Can I incorporate my business myself?

Twisted Bicycle

I am often asked by new business owners whether they can “just form the business entity themselves.”  It is a common question because new business owners operate on tight budgets and want to save money wherever they can.

The two alternatives for using a lawyer are non-lawyer filing services (the ones that’ll do it for $99) and doing it yourself by filing the documents with your state of incorporation.  The non-lawyer services offer little more than a streamlined process and proofreading.  The DIY approach opens the business owner up to all kinds of mistakes and things he or she doesn’t even know to look for.

So what does a lawyer do in this process?  The value a lawyer offers is not in filing the documents.  While having someone else do it is certainly convenient, it’s more like the difference between putting pepper on your own salad versus allowing the server at the restaurant to give you fresh cracked.

A good lawyer provides a new business owner with two valuable services.

  1. Analyzes Legal Implications of Business Goals – The many available business entities (LLC, S Corporation, C Corporation, Limited Partnership, etc.) differ greatly from one another and many have restrictions on the types of conduct in which the owners may engage. A good lawyer discusses the business owner’s short-term and long-term goals to determine which entity may best suit his needs.
  2. Tailor Governing Documents – The governing documents for a business are the shareholders’ agreement and bylaws for a corporation and the operating agreement for an LLC. Non-lawyer services provide their customers with generic documents.  Lawyers not only provide their clients with specifically tailored documents, but also walk their clients through the process of understanding the legal decisions they are making.

Many of us like to believe that there are easy alternatives to hard things.  Lose 10 pounds in 10 days.  Become fluent in a foreign language in 3 months.   Make $100k in 1 month by doing fill-in-the-blank “easy” job.  Form your business the simple way for only $99.

As with all of these promises, there is a better and more sustainable way of producing the desired result.  While the cost of using a lawyer will be more than $99, the cost of not using a lawyer can be far greater than that.  The cost of using a lawyer to fix the problem will also be far more expensive.

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