From choosing the wrong entity to skipping EINs—what every new founder should know
Starting a business in 2025 is easier than ever—but that doesn’t mean it’s mistake-proof. Many entrepreneurs rush through the company formation process without understanding what steps are legally required, which decisions affect their taxes, or how to set themselves up for long-term success.
At TaxMagic, we guide startups through every detail of forming an LLC, S-Corp, or C-Corp, ensuring all the boxes are checked—from state registration to tax ID setup—without the stress or confusion.
Picking the Wrong Business Structure
Your business structure determines how you’ll be taxed, your liability protection, and how profits are distributed. Choosing between a sole proprietorship, LLC, S-Corp, or C-Corp depends on your business goals, size, and whether you plan to raise capital.
Many new founders pick a structure without consulting an advisor—leading to high self-employment taxes, exposure to legal risk, or limited scalability. TaxMagic offers detailed assessments to help you choose the best fit, and we can even file entity conversions if needed.
Forgetting to Apply for an EIN
Your company’s federal tax ID is its Employer Identification Number (EIN). Even if you don’t have employees, you’ll likely need one to open a business bank account, apply for licenses, and file federal taxes.
A common mistake is thinking your SSN is enough. TaxMagic can get your EIN issued fast, securely, and correctly—often within 24 hours.
Ignoring State-Specific Requirements
Each U.S. state has different laws for business registration, annual reports, and business licenses. A simple oversight—like missing a franchise tax payment or failing to renew a permit—can result in your company falling out of good standing.
With TaxMagic, you’ll always be up to date on state compliance requirements. Whether you’re forming in Delaware, Florida, or California, we ensure your paperwork is filed correctly and on time.
Skipping an Operating Agreement
Even single-member LLCs benefit from a written operating agreement, which outlines roles, responsibilities, profit sharing, and what happens if a partner leaves or the business dissolves.
Without one, disputes and misunderstandings become much harder to manage. TaxMagic helps you draft compliant, customizable documents that protect your business from the start.
Not Opening a Business Bank Account
Mixing personal and business finances is a huge red flag for the IRS—and it can make taxes a nightmare. It also destroys your limited liability protection if you’re ever sued.
Forming your company with TaxMagic includes assistance with choosing the best business bank accounts and digital banking tools so you stay compliant and organized
Delaying Tax and Licensing Setup
Too many new business owners wait until tax season to think about tax registration or business licenses. By then, it’s too late to fix errors or avoid penalties.
We help you register for state and federal taxes, set up sales tax accounts (if applicable), and apply for business licenses so you don’t miss critical deadlines.
Missing Out on Tax Deductions and Credits
The earlier you set up your business properly, the sooner you can benefit from valuable tax deductions and startup credits. These include deductions for equipment, marketing, home offices, and even meals or travel.
With TaxMagic, you gain access to a team that ensures nothing is left on the table—and we help you track it all year-round.
Why New Businesses Trust TaxMagic
Whether you’re launching a tech startup, a construction firm, or a freelance business, TaxMagic is here to guide you through the formation process and beyond. We don’t just file your paperwork—we build a roadmap for growth, compliance, and tax savings.
Our team helps with:
- Choosing the best business structure
- Filing state and federal paperwork
- Setting up tax IDs and bank accounts
- Drafting legal agreements
- Tracking business deductions and tax obligations
From day one, you’ll have a partner who understands how to form a business the right way—so you can focus on what matters: building it.
