After getting a physical address for my as of this time purely online business, I could now complete the paperwork to setup my own Limited Liability Company. (See previous articles for why I chose to do this) There were several options for completing the paperwork and filing which I will briefly talk about. I am also mainly going to go write about the option I ended up choosing in order to accomplish the filing, and possible mistakes I may have made along the way.
Options for Filing the LLC Paperwork
Do It Yourself
Hire an Attorney and/or CPA
Use a non-attorney legal documentation service
Do It Yourself
The first option for filing my LLC paperwork was to request the paperwork from my state, Texas, fill out the forms myself, and send it to the Secretary of State office for filing. Now I had read several articles on this with some people saying it was painful while others stated that it was not that hard to do. I guess it just depends on how much you like to do yourself. I often like to figure things out and over-research things before I do them (often spending more time on the research than the actual doing part which is a problem I have!) I decided from the start with my businesses that I didn’t want to get caught in that trap I set for myself often. On the other hand, I also don’t want to shell out more money than I think I need to if I don’t have to. I’m sure with proper research and time I could have completed the paperwork accurately and saved money in the final cost of filing. But since I did not have unlimited time or an unlimited ambition to tackle this, I chose not to follow this path.
Hire an Attorney and/or CPA
This of course would have been the most expensive option and I’m not sure it would have saved me anymore time or headache over the third option listed. First you would have to pick an attorney that had experience in setting up an LLC (from what I had learned, this can vary more than you think.) Also just like anything that you want to outsource, such as car repair, plumbing services, lawncare, etc., unless you have used their services before you really do not know how good it is until you use them. With attorney’s and CPA’s fees, this can be an expensive process. I personally do not have much experience selecting these professional services because I have not used them much in the past. So I would either have to research and find recommendations for these professional services, taking time and effort, or just hope that the ones I did contact would do a good job.
Use a Non-Attorney Legal Documentation Service
This option is much like taking your tax papers to tax preparation services like H&R block or the like. With this option you get some guidance with paperwork preparation and filing assistance, but they do not offer you legal advice which you may or may not require. These services are setup to be user friendly with answers to many frequently asked questions listed for reference. Think of Turbo Tax Online as a comparison except these are for legal documents. I ended up picking this type of service over doing it myself completely or hiring an attorney and/or CPA.
There are varieties of companies that provide these services and I did check out a few. I have to admit, I ended up choosing LegalZoom.com out of recommendations from others online that had used them, and also because of brand recognition. Hey I guess marketing does work. As a note of disclaimer, after I used their service and was happy with the results (keep on reading) I signed up for an affiliate account with them. I’m not asking anyone to use a particular service, that is up to you, and there are many out there which may be just as good or better.
How the Process Went
I will not give the actual step-by-step, line-by-line process because I believe most of it is self-explanatory to those who use their service, and there is no reason to duplicate their entire process just to bloviate and have more to write than I think is needed. Also there are many different choices to be made which are based on each individual business’s circumstances, and for me to lay out my specifics would not necessarily be of any benefit to others. I have to say, though, that I felt there was adequate information given to guide me through the procedure. The only point in the process where I think I should have done more research prior to starting the paperwork related to deciding how you want your LLC to be taxed. In simple terms, you can choose to be taxed either as a corporation or as an individual in terms of how profits are regarded. I believe this is an area where you might need to get more background information regarding the pros and cons of the route you choose prior to starting the paperwork process, and make sure you know why you are choosing the method of taxation you end up selecting.
Legal Zoom had three different packages for filing your LLC paperwork. They had the Economy, Standard, and Express Gold. The prices listed do not include the costs of the actual state filing fee which is charged by the state where you form your LLC. This varies from state to state so it is helpful to know what your state charges beforehand so you will not have sticker shock when it comes to the total cost. I will breakdown my costs a little later in this post.
The Economy package ($149.00) or basic package included a preliminary clearance of your LLC’s name, the filing of Articles of Organization, a custom operating agreement including provisions protecting officers and managers from liability, and their “Peace of Mind Review.”
The Standard Package ($249.00) included everything in the Economy package plus extras such as a Deluxe LLC Kit embossed with your company name, an official company seal, and 20 customized membership certificates with transfer ledger.
The Express Gold package ($359.00) included everything in the Standard package plus Priority Rush service (7-10 business days), over 40 essential business forms on CD-ROM, including employment and independent contractor agreements, Federal Tax ID (EIN) application preparation, and two-day FedEx delivery of final package
The price differences between the packages were mainly related to add-ons which had nothing to do with the actual filing process. I chose the Economy package because I was only interested getting the filing performed with just the necessary paperwork and services required to do this. At the end you can choose additional add-ons if needed as well. I added the filing for my business employer company incorporation identification number (EIN) so that it would be provided at the same time my LLC paperwork was completed. I have read that obtaining your EIN through the IRS is a really painless, fast, and easy process online, so you may decide not to have it as an add-on expense if you use a filing service.
There was one hidden fee, or at least not clearly spelled out fee, I encountered during the process. It was a fee related to selecting a Registered Agent for your LLC. “Each LLC must have a registered agent. This is the person designated to accept official notice if the LLC is “served” with a lawsuit. A registered agent must be either (1) an adult living in the state of formation with a street address (P.O. boxes are not acceptable) or (2) a company registered with the Secretary of State in the state of formation.” (Legalzoom.com, 2010) Now there are advantages in selecting a registered agent other than yourself which are listed in the information on their website, such as adding a layer of privacy among others, but what did not seem to be clearly discussed was the fee of $149.00 a year for having your registered agent through LegalZoom’s registered agent service. This is something I will look into more during the year to see if I want to change my registered agent to avoid this recurring fee.