I have nothing against lawyers. I’m married to one, in fact. And I myself graduated law school and obtained my JD (Juris Doctorate Degree) back in 1998. But with that said, there are times when attorneys are overused — and those unnecessary retainer fees and hourly rates can hurt the startup process when cash is tight.
One such situation is when you’re considering forming a corporation or an LLC for your startup. Too many entrepreneurs think they need a lawyer for this matter, when viable alternatives exist that can save significant dollars and be just as reliable. By working with a legal document filing service, you can represent yourself to create a legal business entity. In the eyes of the law and IRS, your business structure will be just as valid than if a high-priced attorney sent in the documents for you.
Of course, there’s a key difference that’s important to understand. A document filing service is well… a document filing service. It’s not a substitute for an attorney, accountant or tax advisor. These service companies cannot give you specific legal or financial advice for your set of circumstances. If you have particularly complex business needs — for example you have strict requirements for shareholder structure or stock allocation, or you’re dealing with millions of dollars up front — you should retain your own expert counsel to help get you started.
However, for many startups, the general information provided by a document filing service is all you need to help make your own decisions. There’s exhaustive information on the web that explains the differences between an LLC (Limited Liability Company) or an S Corporation (as one example) in detail, and in plain English!
For example – and this is by no means meant to be a comprehensive look, just a quick snapshot to get you thinking…An LLC is great for startups that want legal protection, but minimal formality — i.e. no exhaustive meeting minutes or addendum filings. The LLC is also the perfect structure for a start-up who will have foreign owners. An S Corporation (or S-Corp) is ideal for those startups that plan to make a profit soon after incorporation, and distribute that profit back to all the shareholders. A C Corporation (C-Corp) should be used for those startups that plan to reinvest their profits back into the company or seek funding from a VC.
And there are other rules and guidelines that can help steer you toward the right legal structure for your startup. For example, if you plan on having more than 100 shareholders, you’ll need to consider the C-Corp. Likewise, if any shareholders are not individuals (i.e. a partnership or an LLC) or legal residents of the U.S., you’ll need to consider the C-Corp or alternatively, the LLC.
In straightforward circumstances, most entrepreneurs can make a sound decision about their legal setup. And believe it or not, when you call some document filing services, it’s possible to actually reach a live, knowledgeable person who’s well versed in the needs of a small business and doesn’t follow a script.
Of course, when it comes to legal matters, I’ll be the first to say that trying to save a few dollars up front can end up costing you big in the long run. Trust your gut; if you feel like you need to bring in expert counsel, then by all means do so. Just remember that you are able to file for incorporation or LLC formation without an attorney, and this could be a reasonable, and cost effective, way to go.
CorpNet’s professional staff is here to assist you every step of the way… And once you know what you’re required to file, we can take care of the details for you! If you have specific legal questions or concerns, you should consult an attorney for sound advice. After all, your business is worth it.
Please feel free to reach out to me with any questions to firstname.lastname@example.org.
I wish you the best of luck in all of your business endeavors!:)