LegalZoom Review: How to Form an LLC With LegalZoom
Setting up an LLC (Limited Liability Corporation) is an important business task that will separate your business liability from your personal liability. It’s not the most exciting job, but it’s a necessary thing for business owners to do. Fortunately, using LegalZoom to start your LLC will alleviate some of the stress and time so that you can do more of what you love.
What is LegalZoom?
LegalZoom is an online legal technology company that offers a variety of legal services for people who want convenient and affordable options for using an attorney. You can use LegalZoom for all sorts of legal needs, from fully forming an LLC to patent paperwork, living wills, and prenups.
You don’t need to be tech savvy or have the legal experience to use LegalZoom, and that’s a big plus for many people, including business owners like you, who need to set up an LLC. They’re also generally much less expensive than using a business attorney, and the turnaround time can be pretty quick.
Learn more about what LegalZoom can offer your business.
Why you need an LLC for your online business
Again, an LLC provides some separation between your personal and business liability, in turn protecting your personal assets. For example, if there are debts or lawsuits against your business, you generally won’t be personally responsible for them, your business will be.
If you’re side hustling, like running Facebook ads for small businesses or blogging, you are a business owner. You should be keeping your income separate, reporting your business income, and treating your side hustle like it really is a real business – setting up an LLC using LegalZoom can help you.
There’s also something a little more official about having the letters “LLC” behind your business name. It tells clients and customers that you are taking things seriously.
Listen to Episode 7: Do I Need an LLC for my Online Business? to learn more.
How to set up an LLC with LegalZoom
Using LegalZoom to set up an LLC is really pretty easy and just takes seven simple steps.
1. Pick a name for your LLC and confirm that it’s available
Your name can be just about anything, but remember that it is a representation of you and your business. Because LLCs are state specific, you can search through your Secretary of State’s website or by using the search function on LegalZoom.
There are some restrictions on the names you can choose, again state-specific and you may not be able to use words like “university” or “bank.” Most states will require that you include “LLC,” “Limited Liability Corporation,” or something similar at the end of your LLC’s name.
2. Create a statement of purpose for your LLC
A statement of purpose describes the primary purpose of your business and is required by most states. Some states want general statements while others want specific ones.
Here are a couple of examples of a general statement of purpose:
- The purpose for which this Limited Liability Company shall be organized is for any and all lawful purposes for which a Limited Liability Company may be organized as per the laws of Texas.
- For any and all lawful purposes for which an LLC may be organized in Texas.
Both of these have the same effect, and you can take out Texas and put in the name of your state.
A specific purpose statement will be a sentence (maybe two, but the simpler the better) that says more about what your LLC will be doing. These ones are trickier because being too specific could potentially limit what your business can do, but using LegalZoom means they will help you with those formalities, and you can even change your purpose statement later on.
3. State whether or not you’ll be hiring employees
Whether or not you hire employees will help determine whether or not you need an Employee Identification Number (EIN). Your EIN will be used in filing taxes, handling payroll, and other recordkeeping responsibilities.
If you are starting out on your own, you can always change this later using LegalZoom.
4. Identify a registered agent
Registered agents aren’t required in every state’s LLC formation guidelines, but if they are, you will need to name a third-party individual responsible for receiving notifications and paperwork related to your LLC. You can also name yourself as the registered agent as long as you reside in the state you’re forming the LLC in.
5. Start drafting your LLC documents
Depending on your state and type of LLC, you may need to file some additional paperwork to finalize the formation of your LLC, including an operating agreement, your EIN forms, and licenses. You can use LegalZoom to fill out and file these documents as add-on services.
- Operating agreement ($99) This document describes how your business will run to prevent any conflicts or disputes.
- Operating agreement and EIN ($159) You can file for an EIN for free through the IRS, but you can also use LegalZoom to handle that while also drafting your operating agreement.
- Operating agreement, EIN, and licenses ($199) The license add-on might not be applicable to your online business, but it would be a must-have if you needed a liquor license for a bar or restaurant, or were opening something like a salon.
6. Select your LegalZoom package and pay
To form an LLC with LegalZoom, you’ll have three options that range from as little as $29-$349 + state fees. The prices do vary from state to state. For example, the lowest priced package (Economy) will cost $29 + $100 in state filing fees if you live in Oregon, but it’s $29 + $160 in state filing fees in Pennsylvania. You will also need to figure in the cost of any of the add-ons listed above.
The package you choose will reflect the timeline for processing your information (as fast as 7-10 business days) and additional products, like an official certificate with seal and organizer.
Don’t forget that using LegalZoom is a business expense, meaning you can deduct the cost of using LegalZoom for your LLC formation on your business taxes.
The packages are:
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7. Finalize the details of your LLC
The last step is providing LegalZoom with a few more details about your business, and again, some of this will vary state to state. But for the most part, this information will include:
- Business address
- End of your fiscal year
- Dissolution date
- Whether or not you’re a licensed professional
- Owner names
- Owner interests
- Management structure
- Contact information
Finish this step and you’re officially in business! Congrats!
Pros and cons of using LegalZoom
For the most part, LegalZoom is going to alleviate some of the stress that goes along with forming an LLC. However, just like any other product or service, using LegalZoom to form your LLC isn’t going to be for every online business owner. Here are the pros and cons of using LegalZoom to help you decide if it’s right for you.
Pros of using LegalZoom to form an LLC
- Significantly less expensive than hiring a law firm or business attorney to handle your LLC formation needs.
- LegalZoom is a trusted service provider who has been in business for over 15 years.
- You don’t need to have any legal training to set up an LLC – LegalZoom takes care of everything.
- They offer a variety of services and add-ons from tax compliances to licenses.
- Using LegalZoom will save you time. You don’t have to research attorneys or firms, find the correct paperwork, etc.
- If you choose the highest priced package, Express Gold, you can have your LLC up and running in just 7-10 days.
Cons of using LegalZoom to form an LLC
- Compared to other online filing services, LegalZoom has slightly above average prices.
- Their customer service is somewhat limited because you don’t have access to one-on-one support from an attorney, and they can get backed up with customer service requests.
- There have been complaints about auto-renewal billing, so you will need to pay close attention at checkout time and keep an eye on your credit or bank statements.
What are the alternatives to using LLC to form your LLC?
If LegalZoom doesn’t sound like the best option for you, or you just want to shop around, there are other online LLC formation services, like IncFile, Northwest, and Rocket Lawyer. Doing your own research and reading online reviews from real customers is always a good option when you are paying for any services related to your online business.
Should you use LegalZoom?
LegalZoom is just one of many options you can use to form an LLC for your online business. You can use one of the other online services listed above, or you can go with an in-person option and find a lawyer in your area. The other option is doing it yourself, which honestly isn’t that difficult.
You know your business and your needs as a business owner. If you are the type of person who can manage the paperwork and stay on top of everything, then going at it on your own isn’t a bad idea. But if you need some extra support and want everything streamlined for you, then LegalZoom does have a lot to offer.
Just like any business decisions that you make, who you choose to use to form an LLC is an important choice, and you’ll need to weigh up the options to make the right choice for you.
Whatever you do, forming an LLC is an important part of running an online business. It’s relatively inexpensive, even if you do go with LegalZoom, for the type of protection it offers you.