One question that I am frequently asked by prospective clients is whether it is best to use an online incorporation service like LegalZoom or to retain an attorney to incorporate a startup business. My answer is always the same: if you are looking to form a startup business -- such as a limited liability company (LLC), an S-corporation (S-corp), or any type of business entity -- your best bet is to retain an attorney instead of relying on LegalZoom or other similar online legal document preparation services.
Although LegalZoom is a viable alternative for the preparation of some legal documents, it is not the best option for entrepreneurs looking to start a new business. First, LegalZoom cannot provide legal advice. It can only provide “self-help services at your specific direction.” Most entrepreneurs looking to start a new business need individualized advice from an attorney. They not only need to understand the incorporation process, they also need assistance with a host of other legal issues that accompany starting a new business including the hiring of employees, reviewing and negotiating leases, and drafting business contracts.
Additionally, LegalZoom uses a standard online questionnaire to determine what should go into the incorporation documents that it prepares for you. However, given that incorporation documents (e.g., Bylaws, Operating Agreements, etc.) are the foundation for the operation of your business, an attorney is often needed to ask important questions regarding various business contingencies and intricacies. For instance, although I may start the process of forming an LLC with a basic set of questions to the client, I always have hundreds of “what if” questions based on the initial answers provided by the client. The client’s answers to my litany of additional questions are essential to my determination of what to include in the incorporation documents or whether other legal documents are necessary to effectuate the client’s goals.
The process of starting a new business is much like the process of building a new house: you want it done right the first time around! Although it may be tempting to cut a few corners and save some money with a legal document preparation service, it is worth your while to retain an attorney to ensure that you are building a solid foundation for your new business. For startups in Virginia, a great resource for obtaining basic information on the incorporation process can be found at the website for the State Corporation Commission.