The Truth About LegalZoom and RocketLawyer: DIY vs Professional LLC Formation

Starting a new business is an exciting yet daunting endeavor, especially when it comes to understanding the legal intricacies of forming a Limited Liability Company (LLC). Many entrepreneurs look to services like LegalZoom and RocketLawyer for assistance, but there are many alternatives and considerations one must take into account. In this article, we will explore the benefits and drawbacks of using DIY services, the value proposition of hiring a professional lawyer, and the importance of choosing the right formation process for your business.

DIY vs Legal Services: A Comparison

LegalZoom and RocketLawyer are well-known for providing legal services to help entrepreneurs form their LLCS. While these platforms offer convenience and often are cheaper than hiring an attorney, they may not always be the best choice. Many of these services focus on the initial formation process and may offer additional services like handling tax filings and ensuring ongoing compliance.

However, at some point, you will likely need a Certified Public Accountant (CPA) or business adviser. Personal experience suggests that starting a business with these services may create a false sense of security. In the long run, the ongoing support of an accounting firm can save you money.

The Secret Behind LegalZoom and RocketLawyer Services

Many entrepreneurs may not realize that they don’t necessarily need LegalZoom or RocketLawyer services. Most Secretary of State websites provide a simple form for LLC formation, and increasing numbers of states allow for online filings. All you would pay for is the filing fee.

The dirty secret is that a lawyer can provide you with comprehensive guidance and explanations that you won’t get from DIY services or RocketLawyer. A lawyer will explain how an LLC works, including the complicated tax issues. They will also guide you on the best state to incorporate in, especially if you are on a venture capital path, where forming a corporation might be more suitable.

A lawyer can create a customized operating agreement for your LLC, explaining each sentence and its implications. If you are not aware of the importance of an operating agreement, a lawyer will explain that to you.

When do You Really Need a Lawyer?

The decision to use a DIY service or hire a lawyer largely depends on your business needs and goals. If you are starting a basic business, the services provided by DIY platforms may be sufficient. However, if you are forming a business holding company, investment vehicle, or any venture that involves multiple participants, investors, or significant growth, hiring a professional is essential.

These services often come with hidden costs, including expediting services and registered agent retainers. While you may need a registered agent, there are less expensive options available. Additionally, you can find free or nearly free LLC agreements online, catering to various business structures and needs.

Conclusion

Forming an LLC is a significant step in the life of a new business. Starting with DIY services might seem convenient, but it can leave you with a false sense of security. Understanding the true value of professional legal guidance is crucial for long-term success. Choose the right formation process for your business, whether it's DIY or professional, and ensure you are making the best decision for your venture's future.