Plenty of entrepreneurs form their own limited liability companies (LLCs) using the do-it-yourself method every day. However, if you don’t already have experience with business formations, it can be a time-consuming process. In addition, there are some complexities with the LLC formation process, and the peace of mind you gain from hiring professional assistance is invaluable.
Still, this is a question we hear quite often from our readers. With this in mind, we’ll break down the advantages and disadvantages of either option in this article.
First off, let’s quickly outline what an LLC is. A limited liability company mixes elements of sole proprietorships, general partnerships, and corporations, essentially giving entrepreneurs the best of these worlds. LLCs are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes. An LLC may also elect to be taxed like a corporation, although this is not a very common option.
There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are not at risk.
The advantages of hiring a qualified business lawyer start with one word: expertise. While online business formation services have plenty of appeal as well, one area where they simply can’t compete with an attorney is the depth and breadth of their business knowledge.
There are several aspects of the formation process that only a lawyer can help you with, like choosing what the right entity type is for your business to begin with. With online formation services, you simply select the type of business you want to form.
With an attorney, you can discuss the differences between an LLC, a corporation, and a limited partnership, for example. You can also talk about which state is the best option for you to form your business in, if you operate your business in multiple states.
Additionally, hiring a lawyer provides the kind of peace of mind that you just can’t get from a business formation service. If you need to be absolutely certain that every possible step of the process was completed correctly, and that your new business entity will be compliant with your formation state, hiring an attorney is the way to go.
Much like with the advantages of hiring an attorney, the advantages of hiring an online service start with one crucial word: affordability. Whereas hiring a business lawyer to form your LLC can cost hundreds or even thousands of dollars, there are many reputable online services that charge less than $100, while also including some additional features that lawyers don’t provide.
Aside from the cost, another advantage of hiring an online LLC formation service is the convenience factor. When you use one of these services, all you need to do is provide them with some basic information about yourself and your business, and they’ll handle the rest.
With a business formation service, there’s no need to have a consultation with your attorney and talk through all the details. These companies also can have your new LLC formed in a matter of mere days in some states, as they have streamlined and automated services that can form businesses as quickly as state governments can process those formations.
Another aspect of online LLC services that we enjoy is the way they provide ongoing customer support at no additional cost. If you hire an attorney, you’ll have to spend more money on their fees if you ever need to ask them any follow-up questions.
While the level of support you get from an online service isn’t nearly as in-depth as that of an attorney, there’s also a big difference between something that’s free and something that costs hundreds of dollars per hour.
With that in mind, let’s discuss how you can decide whether to hire an attorney or hire an online LLC formation service.
If your business has a limited startup budget, using a business formation service might be your best bet. If you can’t spare the $1,000 or more that it will likely cost you to hire a lawyer, an online LLC service could be your only option.
Additionally, some LLCs just aren’t all that complicated to set up. If you’re starting a single-member LLC that you will own and operate by yourself, or even if you have multiple members with an even ownership split, you can probably trust an online business formation service to get the job done right.
Online LLC services also throw in some additional features to sweeten the deal. Do you want a free year of registered agent service along with your LLC formation? Perhaps you’re looking for someone to create your operating agreement at no extra charge? Business formation services might be just what you’re looking for.
However, if you have multiple owners with varying percentages of ownership and financial commitment, if you operate your business in more than one state, or if your business operates in an industry with special restrictions or regulations, it’s probably a good idea to hire an attorney.
Another situation where hiring a lawyer is preferred is if you simply want to have as much reassurance and peace of mind as you can get. Online LLC formation services are staffed by knowledgeable professionals, but they certainly don’t have the experience or expertise of a qualified business attorney. If you want the confidence that comes from having a true expert handle every step of your formation, hiring a lawyer is still the way to go.
By this point, we hope you’ve been able to decide whether you want to hire an attorney or an online formation service to create your new LLC. But how do you choose the right lawyer, or the right LLC service? Don’t worry, we can help with these questions as well.
If you’re looking to hire an attorney, we have a comprehensive resource just for you, titled “How to Find an Attorney to Form an LLC: Choose the Right One.” In this article, we break down a variety of options for finding the perfect lawyer for your business.
Some of these options include asking your clients or partners for word-of-mouth recommendations in your area, contacting regional bar associations or law schools, using an online legal services website like LegalZoom or Rocket Lawyer, or searching Avvo’s extensive lawyer directory.
This resource also includes information about how to figure out if the attorney you choose truly has your best interests in mind. Check it out if you have any questions about how to find the right lawyer for you.
As for online LLC services, we have some helpful ideas for this option as well. There are dozens of reputable online services that can save you a ton of time, while also costing far less than hiring a business lawyer to form your LLC. If you want to take a look at the top options, head on over to our guide to the seven best LLC formation services available.
It’s difficult for us to make a blanket statement about whether hiring an LLC attorney or an online LLC service is the “better” option for our readers, although we will say that we advise either of these options over forming your own LLC using the DIY route.
In general, if your LLC has any complicating factors, and if you have the budget, we prefer hiring an attorney to form our businesses. There truly is no substitute for the level of expert assistance you’ll receive if you hire a reputable business lawyer to form your LLC.
On the other hand, if you’re operating your business on a limited budget, or if you’re forming a relatively simple business with few complications, online LLC formation services also offer a quality service. You won’t receive the same level of expertise, but you can still count on these companies to form a compliant LLC on your behalf.
If you are looking to consult a lawyer, see: Questions to Ask a Lawyer When Starting a Business
Identify the LLC package and services that fit your needs and then get started.
Disclaimer: The content on this page is for information 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.
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