Forming a US LLC looks straightforward until the paperwork starts moving. Across LLC formations and EIN applications processed for founders in more than 175 countries, the same handful of errors keep showing up: choosing an unsuitable state, delaying the EIN application, failing to draft an operating agreement, commingling funds, or missing the FinCEN BOI report deadline. They are all simple to correct in a matter of minutes if you spot them before filing. The trouble is, most do not, and by then it has become an expensive proposition.
Some of these missteps run a few hundred dollars. Others have resulted in months of lost time and, on occasion, a frozen bank account. Here is an account of what goes wrong and how to sidestep it.
1. Forming in the Wrong State
Delaware is often cited as the place to be, and for a venture-backed firm looking to raise a priced round, that makes sense. For the rest, it is often a poor choice. Take a non-resident with no US operations who is selling online; Wyoming or New Mexico is far simpler and less costly. In Wyoming, there is no state income tax, and the filing fee is $100. New Mexico is $50 and eliminates the annual report altogether, which helps keep your compliance burden down.
Delaware requires a minimum $300 franchise tax payment by June 1 each year, even if the LLC hasn’t turned a profit. Clients have formed there on the strength of some blog post, only to forget the franchise tax and get slapped with a $200 penalty and interest before they could so much as open a bank account. If you have a warehouse or staff in a given state, you will need to form or foreign-qualify in that state regardless. Go where your operations are, not where the name carries weight.
2. Delaying the EIN Application
Non-residents in particular make this mistake. The IRS will not issue an EIN until the state has legally recognized your LLC, so an early application is bound to be turned down. Yet waiting weeks after formation is a waste of time.
Those with a US SSN or ITIN can get an EIN on the spot via the IRS tool. Without one, you are left to file Form SS-4 by mail or fax, a process that takes four weeks or more. Do not be misled by the marketing on some formation sites into thinking there is an online workaround. The right approach for non-resident founders is to file the SS-4 as soon as the state confirms formation, not when the registered agent packet arrives or you have decided on a bank. You don’t want to add to your position in the fax queue any more than necessary.
3. Skipping the Operating Agreement
Wyoming and Delaware won’t make you file one, but you shouldn’t leave it out. In its absence, your LLC is at the mercy of the state’s statutes on matters like dissolution or how profits are divided. A single member may never notice, but for a multi-member entity, it is a liability if a partner wants to exit or passes away. Then there are the banks. The LLC and EIN paperwork has been delayed because Mercury or Relay would not open an account until a founder could provide an operating agreement.
4. Why Banks Reject New LLC Accounts
The reasons are fairly standard: a name that doesn’t match, no US address, or no EIN confirmation letter. There is no room for error when it comes to the name on your Articles of Organization; it must be an exact match with your EIN confirmation letter, punctuation and all. Account rejections have come from LLCs like “Acme Trading LLC” that were put before the IRS as “Acme Trading, LLC.”
Banks are not satisfied with just a number; they want to see the CP 575 form. If you applied by fax and the physical or PDF copy has not yet arrived, do not expect them to move forward. You could ask the IRS for a 147C letter in lieu of the confirmation, but then you’re making another call and waiting around for it.
For a non-resident without a US address, a registered agent is required for KYC, but it must be one the bank will accept. Some will flatly refuse an address from certain mail-forwarding services.
5. The BOI Report Founders Forget
Most LLCs are required to tell FinCEN who is in control via the Beneficial Ownership Information report. Any new entity formed in 2026 has 30 days from formation to complete this. It is distinct from your state and EIN filings, yet founders are often unaware of it until they are past due. While the online filing at FinCEN costs nothing, the error lies in not being cognizant of the deadline. Willful non-filing can incur penalties in the thousands. Given that enforcement guidance has been in flux this year, it’s worth verifying what is required on FinCEN’s site before your window runs out.
Common State-Specific Filing Fees and Timelines (as of August 2026)
| State | Filing Fee | Standard Processing | Annual Requirement |
| Wyoming | $100 | 1 to 3 business days | $60 annual report |
| New Mexico | $50 | Same day to 1 week | None |
| Delaware | $110 | 3 to 5 business days | $300 franchise tax, due June 1 |
| Texas | $300 | 3 to 5 business days online | No annual report, franchise tax if revenue exceeds the threshold |
| California | $70 | 5 to 10 business days online | $800 minimum franchise tax |
Processing times and fees are subject to change. California can be particularly slow with mail filings, at times 3 to 7 weeks. Put aside any guide that may be a year old and check the Secretary of State page for your jurisdiction first.
6. Getting the EIN Responsible Party Wrong
The SS-4 requires the responsible party to be an individual, not an LLC or another entity. The IRS relies on this for its point of contact on tax issues. To fix a mistake down the line means filing an 8822-B and adding a few weeks to your paper trail. Founders have removed a business partner without understanding that the individual becomes the permanent contact for the IRS on that EIN, receiving notices that the true owner does not.
A Filing Sequence That Avoids Most of These Mistakes
To sidestep the usual problems, follow this sequence:
- Pick a state where you are operating rather than one that sounds appealing.
- Get your Articles of Organization filed and confirm with the state.
- Apply for the EIN right after, making sure the responsible party is correct.
- Have an operating agreement in place before you go to the bank.
- Once you have the CP 575 in hand, open the account.
- File your BOI report with FinCEN within the 30-day period.
- And on the day of formation, mark off your state’s annual or franchise tax date on the calendar.
Nearly every misstep you see on this list is the result of reordering or omitting these steps.
Getting Formation Set Up Correctly the First Time
Weighing states, waiting on an EIN, or trying to untangle a bank rejection all come down to the same fix: get the sequence right before filing, not after something bounces back.
FAQs
What is the costliest error a new business can make? A foreign-owned single-member LLC is failing to file IRS Form 5472. The form is an annual requirement, and you are on the hook for it even if there is no activity in the LLC. Penalties for not filing or for an incomplete submission have been raised from $25,000 to up to $30,000.
Is it possible to obtain an EIN without a US Social Security Number? Indeed. As a non-resident, you can put in a request via Form SS-4 by mail or fax, and the IRS will issue your EIN in lieu of an SSN or ITIN.
Must I have a registered agent in each state where I form an LLC? That is correct. All states will want one on record with a physical address where they can be reached in normal business hours.
What is the timeline to get everything in place, from the LLC and EIN to a bank account, and be up and running? Non-resident founders should plan for 3 to 6 weeks from start to finish; the wait for the EIN through the fax queue is typically the bottleneck.
Are operating agreements a legal necessity? You will not need one to file in most states, but in practice, banks and multi-member LLCs will require one.
