Avoid Common Company Formation Mistakes

Entrepreneurs are an passionate lot. Charged through enthusiasm of setting up their individual business and forming their own companies, at times, makes them chuck caution to the winds. If the knowledge of what their startup would do is flawed, it is bound to, and nobody can be done about it.

Avoid Common Company Formation Mistakes

However, what is unpardonable is when a faultless startup idea results in operational and monetary downfall, just because the entrepreneur failed to avoid the corporate mistakes in the process of company formation.

If you are forming your own company or are taking the help of online company formations agent, be sure what all it entails. You would do well to recognize the pitfalls beforehand to avoid them.

Common mistakes in company formation

Find below some common mistakes committed during company formation that you can greatly avoid:

#1 Mistake: Quitting your full-time job to start a company

Of course, your aim for starting your own company is to free yourself from the stranglehold of your bosses, avoid office intrigues and chart your independent path. However, getting along with people and skill to work with them is the major requirement in forming your own company.

It needs interpersonal skills, patience, and collaboration. So, gauge whether you have these skills before deserting to be on your own.

#2 Mistake: Working day in and day out

Forming a company wants deliberation and consultation with others who have been there, done that. In your eagerness to build your company, you are best likely to take on too much, too soon.

Doing this, you run the risk of first burnout, prematurely commit your resources and overextend yourself. Remember, you are in for a long haul in starting your company, so pace yourself.

#3 Mistake: Customers will line up by themselves

If you think your business idea is a runaway realization and customers will come in droves at your doorway or website to buy, think once more.

Unless you feast awareness about what your business does and tell the customers what is in it for them, it is unlikely that your product or service will find any customers. So, establish yourself through networking, marketing your product or examination and branding your business.

#4 Mistake: Not preparing for lifestyle changes

If you have turned an entrepreneur from a nine-to-five job, you should be prepared to immerse yourself wholly in your business to create it a success. This is likely to take a significant toll on your private life.

This sudden lifestyle alteration may not be liked by your family since they have to give up on specific luxuries that they took for granted before. So, before you make the momentous decision to form a company, take your family members into assurance and explain what all it entails.

#5 Mistake: Not checking use of the business name

You can think up the best fantastic name for your firm; chances are others have previously not only thought of it but have registered it for their own companies. If you don’t checked whether you are allowable to use the name lawfully, you will be defying on additional company’s trademark and run the risk of legal action.

Thus, before you get your business cards printed and put up your company’s name on the social media, checked with the names registered with the state secretary where you are living. Similarly, carry out a national level trademark search to ascertain the company name is not previously in use.

#6 Mistake: Registered business structure type is wrong

Registered business structure type is wrong

Your choice of business structure type has a direct attitude on the conduct of business and taxes. So, it is permanently safe to consult a lawyer to define what is greatest for your firm. However, to safeguard your assets from company liability, it is permanently advisable to form an LLC (Limited Liability Company) or corporation.

#7 Mistake: Not opening a business bank account

Never mix your individual and business finances, since it raises mistrust in the minds of regional or state tax bureaus or the Internal Revenue Service.

Even definite legal structures require keeping your individual and business finances separate. It also gives you an air of professionalism, when you write checks of your business account, rather than from your individual one.

#8 Mistake: Not having a strategy, goal or objective

Proceeding without a business roadmap is akin to courting disaster, since you might go off course in no time. So, it is needed that you document what you want to achieve and chart out a strategy to get it done. You will, of course, must to build some flexibility into it and likewise adapt to the changing business scenario.



Company formation requires together passion and patience. Attractive hasty decisions and not consulting with experienced entrepreneurs is certain to lead your company into rough weather. Exercising self-control and thinking out each aspect of your business will prevent you from creation these mistakes.