I'm gonna show you the top six mistakes that business owners make when opening a business as an LLC.

I'm gonna show you the top six mistakes that business owners make when opening a business as an LLC. The first mistake that people make is not recognizing that your name is still attached to that LLC. In fact, if you go look at your EIN document right now, it will probably read your business name with your name underneath it as the sole member. What that means is every time that you try to do something for that business, the banks are gonna always ask you to personally co-sign. You ever noticed that whenever you try to go get a credit card, go get a vehicle, go get a loan, sign a lease, they always asking you for your credit score? That's because your name is attached to it. Unfortunately, business owners don't recognize that whenever your name is attached to something, you can't be protected from it. The second mistake that people make is not understanding that a single-member LLC is automatically classified as a disregarded entity. When you are seen as a disregarded entity, that means all of the business's income flow directly to you personally. The IRS does not see a separation between you and the business. So when you file your taxes using a Schedule C, the Schedule C is attached to your personal tax return. At the very top of that Schedule C, it's going to say profit and loss from the business. Underneath it, it's going to say sole proprietorship, which means the IRS is viewing you as a sole proprietor. A sole proprietor is a person who owns a business by themselves that is responsible for all of the income, losses, and deductions for that business. The third mistake that people make is when you hear people say, get an LLC and just go open a trust. First of all, a trust is not a business. A trust is just a legal arrangement. Second, a trust does not protect against pre-existing debt. So if the LLC already required you to personally guarantee leases, vehicles, loans, credit, the debt just doesn't magically disappear because you just went get a trust. You are still connected to that debt. The obligations are still there, the signatures are still there, because most people don't understand you gotta go back to the beginning. Whenever you acquire anything, when they asked you for your social security number, when they asked you for your credit score, they asked you to co-sign, all bets were off. The fourth mistake that people make is listening to other people tell you, just go ahead and create an S-Corp. An S-Corp is not a business entity. It's just a tax election, which means when you opened that LLC, you had to request for your taxes to be filed as an S-Corp by filling out a form with the IRS, which is the form 2553, which allows you to be taxed as an S-Corp. At the state level, you're still a limited liability company. Nobody explains the S-Corp in a way that you should understand it. Because the S-Corp is just a tax election, it's a way for you to file your taxes. Whenever you are an LLC filing your taxes as an S-Corp, you have to put yourself on payroll, which means now all of the income, losses, and deductions still pass through to you because the S-Corp is still a pass-through entity. That business does not pay corporate level income taxes, which means all of the income, all of the business's losses, all of the business's deductions pass through to you, which means you're still gonna have to personally guarantee everything. Mistake number five is when people think that the LLC automatically protects them. The interesting part about that concept is people hear limited liability, they confuse that with no liability. That's an untrue thought. The reason why I say that is whenever you have a LLC and you own that business by yourself, you gotta remember your name is attached to it, which means you're gonna have to co-sign for everything. How do you be protected by something that you actually take responsibility for at the same time? Lastly, mistake number six. People think that whenever they have an LLC, they can go build business credit. Because you are a single-member LLC, because you are a disregarded entity, because that LLC is not separated from you, every time that you try to build business credit, they're gonna always ask you to co-sign, which means all of the business's debts is tied to your personal social security number. In fact, if you take a look at American Express business credit card website right now, you go try to apply for American Express business credit card, whenever you select the terms and conditions, you will see that American Express says, by opening this account as an individual and an authorizing officer, you are jointly and severally liable with the company for all of the charges. Even American Express knows that you are 100% tied to that business. I teach people how you can use a C corporation to do everything for your business because a C corporation is a person. And if you look at the American Express business credit card example, you will also see that to get an American Express card, your credit score has to be at least a 670 or higher. When I had my businesses as LLCs, I got sued, my personal accounts got frozen, I actually had lawsuits against me, and as a result of those lawsuits and judgments hurt my personal credit score. As you can see, my credit scores are not even in the 660s. So based on that logic, I cannot apply for an American Express business credit card, which means my business can never grow if it was only depended on me and my personal credit. But because I structured my business as a C corporation, I was able to get this, an American Express corporate card. And when you look at the application for an American Express corporate card, you notice they didn't ask for me for my date of birth or social security number. My name is Dewayne Williams. I sit in the CEO chair of Mac Enterprise Consulting. I run a full service business formation and consulting company where we help you open the business, we help you change your LLC to a corporation, we educate you on how to properly structure your business, and we give you the tools to be successful. If you're interested in changing your business structure, please visit us at www.macenterpriseconsulting.com where we'll be more than happy to teach you. I also invite you to join our Independent Learning System, which is a lifetime access to learning and education that will teach you everything about the business structures. Have an amazing day on purpose. All love.