I’ve had clients who set up their business entities themselves or through online services, such as Legalzoom.com, only to find out down the road that their documentation was incomplete or did not properly protect them.
Common mistakes, when not using an attorney, include failure to adopt bylaws or an operating agreement, lack of shareholder agreements or buy-sell provisions, failure to hold organizational meetings or to elect directors and officers, failure to properly authorize or issue shares of stock, and failure to follow other corporate formalities.
Weak links in the formation process can result in the denial of corporate status, which has tax consequences and can mean personal liability to the individual business owners in the event of a lawsuit or other claim.
Here are some more thoughts about this issue.