Incorporation: What are common mistakes to avoid when setting up an LLC?

Before you decide to setup either an LLC or an INC, we highly recommend that you discuss taxation with your CPA or tax professional. Request a report that outlines your estimated federal & state taxes based on your projected income. It should provide the following information.

1. Tax classification for your entity: While your CPA/tax professional may handle most of your tax & financials, as a business owner or entrepreneur a basic understanding of how S Corporation or C Corporation may impact your taxes would be very helpful to you in the long run.
2. Business deductions: Request your tax professional or CPA to provide you a list of business deductions. There are few business expenses like start-up expenses that you may be eligible for even before your business starts. You certainly do not want to miss out on those deductions. Eg: You are allowed to take up to $5,000 as startup expenses and anything over this amount can be amortized up to 15 years (certain limitations may apply).

Overall, ensure you have a basic understanding of your tax obligations & the process. This will save you lot of compliance costs and help avoid unnecessary penalties and interest.

 

** Our response to question posted on quora

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Posted In: Company Formation

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