Did You Really Save Money by Opening Your Company Online? What looks cheap today can become the most expensive part of your business

 SPANISH

Did You Really Save Money by Opening Your Company Online?

 What looks cheap today can become the most expensive part of your business

By Juan V. Fanti, MBA, CAA, PA

 

The Internet has transformed business. Today we can purchase products, communicate, open accounts and complete countless administrative procedures without leaving home.

But that convenience has also created a dangerous perception:

“If I can do it online for $49, $79 or $99, why should I pay a professional?”

After many years working with business owners and taxpayers, I believe the better question is:

How much could tomorrow's problem cost me compared with what I am trying to save today?

Forming a company is not simply completing a form

One of the most common mistakes is believing that creating an LLC or corporation consists only of registering a name and receiving formation documents.

It does not.

Before forming a company, important questions should be considered.

What will the business actually do?

Who will own it?

Are any owners foreign persons?

How will it be taxed?

Will it have employees?

Will it acquire real estate?

Will it receive investments?

Will it operate only in Florida or in other states or countries?

What tax and administrative obligations will follow?

An automated platform may ask what you want to register.

An experienced professional should first ask what you are trying to accomplish.

That difference matters.

When the price seems mathematically impossible

Some online offers appear extraordinarily inexpensive.

The business owner should stop and ask:

What does that advertised price actually include?

Florida government filing costs do not disappear because a website advertises a promotion. A new Florida LLC currently carries $125 in required state filing and registered-agent designation fees, while the required state charges for a new Florida profit corporation total $70 before optional services.

That does not mean every inexpensive service is bad.

It means consumers should understand exactly what is included, what is excluded and what additional charges may follow.

“They also got my EIN”

An EIN provides another excellent example.

The IRS issues EINs free of charge directly to qualifying applicants.

Therefore, when a professional charges to manage an EIN application, the professional value should not simply be selling a number that the government provides for free.

The value should involve helping ensure that the application properly reflects the entity, responsible party and circumstances that may later interact with the company's tax filings.

The problem is not paying someone to handle an EIN application.

The problem is paying someone to handle it incorrectly.

Then tax season arrives

This is frequently where our work begins.

Over the years, clients have walked into our office holding IRS letters and saying:

“I don't understand what happened. I paid someone to prepare my taxes.”

Then we open the file.

I have reviewed tax-return packages approaching 100 pages, containing numerous essentially blank pages, unnecessary forms, information inconsistent with the taxpayer's activity and tax treatments requiring substantial review.

A long tax return is not necessarily a sophisticated tax return.

More pages do not mean more expertise.

The problem no longer costs $50

Once a return is prepared incorrectly, the potential cost is no longer simply the original preparation fee.

There may be an IRS notice.

Then penalties.

Then interest.

Records may need to be reconstructed.

Returns may need to be amended.

IRS correspondence may require a response.

And more complex matters may eventually require a CPA, Enrolled Agent, tax attorney or another professional with appropriate representation rights.

Federal tax rules provide penalties for various filing and accuracy problems. For example, an accuracy-related penalty can equal 20% of the portion of an underpayment attributable to certain covered conduct, and interest can increase the outstanding balance.

Suddenly, the money that seemed expensive at the beginning can become thousands of dollars in corrections, professional fees, penalties, interest and lost time.

The Internet is not the enemy

This distinction matters.

Technology is extraordinarily useful.

Many legitimate online platforms provide valuable services.

Business owners can even complete certain formation procedures directly through official government systems.

The mistake is confusing:

a tool that submits documents

with

professional advice that helps determine which documents and decisions are appropriate.

They are not the same thing.

A platform may execute the wrong instruction perfectly.

An experienced professional should attempt to identify why the instruction may be wrong before executing it.

Accountant, attorney or online platform?

Not every business matter requires an attorney.

Legal matters should be handled by qualified legal counsel.

Accounting and tax decisions should be evaluated by professionals competent in those areas.

And simple administrative filings may sometimes be handled effectively through technology.

The intelligent decision is understanding which situation requires which professional.

At 200GFS, our accounting and tax work does not replace legal advice when legal counsel is required. Recognizing when an attorney or another specialist should become involved is itself part of responsible professional service.

Did you actually save money?

Suppose you save $100 today.

Two years later, you spend $2,000, $5,000 or more correcting an entity, tax return or compliance problem.

Did you save $100?

Or did you simply postpone the real cost?

Perhaps it is not yet time to start the company

This may not be a popular opinion, but years of working with businesses have reinforced it:

If properly starting a company is completely beyond your current budget, you may need to reconsider whether this is the right moment to start it.

Businesses require capital.

They require accounting.

They have tax obligations.

They may require licenses.

They incur administrative expenses.

And those responsibilities do not disappear simply because the business has not yet generated enough revenue.

Entrepreneurship involves risk.

But removing the controls that can protect the business merely because they cost money is not necessarily intelligent entrepreneurship.

At 200GFS, we do not simply want to open your company

We want to understand why you are opening it.

We want to understand what the business will do, who will participate, how it expects to generate revenue and what obligations may follow.

Perhaps you need an LLC.

Perhaps a corporation.

Perhaps additional legal advice is necessary.

Perhaps the structure you originally considered is not appropriate.

Or perhaps this is simply not the right time.

Our job is not always to tell you “yes.”

It is to help you ask the right questions before committing your money.

After decades in this profession, I continue seeing the same lesson:

Cheap does not always become expensive. But doing something incorrectly simply because it was cheaper can become extraordinarily expensive.

Before forming your next company—or attempting to repair one that already has problems—talk with us.

First, let's understand your situation. Then let's make the decision.

Juan V. Fanti, MBA, CAA, PA
Two Hundred Global Financial Solutions, LLC — 200GFS
Tel. / WhatsApp: +1 (954) 683-3578
Web: 200GFS.com

 

This article is for educational and informational purposes and does not constitute individualized legal, tax or financial advice.