The Biggest LLC Mistakes to Avoid
A 2025 field guide to clean, compliant, tax-smart entities—without the guru gimmicks.
Most founders don’t start companies because they love forms, fees, and filings—they start them to build wealth and keep it. The LLC is supposed to be the simple, flexible wrapper that lets you do exactly that. Yet in practice, small choices at formation—which state, what address, which tax election, how you bank—can ripple into higher taxes, public-record exposure, or a nasty surprise when a bank, buyer, or judge asks for documents you don’t have.
In 2025, the stakes are a touch higher. States are leaning on compliance revenue, banks are tightening on account openings, and federal transparency rules continue to evolve. That means the difference between a clean, low-maintenance LLC and an expensive headache often comes down to details that take minutes to set correctly—and months to unwind if you don’t. This guide is here to make those minutes count.
We’re going to cut through the folklore (“always form in Delaware,” “Wyoming solves privacy forever,” “a one-page filing is enough”) and show you what works for real, U.S.-based entrepreneurs: the Etsy seller turning into a seven-figure brand, the consultant crossing the six-figure mark, the landlord adding a second duplex, the agency hiring its first employee out of state. The through-line is simple: form where the business is real, keep your private life private, separate the money, and choose the tax treatment that matches your profit—then maintain it with light but consistent governance.
You’ll see how to fix the most common missteps without drama: when to domesticate versus start fresh, how to swap out public home addresses, what a bank actually expects to see in your company “book,” and when an S-corp election can legitimately trim self-employment tax without painting a target on your back. We’ll also flag what’s new this year so you don’t waste cycles on requirements that no longer apply—and don’t get blindsided by rules that do.
Most important: none of this is about perfection. If you’ve already formed in the wrong state, used your home address, or mixed funds, you’re not alone—and you’re not stuck. Almost everything is fixable with a clear plan and the correct sequence.
1. Forming in the wrong state
The right state is almost always where the business actually happens or where the property sits. Forming elsewhere creates a “foreign entity” problem: you’ll still have to register (and pay) where you operate, while also paying the original state to keep that shell alive. That means two annual fees, two sets of deadlines, and more opportunities to miss something.
How to fix: If both states allow it, domestication/conversion cleanly moves your charter and preserves contracts, bank accounts, and EIN. If not, form a new entity in the correct state, assign contracts, retitle accounts/assets, and dissolve the old one once the dust settles. Time the switch at a month-end/quarter-end to keep books clean.