Neglect the paperwork. To create a legal corporate entity, articles of incorporation are filed with your state. But this is only the first set of paperwork your attorney must process. You still need to have an organizational meeting where you elect the board of directors (which in some states, like Florida, can be just you), approve corporate bylaws, and authorize the issue of capital stock. After that, you’ll need to have a board meeting to elect officers and make some needed corporate resolutions (such as authorizing the newly elected officers to open bank accounts). All of this minutia must be documented minutes from meetings, consents in lieu of meetings, and so on and so forth. This extra paperwork is often missing when incorporating on your own, but if you don’t do it, the IRS might view your corporation as a sham and you will lose the limited liability protection.
Skip over a buy-sell agreement. A buy-sell agreement describes what happens if a shareholder (or his heirs) wants to sell shares. Basically, the agreement specifies who must buy the shares and at what price. These arrangements can get complicated, particularly as the number of shareholders increases. But the logic is straightforward. If something causes a shareholder to sell his shares, it’ll make things a lot easier if there’s a plan that says how the sale is supposed to work.
Use your personal bank account. If the new corporation doesn’t keep separate financial records, it may not be viewed as a separate entity by either the state or the IRS. (In this case, there would be no limited liability and no income tax benefits.) You’ll also want to keep professional financial records– records that show you don’t mix shareholder funds, such as your personal checking account, with corporate funds. Otherwise, you could threaten the identity of your corporation, and the IRS could challenge you for commingling of funds.