Learn the pros and cons of starting a corporation with a lawyer, doing it yourself, or using a corporation formation service.
Do you need a lawyer to incorporate your business? If you find yourself asking this question, you’re not alone. Ultimately, no state has a legal requirement stating that you have to employ an attorney to help you form a corporation. But depending on your circumstances, hiring a lawyer might be a good idea.
There are other options, too. You can hire a corporation formation service, or you can do it yourself. All three methods are perfectly legitimate, but there are pros and cons to each. In this guide, we’ll walk you through those advantages and disadvantages so you can decide which method is right for you.
When you’re starting a corporation, there are three primary methods you can pursue: doing it yourself, hiring an attorney, or using a corporation formation service like ZenBusiness. Each method is perfectly acceptable, but there are pros and cons to each choice.
There’s nothing stopping you from just filing your own Articles of Incorporation and creating your corporation by yourself. This option can be especially helpful for small, uncomplicated corporations.
The arguably biggest advantage to incorporating on your own is that it’s the cheapest option available. Granted, you’ll still have to pay your state filing fee, but you won’t pay legal fees or other start-up costs to a third party.
Plus, filing on your own is pretty fast, especially if you do it online, which is an option in most states. You’ll only need a few minutes to fill out the form and make your payment. You won’t want to rush through the forms, of course, but at least you won’t have to wait on updates from a third party.
There are, unfortunately, some drawbacks to incorporating without help. If you haven’t taken the time to do your research about the business formation process, you’ll run the risk of making potentially costly errors. Every state has different requirements for its corporation filings, and it can be tough to learn them on your own. You can, of course, take time to figure them out, but not everyone has the time necessary.
Plus, certain types of corporations can be especially complicated. If you’ll be issuing public shares of stock, you’ll need guidance to follow securities laws and reporting requirements. Or let’s say you plan to apply for 501(c)(3) status as a charitable nonprofit, issue multiple classes of stock, or start a professional corporation. If so, you’re much more likely to encounter complicated requirements.
If you’re starting a more complicated corporation, then you might find yourself searching for business attorneys in your state. Using an attorney is a highly-recommended option if you’re hoping for a guided, personalized experience.
Attorneys provide a lot of advantages simply because they can sit and talk with you face-to-face about your needs and goals. A business attorney can provide guidance on what type of corporation suits you best, how to follow securities laws, and your state’s unique corporate formalities. They can even advise you on whether you should be taxed as a C corporation or S corporation.
Business lawyers can also provide other useful services, such as acting as a registered agent, drafting your corporate bylaws, or drafting contracts.
There are, unfortunately, drawbacks to using a corporate lawyer. The most notable one is cost. Lawyers usually charge hourly rates for their services, often starting at $100 (to even hundreds) per hour. Some might offer a package for a corporation service, but even as a bundle deal, their expertise can be far pricier than doing it yourself or hiring a formation service.
Additionally, you may have a longer start-up time as you interact with your attorney, since they work with multiple clients at a time. If you do go this route, you should also take care when selecting an attorney. Some are dedicated business lawyers, and others just advise on business law to supplement their primary services.
If you don’t want to do your business formation yourself, but you don’t want to spend a lot upfront, a corporation formation service might be a great fit. A formation service like ZenBusiness can file your Articles of Incorporation for you and help you handle other compliance tasks like hiring a registered agent, learning about business licenses, and more.
Using a corporation formation service has some notable perks. For starters, it’s usually far less expensive than an attorney — even if you use multiple extra services/products. These formation services also have plenty of experience forming businesses, with hundreds of thousands of businesses created across the country.
Thanks to that experience, formation services can quickly help you create your corporation with very little downtime. If state paperwork stresses you out, a formation service can be a big lifesaver.
As with any business start-up method, there are drawbacks to using a corporation formation service. While it’s less expensive than hiring an attorney, it’s more expensive than doing it yourself. If your budget is tight, it might not be the best option.
Additionally, these services can’t truly replace advice for complex legal compliance issues and accounting questions. They’re helpful for standard corporations and basic LLCs. But let’s say you’re unsure if a corporate structure is right for you. Or, perhaps you’re debating whether C corporation or S corporation status is best, or you’re thinking about creating a corporation with subsidiaries, or you’re pondering another complicated process. If that’s the case, you’ll need more hands-on, expert assistance.
If you want to start a corporation without breaking the bank, ZenBusiness can help. We’ll help you incorporate your business for $0 plus state fees. And then we’ll keep supporting your corporate needs, from registered agent service to annual compliance help and everything in between. We’ll handle the red tape so you don’t have to.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
The exact state requirements vary, but generally, you’ll need someone to incorporate the business (execute the business documents). You’ll also need to choose a business name and appoint a registered agent in order to file your Articles of Incorporation or similar form.
Every state has a filing fee to submit the Articles of Incorporation, so it’s never free to incorporate a business. Some states are more expensive than others, and some states actually charge more based on the number of stock certificates you issue. Consult your state statutes for more information.
The actual act of incorporating a business isn’t terribly difficult, as it’s primarily the act of filing the Articles of Incorporation that creates your business. However, being prepared to fill in the formation document takes ample preparation. You’ll need to understand terms like registered agent, incorporator, board of directors, officers, and more. And, you’ll need to have people ready to fill these roles, too.
What can be tricky is understanding different legal and tax issues surrounding a corporation, such as double taxation, self-employment tax, and more. That’s why many entrepreneurs opt to hire an attorney for help.
Corporations are a great business entity option for businesses that want personal liability protection and a sustainable way to raise capital. But they’re not right for everyone. A limited liability company (LLC) might work better for a small business owner who wants personal asset protection but a more flexible management structure. Sole proprietorships and general partnerships offer the most flexibility, but they don’t have limited liability protection.
If you’re unsure about what business entity type you should create, we recommend seeking legal advice from a licensed attorney.
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