What’s the first thing you’ve been told when starting a business. “Create an LLC! You have to do this before you start anything else!” Well, as a tax professional and lover of common sense, I’d like to explain all the reasons why this advice is bologna!

There is no one size fits all solution for LLC formation. Your choice of entity depends on your goals and specific business needs, not what some random “guru” tells you to do over the internet!

Below are three reasons why you should NOT form an LLC:

1. You have not started making any income for your business. You are not sure if your business is going to be successful. Your company has no employees, and you will never have any in the future. You don’t know how long your business is going to last. The IRS won’t care whether or not you’re an LLC! It’s a formality that doesn’t matter from their point of view – so don’t waste your money! You’re just starting out and you have no idea what the future holds for your company.
2. Some states require annual franchise LLC taxes. You don’t want to pay this for a every year unless you have to. For example, California’s franchise tax is $800 a year!! In Massachusetts it’s $500! If your business isn’t making income, you can see why this would be literal money down the drain.
3. You should not form an LLC if you can’t be bothered to do the proper legal paperwork. In most states, it’s easy and cheap (less than $100) to start an LLC or any other business entity! However, hiring someone else to set this up can prove costly. There’s nothing wrong with asking for help, however, if you’d made no money yet, you’re already starting out in the hole.

If you have grown past these reasons and are ready to create a business entity for yourself – lookout for our article about the 4 most common entities to choose from! I break down all the differences between each type of business structures so that it’s easy for anyone to understand.