5 Reasons Why a Company Formation is Rejected
Company formation is setting up your business as a legal entity. This entity might be a limited liability company LLC, or corporation. When you form your business, you will need to register your business on your Secretary of State register. When creating an LLC, entrepreneurs file articles of organization and receive a certificate from the Secretary of State, which formally recognizes the business as an LLC.
Not all business formations are accepted, so why is a company formation rejected?
Can Business Formations be Rejected?
Yes, there are times when a business formation is rejected. There are several ways to form your business: you could choose a business attorney or an online business formation company. You might attempt a DIY company formation or a Legal Stepz course to help you work through the process. Whichever method you choose for your business formation, you will want to reduce the risk that the formation documents are rejected.
Why are Company Formations Rejected?
There are several reasons why a company formation might be rejected. Here are some of the potential reasons below.
Name Too Similar to Another's
You need to choose a name not already registered as a business entity. It is your responsibility to thoroughly research the business name to ensure it is not already registered. If you are doing business under a fictitious name, you will need to register your fictitious business name.
If your name is the same or too similar to another registered business, your company formation will be rejected.
Name Doesn’t Include LLC, Inc., etc.
Your name should also include the type of business entity you wish to form. So, to create an LLC, you should have LLC at the end of your name. For example, for Mark Smith Printing, submit your name as Mark Smith Printing LLC. Or you could have a Limited Liability Company or another derivative.
You Chose the Wrong Business Formation
You might find your company formation rejected if you have chosen to register your business as an LLC, but you are a professional. If you are a doctor or lawyer, you must register as a professional corporation and be licensed to practice.
Name is Offensive
Do not choose an offensive name. It is critical to make sure you choose a suitable name for your business that will enable you to attract and retain customers or clients. An accessible name acceptable to a large audience will give you a greater chance of success and be more likely to be suitable for formation.
Documents are Incorrect
Forming your business online means you are less likely to miss something off your form by mistake. However, a simple error might mean your company formation is rejected.
Mistakes like entering the wrong address for your registered agent or misspelling their name can lead to document rejection. The Secretary of State Department knows many registered agents you might use.
If you do a DIY company formation, you will need to make sure you check your documents carefully.
What is the purpose of registering a business?
When you register your business as a particular entity, there are numerous benefits. You will have a structure for your business to follow and legal requirements to adhere to.
What are the benefits of registering a business?
There are benefits to each type of formation. For example, if you decide to set up an LLC you will have limited liability. You are only financially liable for the assets you invest in your business. Your personal assets are not at risk. Other benefits, like how the company is operated which can make some entities more suitable for a business than others.
How does registering a fictitious name help with starting a business?
If you decide to use a fictitious name, such as Flamingo Party Hire, then you should register your fictitious name. This step is vital because there cannot be two businesses with the same name.
Final Word: Reasons Why is a Company Formation Rejected?
When forming your business, ensure you have carefully chosen your company name, and check it is not already registered or similar to another company.
If you want to complete a DIY company formation, ensure you have researched all legal processes and documentation. Alternatively, you can learn everything you need to form your business with the Legal Stepz courses.