Jack DonaldThere is a common misconception that the only use an LLC might have for a lawyer is to solve legal disputes. While partially true, this isn’t all that a lawyer can do for your company.
Not only can a business attorney handle potential lawsuits and court proceedings, but they can also provide expertise throughout most stages of LLC formation and its subsequent maintenance.
But even if an attorney can make running your business easier, are they absolutely necessary? Or is it possible to find a substitution for their role in forming your LLC?
Unfortunately, there is no easy way to answer that. The requirement for an attorney largely depends on the nature of your LLC, the financial plan of your startup, and the preferred formation method in general.
This article will touch on specific scenarios where hiring an attorney to form your LLC will be indispensable, or at least extremely beneficial, as well as instances where they might not be that imperative.
On a related note, if you only plan on starting an LLC or just need help with checking the compliance of your paperwork, it might be more affordable to hire an online LLC service like ZenBusiness ($39) or LegalZoom ($79) who will supervise all legal forms and other documentation while you deal with other aspects of your business.
Note: Among the leading formation service providers, ZenBusiness holds the top position in terms of pricing and how it compares to the range of features they offered. This benefit-cost ratio has earned them higher scores compared to other LLC services.
When Is It Advisable to Hire an Attorney to Form an LLC?
Even though there is no legal obligation to hire a lawyer to form an LLC, the reality of the average formation process is often not as simple as your state’s basic regulations.
The fact that local and federal authorities do not require you to hire an attorney to create an LLC, this course of action might actually be preferable in some jurisdictions, especially if you choose a DIY route.
Business Structure
The first thing a lawyer will actually do is help determine the optimal business structure for your entrepreneurship. In some cases, an LLC might not be the best option for you, and a lawyer will likely present better options.
Other common structures include more informal entities like general partnerships and sole proprietorships as well as corporations, specifically C-corporations, S corporations, professional corporations, personal service corporations, and more.
A reputable lawyer can make a strong case for one of these based on your needs since one of these structures may prove to be more suitable for your business. It mostly depends on the place of registration, the type of goods you offer and whether they need special licensing, the entity’s location of primary operation, the industry of engagement, et al.
The LLC is nevertheless one of the most universally applicable structures, so chances are it will be the best option for your business. Keep in mind that the flexibility of the LLC model doesn’t diminish your responsibilities.
There are still important decisions to be made on your part, from specifying the internal structure (owner- or manager-operated) to choosing your taxation methods. With a business attorney, you will be able to make a well-informed choice regarding outside management, potential staff, and elected taxes.
Documentation
Then there is the question of documentation. Not every layman can easily get a hang of certain filing requirements, so hiring a lawyer will serve as a fail-safe. They will check whether your formation paperwork is compliant and oversee maintenance documents in the future.
More than that, an attorney can help you create and file your Articles of Organization—a simple yet vital document that registered your entity with the state—as well as your operating agreement designed to outline your company’s internal regulations, from managerial to financial.
A lawyer is also equipped to oversee other interior documents like your LLC’s banking resolution, proof of licensing, meeting protocols, and more. Incorrect handling of some of these forms may internally destabilize your company, whereas a business attorney can ensure every piece of documentation is aptly managed.
Formation
And if you choose to stay clear of registered agent companies, an attorney can also act as your official registered agent and receive important state documents and service of process on your behalf. Many entrepreneurs even favor this formation method, choosing to hire attorneys to create an LLC.
In some cases, it is indeed the best option since hiring formation services or going at it alone can be lacking due to the complexity of a certain business. Plus a truly excellent business lawyer possesses considerably more expert skill than an average LLC formation company, the fact of which makes lawyers fairly expensive.
If you want to save more money, of course, you would want to form an LLC yourself. The truth is, you might simply be too busy to do that alone. And if even a single form is filled out or filed incorrectly, your LLC application would be rejected by the state.
The good news is, you might not even need to look for a new lawyer if you already employ one for handling other business procedures. For instance, if you had to hire a litigator to manage your intellectual property, they could potentially assist you with LLC formation.
Why Is It Unnecessary to Hire a Lawyer to Form Your LLC?
Despite being more than beneficial, there are some drawbacks to hiring an attorney for this purpose. And if in some cases, the cons outweigh the benefits, it won’t pose a problem at all since getting a lawyer is not a hard state law.
As mentioned before, the main issue with business lawyer services is that they tend to be costly, especially if you aim to hire a highly reputable professional or designate them as a registered agent on top of other duties.
This is obviously far from ideal for most startups and small companies that work with a limited budget and are unlikely to see quick recuperation from expensive lawyer services.
It’s usually clear in the early development stages of your startup whether there is any merit to this formation method or if lawyer’s LLC formation fees will simply leech your funds.
Many entrepreneurs find they can preserve the little funding they have by doing it alone, so you can effectively form an LLC on your own without paying thousands for a lawyer. The only major cost with the DIY method will likely be your state’s filing fee ranging from $40 for Kentucky LLCs to $500 for Massachusetts LLCs.
There is some benefit to doing it on your own too, mostly the accumulation of knowledge and the fact that you will be developing your business skills that could come in handy for future LLC formations and expansions. Finding relevant information is fairly easy, with most online LLC formation service websites and state websites offering detailed guides.
A handful of states may require you to submit a few unorthodox formation forms, but the majority of jurisdictions keep it simple. The general information you will need to provide includes:
- Entity’s name
- Physical address
- Registered agent info
- Names and addresses of the Ownership group
- Organizer’s signature etc
And if you’re unsure of your legal knowledge, a cheaper alternative to a lawyer would be hiring an online LLC formation service whose rates are significantly lower. What makes them more cost-effective is their practice to include useful features in a single formation package. This is indeed a good bargain compared to lawyers charging a fortune for each service separately.
Some of the best online LLC formation service providers provide a year of registered agent service with your initial package or subscription, even if you choose the cheapest option. Every LLC is legally required to designate a registered agent, so covering this step in one single purchase is extremely time-efficient.
If you’re looking for examples of the most effective formation companies, IncFile or ZenBusiness could be your best bet at finding that oft-desired good value. Both services are more than affordable and come highly recommended as seen from customer reviews.
In Conclusion
Before you could rush into a contract with an overpriced attorney, remember one important thing—hiring a lawyer is not mandatory to form your own LLC.
Although their services come with a fair share of benefits, many entrepreneurs may find lawyers much too expensive. The same business owners might also want to avoid dealing with paperwork on their own, but you can find a happy medium in a good incorporation service such as IncFile or ZenBusiness.
A reliable LLC service provider can help you each step of the way while reducing your general costs. They can draft and submit your documents, provide registered agents to mediate the company correspondence, and much more.
If you’re interested in learning more about the subject, feel free to browse our website for comparative reviews of formation services and other educational resources.
