1. You Setup The Company Yourself
There’s nothing wrong with doing the setup yourself. But you really need to have a good idea of what you’re trying to accomplish, and the steps needed to get there.
Getting information off the internet can help you to a certain extent. However, a lot of that information can be confusing, incomplete, or simply wrong. Moreover, most of what you do find is geared more towards a basic common setup more so than what you may need for your business and your specific situation.
There are a number of steps necessary to properly set up your company. Those steps will vary depending on location, the type of business, and the type of business entity being formed. Failing to take any of those steps or to carefully consider your situation could cause hidden legal issues down the road.
When you first started your business doing it yourself (DIY) may have been a viable option. If your business has grown in the interim there may be hidden legal issues you need to address.
With DIY business formation there is a knowledge gap. That knowledge gap could expose you to unnecessary legal liability and could prove to be expensive in the long run.
2. You Used An Online Service
The primary selling factors for online incorporation services is that they bridge that knowledge gap, are fast and less expensive than working with an attorney.
These services are not the cure-all they like to market themselves as and may not be appropriate for your business. In general, you are asked a series of generic questions about your business or are asked to fill out a one size fits all form. From the answers provided you are directed to a generic package of services to form the business entity.
There are a few flaws to this approach. First, it does not take into account your and your business’ specific circumstances. Second, you are generally expected to know what you need. Third, although you may think you are getting help to guide you through the process you really aren’t.
Once you compete the fill in the blank forms and pay the fee you are told you are done, and the paperwork is on its way to be registered with the state. You get a warm and fuzzy feeling of accomplishment and check entity setup off your to-do list.
It could be years before you discover that there is a problem with how your business is structured.
Depending on the circumstances, there are a lot of potential legal issues that could occur. The simple fact of the matter is that online formation services can’t give you legal advice. And, unless you have the formation and governing documentation reviewed you can’t confidently know if the entity was properly and completely setup.
3. Your Accountant Set It Up For You
Having your accountant set the business up is often a convenient choice. Moreover, some accountants see it as a value added service, they can provide their clients.
The problem is, accountants are accountants, not business lawyers. They understand the tax implications of a business structure, but they don’t know the legal implications. Nor do they know the legal requirements for setting up your business or the governing documents you may need for your circumstances.
The pitch generally focuses on lower cost, a streamlined process, and convenience but they usually only facilitate a few of the required tasks for proper formation. Taking this route could leave you with a partially formed entity with no, or incomplete governing documentation. Opening you and your business to both internal and external legal liability