Online incorporation services make a lot of money selling fill in the blank documents. The cost to use these services is often minimal, and that is one reason they are so popular. However, if you are serious about your business, using an online incorporation service, instead of a qualified business formation lawyer, is likely a huge mistake.
“Created by Attorneys “ Isn’t the Same as Legal Advice
Many of these services advertise that they were “created by attorneys”. However, just because it was founded by an attorney doesn’t mean you are getting legal services. In fact, every single online incorporation service makes you acknowledge that you are not getting legal services.
There are many factors that go into choosing the best type of corporate structure for your business. Most online services are not equipped to ask the kind of in depth questions an experienced lawyer will when advising a client. Online services also don’t ask any follow up questions or talk to you about the dangers of different structures to your business model.
Starting a business is a significant life decision. You are making certain legal commitments; you deserve to get legal advice from an attorney who is ethically bound to protect your interests.
You Don’t Know What You Don’t Know
Your business is unique to you and your ideas. Your financial and legal situation is not like anyone else’s. When you use an incorporation service you have to make all of the decisions about what you need. However, the tax and liability consequences of LLCs and corporations can vary widely based on the smallest details in your business.
Even if you are an experienced entrepreneur, there are a lot of things that you do not know about that a business lawyer can provide advice . You don’t even know what types of traps could be waiting for you.
Choosing an online incorporation service does not mean you are getting a guide to help avoid trouble. All it means is that you have someone telling you what paperwork to fill out. But, in most instances they cannot even tell you how to fill out the paperwork.
Just like a map of a river is not the same as having an experienced river guide in your boat on a rafting trip, using an online incorporation service is not the same as having the aid of a lawyer.
Creating a New Legal Entity Requires More Than Filling Out a Form
Incorporating sounds simple. File some paperwork and pay a fee. But, the paperwork is simply the end result. The actual process of incorporation is much more complicated.
You are creating a new legal entity. You need to make sure you fully understand the consequences of your actions and the duties you are agreeing to by filing incorporation paperwork.
You would never enter into a business deal, sign a commercial lease or business contract without doing your due diligence. The same caution should apply to choosing a business entity and then forming it.
The Consequences of Making a Mistake Are Potentially Huge
What is the worst that can happen when you use an online incorporation service? You could end up making a mistake on your taxes that leads to you owing tens of thousands of dollars. You could end up mistakenly failing to complete the incorporation process, leaving your personal assets vulnerable to creditors. You could accidentally change the ownership structure of your business.
Even if the worst case does not happen, plenty of less serious problems often occur when people try and do their own incorporation paperwork. You may choose the wrong structure for your business type. You could end up running afoul of securities law because of the way you completed the paperwork. You may have to pay a lawyer to wind down the old entity and then create a new entity.
Why take these kinds of risks with your business in an effort to save money? In most cases it could be more cost effective to get the job done correctly the first time.
Incorporation is Only Part of the Process
If you want to enjoy all of the protections and benefits that incorporating gives to your business, you have to understand that the initial incorporation paperwork is only part of the process.
There are things you will need to do every year to maintain your status. Failure to fully comply with all of the regulations governing things like LLCs and corporations could end up allowing a future plaintiff to pierce the corporate veil to attack your personal assets. Failure to properly maintain your corporate structure could also create tax headaches in the future.
When you have a lawyer helping you with your incorporation process you have the peace of mind of knowing that not only is all of the initial paperwork going to be done correctly, but that you will also know everything you need to do to keep your business safe for years to come.