with the state. They receive legal documents and time-sensitive notices on your behalf. Some business owners use a family member or try to do it themselves, but that’s risky. If you miss a service of process or an annual report notice, it could cost you significantly in fees or could even result in the dissolution of your business.
Why this matters:
- States require every LLC to have a registered agent
- Missed notices can lead to administrative dissolution
- Using your own address can risk privacy
Better option: Use a professional registered agent to ensure compliance and peace of mind.
For more information about registered agents, we’ve answered our most frequently asked questions here.
2. Filing in the Wrong State
We get it. Delaware and Nevada sound like the smart play because you’ve heard about their business-friendly laws. But if your LLC actually operates in another state, you may have to file there anyway—and pay extra fees for doing business out of state.
Things to consider before choosing a state:
- Where your business physically operates
- Where your customers or clients are located
- Extra costs of registering as a foreign entity
Unless you’ve got a specific reason (like venture capital requirements), it’s often best to form your LLC in the state where you’re doing business.
3. Not Creating an Operating Agreement
Even if you’re a one-person LLC, you should still draft an operating agreement. It outlines how your LLC is run and helps show that your business is separate from your personal affairs.
Why an operating agreement matters:
- Defines ownership and roles
- Prevents internal disputes
- Reinforces liability protection in court
This is especially important in multi-member LLCs where expectations should be clear upfront.
4. Overlooking Initial Compliance Requirements
Once your LLC is formed, you’re not done. Some states require an initial report or even a newspaper publication. You’ll likely need an EIN from the IRS. You may also need to register for state taxes or local business licenses.
Common initial steps:
- Apply for an EIN (Employer Identification Number)
- File an initial report with your state (if required)
- Register for any applicable business licenses or permits
Missing one of these steps can delay your launch—or worse, lead to penalties or non-compliance issues.
If you’re forming your LLC with URA, we can assist you with acquiring an EIN as a part of your formation package.
5. Thinking You Can Forget About Compliance
Forming your LLC is just the beginning. Every year, most states require you to file annual reports, maintain a registered agent, and keep your records up to date.
Ongoing LLC responsibilities include:
- Filing annual or biennial reports
- Maintaining a registered agent
- Keeping accurate internal records
- Renewing business licenses or permits
If you fall behind, your LLC can fall out of good standing or even get administratively dissolved. Not sure where to start? Universal Registered Agents offers Annual Report filing services. Our ACE (Annual Compliance Entity) Service means that you’ll never miss an annual report filing, ensuring that all your filings are accurate and on time, avoiding any penalties.
Final Thoughts
LLC formation mistakes are easy to make. But they’re just as easy to avoid with the right guidance. Forming an LLC is a powerful way to protect and grow your business. Doing it right from the start makes all the difference.
If you’re unsure about any part of the process or want help staying compliant, we’re here to support you. Explore our corporate compliance services to stay ahead of your legal obligations and protect what you’re building.
