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4 Mistakes to Avoid Before Filing an LLC

May 18, 2023

legal, Legal Tips, LLC

4 Mistakes to Avoid Before Filing an LLC

What are the big mistakes you want to avoid before registering for your LLC (limited liability company)? If you are an online business owner, you have plenty to worry about, and messing up your business corporation is not on that list. Here are the 4 mistakes to avoid before filing an LLC.




What kind of attorney would I be if this didn’t have a disclaimer? I’m a licensed attorney and I practice in Utah and Idaho. I am not your attorney. This is not official legal advice. If you have any questions, please consult with a legal professional in your jurisdiction.



4 Mistakes to Avoid Before Filing an LLC

I want to ensure that as you grow and scale your business that you are doing everything you can to protect it and get it legally legit. I know the legal stuff can either confuse you or make you run and hide, but that’s why you have me! You can count on me to remember all the legal things for you and relay them to you in a way that is helpful and straight to the point. So make sure to subscribe to my YouTube channel HERE to get all the legal advice you could ever need for your online business!


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LLC Filing Mistake #1: Picking a business name that is already taken.

As you set up your LLC, you’ll want to go to your state website. It’s usually a website hosted by the secretary of state or the secretary of commercial division.  This website is where you register your business as an LLC under the name you have chosen for it. 


Some of these websites have a search function where you can look up your business name to see if there are any other businesses out there in your state with the same name as yours–either exactly or similar. There are many reasons why you don’t want to have the same name as another business, two being having mail sent to the wrong address and people mixing up your businesses which could lose you sales.


Your state website may not have this search feature readily available in the same place you file for an LLC. There is still a way to search for your business name even if your state website does not have a search function built in with where you input your business name. There should be a portal on the same website where you put in the name you’re thinking for your business and the results will tell you if that name is clear and available. Again, make sure your business name is not too close to any others–especially if you are in the same niche or sell similar products. 


Bonus Tip: It won’t be enough to add a word like agency, partners, corp, etc. to your business name to make it different from another company. Your state will probably require you to have it be more distinguished than that. So make sure your business name is completely different from any other results that pop up.



LLC Filing Mistake #2: Using your residential address as your business address.

We want to make sure that if you’re operating your business from home, you’re giving yourself the best chance possible of preserving your own privacy. We all know it’s easier now, more than ever, to find residential addresses online, especially if you live a very public life. 


So, if you have a home-based or virtual business and don’t have a commercial storefront, here are some steps to take before you file your LLC.


  1. Get a virtual mailbox.

A virtual mailbox is an online mailbox service that charges about $10 a month. I recommend Anytime Mailbox for this service. Another option is to set up a PO box, but I like a virtual mailbox better because it gives you a real-looking street address. 


  1. Sign up for a commercial registered agent service.

A commercial registered agent service is the legal representative that can sign on your behalf. For example, if you are sued and receive official service of process in a lawsuit, they will not come to your personal home address to give the documents to you. (And of course, we hope this never happens!) BUT setting up this service ensures your safety and protection which is super important as a home-based business owner. 


These two resources are a must for me, and I hope they will be for you too. While you do have to pay for both of these tools, it’s an investment that is well worth it. And remember, expenses like these are tax deductible because it’s a cost of doing business!



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LLC Filing Mistake #3: Combining your business bank account with your personal account.

As you’re setting up your LLC, do not immediately shoot yourself in the foot by messing up your money. The law says that if the money is being co-mingled then your LLC is being commingled. And honestly, we don’t want to be co-mingling any assets. 


You want to make sure to set up at least one or more bank accounts in the name of your business to ensure you do not violate your limited liability protection. And, once the bank account is set up, never let any money from your personal account go in or out of your business account. 


Bonus Tip: Avoid using the same PayPal address, the same online credentials, etc. just because things are already saved that way and it’s convenient. I urge you to have that full limited liability company protection and you do this by keeping that money fence up!



LLC Filing Mistake #4: Not having an operating or founders agreement. 

I actually see this mistake with a lot of entrepreneurs. You may have also heard of an operating agreement as a founders agreement or partner agreement. It’s basically the clubhouse rules for how you’re going to run your business. 


This operating agreement should include things like, but not limited to:

  • Who gets what kind of membership or equity in the LLC
  • Who is responsible for what
  • How the money is managed
  • What happens if someone wants to leave the LLC


This operating agreement is true asset protection because it sets you up so you are not personally liable for the actions of the company. The business stays with business and your personal life stays with your personal life. They are two separate entities and should be established and treated as such. If you need an operating agreement template, I’ve got you covered! 


4 Mistakes to Avoid Before Filing an LLC

Those are the 4 mistakes to avoid before filing an LLC! I am so excited for you to take this step and make your business an official LLC. And I want to make sure you keep it legally legit so you set yourself and your business up for long-term success. Your business will run so much more smoothly with these 4 things in place. If you have more questions about how to set up an LLC, check out my video HERE. And give me a follow on Instagram @brittanyratelle so you can keep getting the best legal advice for setting up and running an online business! 


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