Overview of Business Formation Services
Given the increasing popularity of entrepreneurship over the past few decades, it comes as no surprise that there are a variety of methods a new business can utilize to get off the ground. In the past, an up-and-coming business owner would have to contact a lawyer about the legal formation process, but in the modern age, most choose the simpler and far less costly route of using business formation services, which are offered by a number of online companies. Two of the most in-depth and helpful online incorporators for business owners are Inc Authority and LegalZoom, whose business formation services range from the basics of filing the paperwork to providing a complete suite of annual maintenance services that will ensure a business is legally protected even after it has begun its operations.
Although in the past it was only recommended that an owner contact a lawyer and pay for the costly fees to have a lawyer file the necessary paperwork , many new business owners are taking full advantage of online business formation sites like Inc Authority and LegalZoom to avoid all of the potential legal headaches that may arise from not having the proper business structure. Although there is certainly a certain allure to paying a fraction of the cost to get the business formation paperwork squared away, business owners should be careful to only trust those sites that are reputable and trustworthy. However, it is important to be careful when moving forward with an online business formation service, as not all firms are created equal.
Understand the Services Offered by Inc Authority
Inc Authority is primarily known for two services: LLC formation and S-Corp formation. The website also provides several online services that revolve around managing your business. They offer a free package where Inc Authority will establish your LLC or S-Corp absolutely free; you’re only required to pay the state fees. For this package, the services and timeline are limited. Couriers are not used and Inc Authority’s registered agent services are not included. Basically, Inc Authority will establish the company in-state but not provide any other services.
If you choose to pay, Inc Authority offers several different packages. The paid packages are relatively inexpensive compared to their offerings. Each package beyond the free plan includes an expedited timing service to help you speed up the formation process.
First of all, all incoming documents can be viewed and received online through the customer portal. This includes annual reports, compliance notifications and other legal documents. There are also unlimited document storage and online support for 30 days. Going further, each package includes a business license and an operating agreement. There is also a free business startup kit included for all packages. These documents help familiarize owners to terms they should know and documents they will need throughout their early startup life.
If you move toward the paid packages, there are also additional amendments and resolutions, plus tax-exempt certificates and award seals. The bronze package includes business consulting and credit monitoring for your business tax ID, while the silver package includes a business credit report and score with access to a credit specialist. There are also free eBooks, online chat and email support.
They list 17 states in which they perform their services, including all the popular states, such as Nevada, Wyoming, Delaware and New Mexico. They don’t charge you extra for the more expensive states, which is a benefit. There are no add-ons during the ordering process either.
They provide a variety of services on their website aside from LLC and S-Corp formation. Whether you choose to use these services depend on your own business needs, but their blog and eBooks offer a wealth of information that can help you maneuver through the startup process.
Learn About the Services Provided by LegalZoom
LegalZoom has a la carte packages, bundled services, add-ons, and subscriptions. Their packages start at around $80, but some can be more than $800 depending on what you need.
LegalZoom Business Formation Packages
LegalZoom has different business formation packages for LLCs, Corporations, Non-Profits, and PLLC Options. The packages are broken down into three tiers: basic, standard, and premium. The basic package comes with entity name availability search, unlimited name changes, articles of incorporation, bylaws, operating agreement, a three-month trial of a company seal, a financial account authorization letter, free CD, perusal of state-specific legal forms, and toll-free support. In addition to the items in the basic package, the standard includes bank kit, certificate of good standing, stock kit, and operating agreement (LLC only). The final tier includes everything in the Premium option as well as a Federal Employer Identification Number, customized bylaws, custom operating agreement (LLC only), and 30-day legal advice trial.
LegalZoom Trademark Services
The Trademark packages start at $99 and go up to $799 based on what you need. The packages include features such as a customized trademark application, a comprehensive database search, and a consultation with a LegalZoom employee about your mark.
LegalZoom will also do a full trademark search for anywhere between $159 and $299 which includes a 14-day guarantee that no one else will have a mark similar to yours. If an existing registration is found for a name that is similar, LegalZoom will issue a refund of the initial search fee. You can also get trademark monitoring and watch services for a subscription price of $10 a month.
LegalZoom’s Services for Individuals
LegalZoom has packages for people who are looking for divorces, wills, advance healthcare directives, incorporation services, trademarks, and other personal document needs. They have flat fees starting at $149 and going up to a few hundred dollars.
A Comparison of Prices and Packages
Upon first glance, it may seem that filing your articles of incorporation on your own saves you money, but in the long run, professional incorporation services can save you from hidden fees. As State by State Legal Filing Services explains, "Some fees are difficult for the regular business owner to find." So, it’s best to know ahead of time what problems you might face if you decide to do-it-yourself. Remember, it’s better to know what you’re getting into so you can be prepared than to be caught off guard when it’s too late.
The exact cost of filing articles of incorporation and the state taxes associated with it are different for every state, but in general, these incorporation services offer a package to help save the headache of filing taxes. However, with the incorporation services you don’t have to file taxes via the internet – you have to pay them in busy offices, and since taxes and some fees are due on a certain day of the month when business owners are busy with other things, it can leave you racing from the post office to the tax office with a long line of other business owners in front of you. Upon this discovery, many business owners realize it would’ve been better off paying the additional $35 or $50 for online filing, if they had gone through Inc Authority or LegalZoom to begin with.
State by State Legal Filing Services explains the process a bit more clearly: "Most states require that you make an annual filing with the Department of Corporations in the state. This filing is due after the Close of the Corporation’s Accounting Year Period (which you can either select first, or negotiate with the state). In addition to the filing, there are usually additional fees due to the state for the filing, and some states also impose a minimum franchise tax or corporate "privilege" tax. Many times a federal tax identification number is also required, which is in fact the same thing as an SSN for your corporation. Some states will try to sell you this service as well."
Even Inc Authority and LegalZoom can’t escape the fees imposed by the state government, and unfortunately neither can you! That’s why when seeking an incorporation service it’s important to understand what costs you’ll actually be paying to the state versus the incorporation service. According to both websites, you are charged a flat rate for the service, but they also charge you for the state government filing fees (and other extras). Below are the costs of packages offered by Inc Authority and LegalZoom:
Inc Authority
Basic-$49 + state fees
Standard-159.95 + state fee
Executive-$249.95 + state fee
Premium-$299.95 + state fee
VIP Package-$349.95 + state fee
LegalZoom
Complete SKU# INCC
Basic-$69 + state filing fee (+ $69 for tax package) ($139 total)
Express Gold SKU# INC-EXP
Plus-$149.00 + state filing fee (+ $99 for tax package) ($238 total)
Express Gold SKU# INC-EXP-PLUS
Pro Deluxe SKU# INC-PROS
Pro Platinum SKU# INC-PRO-PLAT
($379 total)
Complimentary Legal Audit
Plus they charge a $50 fee per change in tax or corporate structure.
The User Experience and Customer Service
User experience goes hand-in-hand with customer support and availability. In 2023, customer experience is critical for success, whether it’s e-commerce or business formation. Customers want to purchase what they need with minimal fuss and maximum support, especially when setting up a new business. Both LegalZoom and Inc Authority have made concerted efforts to meet this challenge.
Inc Authority is perhaps the most user-friendly business formation website we’ve come across. The layout is clean and easy to follow, guiding users with minimal text. The initial form asks for the basic information needed to start forming your LLC. It only takes a few minutes to create an account, select a business type, and enter your business name. The software double-checks your choices at each step, confirming areas such as whether you want the registered agent address to be the same as your business address. If you’re creating an LLC, the software will prompt you for an industry code (an optional feature). You’ll have the chance to enter your EIN in a space that’s clearly labeled "EIN" (again, an optional feature). You can even rename your LLC and choose between the default and an "upgraded" version, which gives your company a name change event notice. The rest of the form is straightforward and simple to complete.
The whole process took less than 5 minutes from start to finish. Inc Authority checks to make sure that all of your fields are filled and give helpful suggestions to get around issues with your entry. The company also has an email option if there are any problems with the registration, which is a nice touch.
On the other hand, LegalZoom offers a less intuitive experience. Multiple forms have to be looked over – this is not a problem if you already know what you want but for those just starting off, it could lead to confusion. Also, there are spelling errors on the main site, which make the C Corp section difficult to interpret. This might be an issue with the format of the site itself, as the text appears in different sizes on my tablet.
On their contact page, LegalZoom says they have representatives available by phone 7 days a week. They do not specify the hours during which they are open for phone inquiries. A chat button is present during business hours, Monday through Friday. The email support is available on the contact page.
Conversely, Inc Authority has a live chat option during the day with a subscription form on the same page. Although the subscription form is labeled as "support," it forwards you to a new page that asks for information on your order. There’s a direct line to Inc Authority that is available on Sunday through Thursday, from 5 am to 9 pm PST and 5 am to 6 pm PST on Fridays and Saturdays.
Legal Knowledge and Document Preparation
When it comes to preparing the legal paperwork needed for LLC formation, Inc Authority and LegalZoom both use paralegals. They draft the documents needed for incorporation and file them with the state directly on behalf of their clients. With LegalZoom, there’s one more step in between that might help you feel a bit more secure. Before any forms are filed with their service, you’ll have a consultation with an attorney who is licensed in your state. This consultation is very valuable and includes an analysis of your specific business needs. However, you do have to pay extra for this.
While you don’t have to schedule a consultation with an attorney through Inc Authority, they have another way to help reassure you about the quality of the paperwork you’re getting. Prior to filing your paperwork, a Senior Business Analyst reviews your state specific filing requirements . This employee goes through an extensive checklist for the state you’re filing in and makes sure that nothing is missing from your LLC formation package. If there is something that should be included that Inc Authority missed, they’ll rewrite the paperwork and resubmit it. This process is repeated before they send the LLC formation package to the state again. According to Inc Authority, they haven’t had a client whose order has been rejected in 2018.
Both LLCAuthority.com and LegalZoom charge a fee to revise documents if there is any type of error. LegalZoom charges a $50 fee per change while LLCAuthority.com charges $100 for any revisions needed. Inc Authority makes the changes for free if the error is their fault. However, they reserve the right to charge for corrections on documents that were completed by another service. Inc Authority will charge a $100 fee for each document that requires completion or reprinting if another service completed the document incorrectly.
The Pros and Cons of Inc Authority
Inc Authority will help you file all the paperwork needed to create your business as an LLC, corporation, or nonprofit. You will pay just $0 using their services. You may be wondering how they can charge $0 in fees and still make money. The answer is simple: they make most of their money by selling you extra services that you don’t necessarily need, including registered agent services, an operating agreement, IRS tax support, etc.
While they do offer some useful services, you’ll have to be careful not to pay more than you need to, or you could end up paying much more than if you just used an alternative service.
Also, it’s worth noting that the free + paid service model is not unique to Inc Authority. Many businesses follow a similar model, including LegalZoom, LLC Formation, ZenBusiness, and others.
Pros:
Superior customer service. Inc Authority has great reviews online from customers who were blown away by their speed and attentiveness. Compare this to competitors who are commonly cited for poor customer service.
Quick turnaround. Inc Authority often completes incorporation paperwork within the first couple of days after you place your order. Of course, Inc Authority doesn’t guarantee a specific turnaround time, but this should give you a ballpark estimate.
Satisfaction Guarantee. Inc Authority offers an 100% satisfaction guarantee on all of its products and services. This means you can try it out and get a full refund if you’re unhappy, no questions asked.
Unlimited filings. Inc Authority allows unlimited filings for all of its basic services. That means you get all of your amendments and documents filed at no extra charge. Other services have limits on the number of documents they’ll file.
Free registered agent services. Inc Authority will offer a full year of registered agent service free of charge, saving you $99 wherever else you might have registered.
Cons:
Limited support hours. Inc Authority only offers customer support between 9-5 PST (12-8 EST). That may be inconvenient for some users.
No guarantee on turnaround time. Inc Authority does a pretty good job of completing orders quickly, but because there’s no guarantee, you’re stuck waiting indefinitely if something goes wrong.
The Pros and Cons of LegalZoom
When it comes to the pros and cons of LegalZoom, you’ll find that the price is typically a substantial draw for small business owners. If your business is just getting started and cash is tight, not hiring an attorney will save you money in the short-term.
LegalZoom has a large footprint on the Internet, giving it an availability that many competitors do not have. There are LegalZoom commercials on TV, and the site is highly visible in web search results as well, which can come in handy if you need help with an item quickly.
Of course, simply because something is cheaper doesn’t make it better. Many users have reported issues getting responses from Customer Service when a problem occurred. It should be noted the Better Business Bureau has LegalZoom rated as a "B," rather than an "A" because LegalZoom gets so many inquiries regarding issues with their service.
The service LegalZoom provides may simply not be right for your business anyway. The packages available might not cover all your business entity needs, and customers have reported that being able to revisit previous purchases on the LegalZoom site is not an option. There have been instances in which a customer has tried to revisit LegalZoom to add a new service to a previous business entity they have purchased at LegalZoom, only to find that LegalZoom no longer has a record of the previous purchase, and they are forced to start over from the beginning.
To Conclude: Which Service Is Best?
Starting a new business requires plenty of research, but it’s important to consider the details before you start spending money on services. With two of the most popular online formation services compared in the previous sections, it should be easy to see the winners and losses and make a decision. If you’re looking for a registered agent and corporation formation service that’s affordable and offers the bare minimum, Inc Authority could be the right choice for you. Forming an LLC is only $49 using Inc Authority , which doesn’t require a monthly membership. However, that barebones plan only includes one year of incorporation and a few other services, which will cost you as you continue to use them. You’ll need registered agent service and business alerts, for example. If you want the best value out of your online formation service, LegalZoom is the clear winner. Yes, LegalZoom is slightly more expensive than Inc Authority and some other services, but the learning center is worth its weight in gold, especially if you’re new to business ownership.