When first starting a business, you have many decisions to make. One of those decisions? What sort of business structure you choose. This step of your business setup is critical because it will impact things like your personal liability for your business as well as how you file and pay your taxes.
One business structure to consider is the limited liability company. There are many perks when you operate as an LLC or corporation, and the main ones are liability protection and tax benefits. Creating an LLC or corporation may also help your business when it’s time to get a small business loan, as some lenders will not lend to sole proprietors. It can also make it easier to build business credit.
If you don’t have the time or expertise required to file the paperwork required to form an LLC, you also have the option to hire a company formation service.
Top 8 LLC Formation Services
In this article, we’ll look at how and why you might want to form an LLC, and we will examine several LLC formation services, including:
- Rocket Lawyer
- Northwest Registered Agent
- Inc Authority
What Does an LLC Formation Service Do?
These services provide information and assistance to complete the steps needed to set up your LLC or corporation. They are familiar with the steps required and can guide you through the paperwork. They may also offer a variety of additional related services business owners need, such as trademark registration.
If you are going to to set up a new company, here are some of the tasks you’ll either need to undertake yourself, or hire a service to do for you:
- Research company name availability
- Register fictitious name (“Doing Business As” or D.B.A.) if needed
- Appoint a registered agent to accept legal notices for the LLC
- Create an LLC operating agreement (not required in all states, but generally recommended)
- File articles of organization (or similar formation documents) in the state in which you register the LLC
- File as a foreign LLC in other states (if applicable)
- Publish a notice of formation (only in states where required)
- Get business licenses and/or professional licenses as required by the state
- Get an Employer Identification Number (EIN)
- Register with your state taxing authority as needed for sales tax or other required taxes
- Create an LLC Banking Resolution
- Open a business checking account for the LLC
- Register a trademark for your business (optional)
There’s a lot to get done! And it’s why new businesses often turn to services that can guide them through the formation process.
Additional Company Formation Options
Before we look at these company formation services, let’s talk about your other options when it comes to business structures.
If you take no action to form a different structure, your company will be, by default, a sole proprietorship. That means it’s an individually-owned entity, and there’s nothing legally separating it from you as the owner. If you have a business partner, you’d default to a partnership.
(Learn more about the LLC vs. sole proprietor business structure.)
You could also elect to operate as a corporation. This provides separation from you personally and the business, meaning if your business had debts it couldn’t pay or was sued, your personal assets couldn’t be taken to cover the business debts. There are two types of corporations: the S-corporation and the C-corporation. The S-corp is the most popular type of corporation, especially for small businesses. It offers what is called passthrough taxes, which means that your business pays no taxes, and you pay taxes on profits on your personal income tax return.
Your business may be a nonprofit if it is a qualifying charitable organization. In that case, you’ll be eligible for tax exemptions.
But this article is about filing as an LLC. With flexible tax options (an LLC can be taxed as a disregarded entity if you’re the only member, a limited liability partnership, or an S- or C-corp) and asset protection, the LLC is a wise choice for many businesses. Also, foreign companies and foreign investors prefer the LLC because it is open to owners living in another country.
8 Best LLC Formation Services for 2022
You can complete registration for your LLC or corporation on your own through your Secretary of State, enlist the help of an attorney, or even hire a registered agent service to simplify the process.
If you decide to hire a service to help you set up your LLC, here are eight popular LLC formation and incorporation services that can help.
1. Inc Authority
IncAuthority offers free LLC or corporation setup. (State filing fees are charged and vary by state.)
The setup services are 100% free, though you will pay the Secretary of State fees and postage. Fees for additional services aren’t posted on its site.
Features and Benefits of Inc Authority
Inc Authority will file your business structure paperwork on your behalf and then give you one year of registered agent service and free Compliance Coach access.
ZenBusiness leverages technology and automation to simplify the process of LLC and corporation filing.
The Zenbusiness standard service starts at $49 a year plus state filing fees. It will help you secure your business name, file and verify your documents with the state, and deliver your Articles of Incorporation. Additional services are available for various fees. Registered agent fees vary, operating agreement templates cost $49, annual report filing for $100, compliance services for $199, and more.
Features and Benefits of ZenBusiness
ZenBusiness offers filing services in all 50 states plus Washington D.C. Its website includes helpful information even if you don’t use its services. It also offers a monthly $5000 grant; customers who have used its formation services are eligible to enter.
Incfile offers free LLC filing, as well as a full suite of startup services like banking and bookkeeping. It also has a robust learning center with information on starting a business, choosing the right business structure, and growing your business.
Incfile offers three tiers of service, and pricing varies depending on the state you’re in. The prices here are for forming an LLC in California, and serve only as an example of what you might pay.
The Silver package charges nothing beyond the state fee for preparing and filing the articles of organization or incorporation documents. You also get unlimited name searches and free registered agent services for a year. The fee is $75.
The Gold package includes all of the above plus an EIN Business Tax Number, IRS Form 2553, operating agreement, and several business services like a business bank account and business tax consultation. The fee is $149 + the state fee (in the case of California, $75).
The Platinum package, at $374, also offers business contract templates, expedited delivery via FedEx, and a domain name and business email.
4. Rocket Lawyer
Rocket Lawyer goes beyond helping you set up a business entity; the company offers a variety of services, including creating a contract or filing a trademark application.
You don’t have to sign up for a plan to use Rocket Lawyer’s services; you can pay a la carte for things like legal documents ($39.99), a 30-minute legal consultation ($59.99), or incorporation filing ($99.99 + state fees). You can also become a member for $39.99 a month and get many services included or at a steep discount.
5. Northwest Registered Agent
Northwest strives to provide over-the-top customer support while helping customers file an LLC, get a certificate of incorporation, create legal forms, or get registered agent services. They pride themselves on answering their phones directly and understanding business owner’s needs.
There are no plans at Northwest. You pay for the services you need. To incorporate or form an LLC, the fee is $225 plus state fees. Registered agent services are $125 a year. And there are a variety of free forms available on the site for corporations and LLCs.
LegalZoom offers business company formation, along with a variety of services such as trademarks and copyrights.
Membership provides 30-minute consultations with attorneys on new legal matters, and contract reviews (up to 10 pages). It starts at $39.09/month billed annually
- LLC formation starts at $79 plus filing fees
- Trademark registration starts at $199 plus federal filing fees
LegalNature offers an extensive library of online legal documents and guides, as well as business formation services.
If you only need to form an LLC, corporation, or nonprofit, you’ll pay a minimum of $49 plus state filing fees. If you also want access to its library of legal documents, you can choose the annual subscription at $84 a year or the monthly subscription of $38.95 per month. You also have the option to pay for single documents at prices starting at $34.95.
Incorporate.com simplifies company formation services and offers ongoing assistance to keep you in good standing.
Pricing is based on the state you’re forming a business in and may be as low as $79 plus state filing fees. You can also upgrade to The Essentials or The Works plan, which each offer additional services like annual report preparation and filing and an EIN.
How to Choose an LLC Formation Service
As you see from the list above, these service providers offer LLC formation packages at reasonable costs, with additional costs for add-ons or memberships.
Prices are generally competitive, so in addition to cost you want to look for positive reviews including Trustpilot customer reviews and other customer feedback online. Ask questions about turnaround time if you are on a tight deadline.
Pros & Cons To Using Business Company Formation Services
Let’s look at both the benefits and drawbacks of hiring a business company formation service.
Pros to Business Company Formation Services
Certainly, it is possible for you to register your business as an LLC or a corporation on your own. But sometimes it can take a little digging to figure out what forms to fill out and what to pay. Also, you’ll need to stay on top of annual requirements: sometimes you need to pay a fee or file an annual report. Working with a company that’s an expert in this field ensures you get it done right the first time.
Company formation services save you time, which is critical in the business startup phase. And while you’ll pay a little for these services, becoming an LLC or corporation could save you on your income taxes.
Cons to Business Company Formation Services
So what drawbacks are there? First, many companies advertise low costs for a basic package, but then rely on upsells, add-ons or expensive packages to make money. Understand they are businesses that are trying to make money, too.
The biggest potential drawback is that depending on what services are offered, you may not get legal or tax advice. If you have fairly straightforward needs, that may not ben an issue, but for others it could be wise to get legal advice. Someone who wants to form a startup to raise venture capital and go public will have different needs than someone who plans to operate a local business, for example. You may want to talk with an attorney and/or a tax professional to help you with important questions such as:
- Where to form the LLC— your home state? Delaware? Wyoming?
- What structure is best given the activities of your business?
In addition, you may want to get advice from a tax professional on the best business structure to help you minimize tax liabilities.
Is there an annual fee for LLCs?
Each state has its own filing fee requirements, and most states require you to file annually and pay a filing fee whether or not your business is profitable. It’s a cost of doing business. However, a few states don’t have annual filing fee costs or requirements for LLCs. Texas LLC’s, for example, generally don’t have to pay an annual filing fee, while California’s annual fees are quite expensive.
Is it worth it to form an LLC?
It can be well worth it to form an LLC or incorporate your new business as soon as possible. The tax benefits alone may make it worthwhile. If your business is sued or runs into other legal problems, you can’t form an LLC retroactively. In other words you don’t want to wait until it’s too late.
You may also find that without an LLC or formal business structure, you may miss out on opportunities for growth because potential clients or customers may not take your business seriously.
Building business credit can be easier as an LLC or corporation.
Finally it can be harder to get financing in the name of your business if you haven’t formed an entity; after all, without a formal business structure there’s really no distinction between you and your business. While most small business credit cards don’t require your business to be an LLC or corporation, there are some small business lenders that won’t lend to sole props.
Nav’s Final Word: Company Formation Services
In running a business, it makes a lot of sense to delegate tasks that you’re not an expert in. Hiring a company formation service can expedite your LLC registration and ensure that you are compliant with the requirements in your state.