Top Five Mistakes in Forming Your Corporation

4. Incorporating and then not filing periodic paperwork or taxes as required by your state.

Once you incorporate, a certain amount of maintenance and follow-up is needed to keep your operations in compliance. Typically, this means updates on ownership, any changes in the resident agents, changes in corporate officers, and of course, any tax liabilities for your particular state or municipality.

Failure to file current paperwork or taxes (as in the case of not getting your local licensing up to date), can be a costly proposition for companies that need resources to go to more productive uses than late fees or fines. This is especially true if you have employees and are subject to payroll taxes at a state or federal level.

5. Incorporating without sufficient capital.

While every owner can benefit by protecting personal assets from business liabilities, owners need to be aware that a lack of capital can be detrimental to a corporation keeping its corporate veil.

Why? Should you be sued as a corporation and you don't have enough revenues, assets, capital or insurance to cover your liabilities, some courts will aggressively pursue you as an owner and hold you personally liable -- all in the name of finding assets.

Again, the advice of a CPA or attorney can be invaluable in helping you determine how much capital you will actually need, and can assist you especially if your company will be dealing with the public (vs. a B2B). Sometimes capital levels differ with the category of business you will be in, so knowing what your metrics are up-front can save you headaches and thousands of dollars down the road.