Avoid These 10 LLC Mistakes in 2025

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Mar 5, 2025

Starting an LLC can be rewarding, but common mistakes can lead to costly consequences. Mixing personal and business finances could raise IRS flags. Missing annual reports might dissolve your LLC, while omitting 'LLC' from documents can leave you personally liable. Entrepreneurs must correctly register in states and maintain proper records to protect themselves and unlock tax benefits. Decisions should involve all members to prevent conflicts. Learn how to avoid these pitfalls for a successful business journey.

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ADVICE

Separate Finances

Separate your personal and business finances.
Co-mingling funds can invite IRS scrutiny and complicate bookkeeping.

ADVICE

File Annual Reports

Remember to file annual reports with your state.
Failure to file can lead to administrative dissolution of your LLC.

ADVICE

Use LLC Designation

Always use "LLC" on business documents and correspondence.
This protects your personal liability in legal disputes.

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Starting and running an LLC comes with big tax benefits and liability protections—but only if you do it right. In this episode, we break down the 10 most common LLC mistakes that could cost you thousands in taxes, legal troubles, or even your business itself.

Chapters:

(00:57) Mixing Personal & Business Finances: Co-mingling accounts makes bookkeeping messy and can trigger IRS scrutiny. Always keep separate business bank accounts.

(2:24) Forgetting to File Annual Reports: If you miss this, your LLC can be administratively dissolved, meaning your business legally ceases to exist.

(03:25) Not Using "LLC" on Business Documents: Failing to include "LLC" in contracts and agreements can leave you personally liable in legal disputes.

(04:21) Registering an LLC in Another State Without a Foreign Designation: Setting up in a tax-friendly state (like Wyoming) doesn’t exempt you from taxes where you operate. You must file a Foreign LLC election.

(07:22) Not Maintaining Meeting Minutes & Operating Records: Proper documentation is essential for legal protection and can also unlock tax deduction opportunities (e.g., business meals).

(08:56) Making Business Decisions Without Consulting LLC Members: If you have multiple members, one rogue decision can cause disputes and even dissolve the LLC.

(10:28) Mixing Personal Expenses with Business for Tax Deductions: Running personal expenses through your LLC is a red flag for the IRS. Use an accountable plan to track reimbursements properly.

(12:05) Not Obtaining Required Business Licenses & Permits: Some businesses require licenses at the state or local level. Ignoring them can lead to fines or forced shutdowns.

(12:49) Skipping Professional Liability Insurance: An LLC protects your personal assets, but business insurance protects your company from lawsuits and financial losses.

(14:21) Not Updating Your Registered Agent Information: If your LLC moves or changes leadership, failing to update records can lead to missed legal notices and compliance issues.

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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The Small Business Tax Savings Podcast is your go-to resource for cutting-edge tax strategies designed to help entrepreneurs and small business owners legally slash their tax bills. Hosted by Mike Jesowshek, CPA, this podcast breaks down complex tax topics into clear, actionable, no fluff insights, so you can maximize your savings and keep more of your hard-earned money.