5 Critical Mistakes New Business Owners Make After Formation That Put Their Personal Assets at Risk

Inclusion is a huge milestone. It’s that thrilling moment when you have an idea real. You’ve chosen the name, filled out the paperwork, and now your business is official. It’s exciting, empowering and a little scary too.

But what? is Included, exactly?

In simple terms, incorporation is the process of converting your business into a legal entity – usually a corporation or LLC (Limited Liability Company).Jeez. This means your business stands out you. It can open your bank account, sign contracts, hire employees and most importantly – it generally protects your personal assets from business liabilities.

In other words, if your business is sued, your personal finances (such as your home, car or savings) are usually off limits.

This is a smart move for founders who are serious about growth. And when an incorporation sets up a legal foundation, it’s only the first step toward building a business that moves.

In our experience helping thousands of entrepreneurs grow and grow their businesses, we’ve seen a pattern. Many founders assume that once they’ve filed their formation paperwork, the hard part is over. In fact, you do the next thing just as much – if not more.

Here are five common mistakes to watch out for after joining — and how to avoid them.

Related: I’ve helped build and sell companies worth millions. Here are the top 50 mistakes I’ve seen kill startups.

1. Thinking automatically protects you

Filing your LLC or corporation creates a layer of legal protection between your business and your personal assets. This is a big deal. But here’s the catch: This protection isn’t automatic or permanent.

If you don’t properly maintain your entity, a court may decide that your business is just a shell – and hold on. you Anyway, personally responsible. This is called “piercing the corporate veil,” and it’s something you definitely want to avoid.

Here’s how to keep your protection strong:

• Keep internal documents updated. LLCs must have an operating agreement. Corporations need bylaws. These documents outline how your business will operate—even if you’re a one-person show. You don’t file them with the state, so it’s easy to forget them. But in a lawsuit, they can help prove that your business is legitimate.
• Don’t do business and personal finance. If you’re paying for groceries out of your business account (or vice versa), that blurs the line between you and your company. Open a separate business bank account and keep clean books.
• Be in good standing with the state. Most states require you to file annual or biennial reports. If you miss these deadlines, your business may fall out of compliance or even dissolve. That puts your liability protection at risk.

As your business grows, the stakes get higher. Think of your legal structure like a house: Additions build the frame, but you need to maintain it to maintain it.

2. Registering yourself as your registered agent

Almost every state requires you to list a registered agent. Many first-time founders simply assume that this is the easiest solution.

But here’s why it’s usually not a great idea:

• You give up your privacy. Acting as your own registered agent means that your home or office address is published in the state’s public database. This record lasts forever. Even after your business is dissolved.
• You may be presented to clients. If your business is ever sued, a process server will deliver legal documents to your registered agent. If this is you – and it happens during business hours – it can be a very awkward (and damaging) moment.
• You will lose support as you progress. Professional registered agent services (like ours at Registered Agents Inc.) do more than just accept mail. We can automatically file your annual reports, send compliance reminders and help you expand to other states when the time comes.

Bottom line: Saving a few bucks by acting as your own registered agent can cost you more – in stress, privacy and lost opportunities.

3. Ignoring Tax Elections (and Missing Potential Savings)

It’s a bit technical, but hang with us – because it could save you real money.

When you form an entity, the IRS assigns a default tax classification to your business:

• LLCs are taxed as pass-through entities—profits go to the owners, who pay taxes on their personal returns (including a 15.3% self-employment tax).
• Corporations (C-corps) pay corporate tax on profits (currently 21%) and then shareholders pay back the profits—known as “double taxation”.

But here’s what many founders don’t realize: You can often choose different tax treatments by filing forms with the IRS.

One of the most popular choices for an LLC is the S corporation choice. This allows you to split your business income between:

• A reasonable salary (subject to payroll tax), and
• Profits, which are not subject to self-employment tax

If your business is making a healthy profit, an S corporation election can significantly reduce your tax burden.

Just be aware, S-corps come with additional complications, such as setting up payroll and complying with IRS rules. But if you’re ready to grow, these steps can actually position you on the scale more effectively.

4. Waiting too long to secure your domain name

You’ve brainstormed a name. Checked for availability in your state. Paperwork filed.

But – did you catch the domain?

Many founders wait to buy their domain until they “need” a website. And by then, it might be gone — or worse, someone might try to sell it back to you at a steep markup.

Here’s why it’s smart to act quickly:

• Your business name may be available in your state, but not as a domain. If so, you may want to reconsider the name before your commitment.
• “Parking” a domain protects your brand. Even if you’re not ready for a website, buying your own domain ensures that competitors or impersonators can’t grab it.
• You will get a professional email address. This adds instant credibility and protects your personal email from spam or customer inquiries.

Pro tip: Consider purchasing domain variations like .NET, .com or common misspellings to protect your brand from lookalike sites down the road.

5. Assume your business name is fully protected

Just because your state allows you to register a name doesn’t mean you own it everywhere.

Unless you file for a federal trademark, someone in another state — or even in the same state — can legally use your business name, especially if they operate in a different industry or file a DBA (“doing business”).

Trademark protection gives you exclusive rights to use your business name (and logo, slogan, etc.) in your category throughout the country.

But here’s the catch: You can’t file for a trademark unless you’re actually using the name to sell something. And the process can take months.

That’s why it’s smart:

• Start researching trademarks early
• Check for conflicts before investing in branding or marketing
• Decide if you still want a name you can’t protect

Many business formation services (ours included) offer trademark support or can connect you with an expert to help you navigate the process.

Related: Planning Your 2025 Strategy? Don’t make these 5 critical mistakes

The real work begins now

Filing your incorporation documents is a huge accomplishment. But what comes next will determine whether your business survives or thrives.

To grow with confidence, you’ll need to:

• Keep your business compliant and in good standing
• Understand your tax options and make informed decisions
• Protect your brand online and legally
• Build systems that support scalability from the start

When those pieces are gone, you’ll be free to focus on what really matters: building the business you dreamed of when you started on this journey.

Inclusion is a huge milestone. It’s that thrilling moment when you have an idea real. You’ve chosen the name, filled out the paperwork, and now your business is official. It’s exciting, empowering and a little scary too.

But what? is Included, exactly?

In simple terms, incorporation is the process of converting your business into a legal entity – usually a corporation or LLC (Limited Liability Company).Jeez. This means your business stands out you. It can open your bank account, sign contracts, hire employees and most importantly – it generally protects your personal assets from business liabilities.