united-states limited-liability-company
Is there a good reason to avoid services like LegalZoom and IncFile?
<p>If I'm looking to create a simple LLC for an online business and can do the research myself on how to start and run it, is there a compelling reason I need an attorney to get started?</p>

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<p>Is there a good reason to avoid services like LegalZoom and IncFile?</p>
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<p>Yes.</p>
<p>What resources like that don't do is &quot;issue spotting&quot; and having an accurate and experience driven awareness of what you need, that a lawyer provides.</p>
<p>Lots of arrangements in entities seem perfectly clear until you have to apply them in a particular factual context and you suddenly find that seemingly clear language does not provide the guidance that you think it should.</p>
<p>In the case of a multi-member LLC taxed as a partnership, for example, Subchapter K of the Internal Revenue Code which governs entities taxed as partnerships, makes analytical distinctions, for example, between allocations of items of income and expense on one hand, and between distributions of assets to members on the other, that is not at all intuitive, especially if you depart from a strict share and share alike pattern. These distinctions are even more complicated in the case of an LLC to which tax rules designed for unlimited liabilities are imposed in a way that prevents tax loopholes, which is done through some rather obscure tax regulations buried in typical operating agreements.</p>
<p>These resources also can't tell you what the typical deal terms are in particular industries, such as how the economic rights of co-owners of a single project real estate development deal are typically arranged, which is critical if you are to be able to raise capital for your venture.</p>
<p>In general, the difficulty is that you don't know what you don't know, and a software package isn't going to clue you in to the hard questions and deal terms that you need to know about to get a good result.</p>
<p>Even in the case of a truly simple single member LLC, the software is unlikely to clue you in to the circumstances where an S-corporation structure would be better, or to the much more rare but not non-existent cases where a C-corporation or a sole proprietorship or a general or limited partnership would be better.</p>
<p>Also, lawyers can easily smooth over uncertainties about practical steps to take like when to pay for what in terms of start up costs and mechanics, can alert you to problems in your basic business model, and can clear up common misconceptions about what &quot;limited liability&quot; does and does not actually do for you. Most people think that limited liability provides more protection in a small single owner business with an owner-operator than it actually does.</p>
<p>Similarly, most closely held companies have a parallel buy-sell agreement with a lot of moving parts that software would only rarely prompt you to prepare as well.</p>
<p>The amount of money you save by doing it yourself in a small closely held entity formation is very modest, and often times if you make a mistake which you often will, the costs of correcting that mistake could easily be 5x times greater or worse than the legal fees you avoided up front.</p>
