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Should You Use A "Do It Yourself" Incorporation Service? Cliff Ennico www.creators.com "I'm thinking of setting up a corporation or limited liability company (LLC) for my small retail business, but the attorneys around here charge a bloody fortune to do the paperwork. I surf the Web a lot, and I see countless Websites that offer to set up a corporation - usually in Delaware or Nevada - for under $200. This seems like too good a deal to be true. Are these services legitimate and, if they are, what am I not getting by using one of these instead of an attorney?" There is nothing wrong with using a "do it yourself" service to set up a corporation or LLC, but be careful. An online service may give you a brochure or DVD illustrating the differences between corporations and LLCs generally, but they won't give you one-on-one advice. That's considered "practicing law" or "practicing accountancy", and only a licensed professional can do that. When looking to set up a corporation or LLC for your small business, it's best to consult with a lawyer AND an accountant to determine the type of entity (corporation, S corporation or LLC) that will give you the most legal and tax advantages. Once you've settled on a particular entity, though, you can (if you wish) go to the online service and save some money getting the paperwork done. Just remember that if they make a mistake, you can't sue them for malpractice. There are some pretty reputable online incorporation services now that are giving the legal profession a run for its money. Intuit Corp. (which publishes the QuickBooks(r), Quicken(r) and TurboTax(r) software products) recently acquired MyCorporation Business Services, Inc. (www.mycorporation.com), a Calabasas, California based incorporation service. Other major players online are LegalZoom (www.legalzoom.com) and BizFilings (www.bizfilings.com). There's even a franchise called "We the People" (www.wethepeopleusa.com), that prepares incorporation and other simple legal documents, with 166 brick and mortar locations in 29 states. But beware. There are a lot of "fly by night" incorporation services that will take your money, file a generic incorporation form with your state Secretary of State's office, and leave you to figure out the rest. When looking at a "do it yourself" incorporation service, you should ask six questions: Will they register your entity with the Secretary of State's office? Virtually all online services do this, but if they're charging less than $200, that's probably all they're doing. If you're incorporating in a state other than your own, will they help you find a "registered agent" to act as your local mailing address in that state? Most online services do this, but will send you the bill for the registered agent's service fee (usually $150 to $250 a year). Will they provide you with the internal corporate documents (such as bylaws, minute book, corporate resolutions, and share certificates) you need to run your business day to day? Some services do this, but most do not. Will they give you notice of filing deadlines on an ongoing basis? Only the better services do this. Will they register your entity with the IRS and get you a taxpayer ID number? Again, only the better services do this. And finally: Will they help you register your entity for state and local taxes (including sales taxes, since you are a retailer)? I'm not aware of any online service that will do the actual registration for you, but some will tell you that this is a necessary step, and the better ones will offer you some assistance (such as a link to your state tax authority's Website) to make sure the job gets done. Until steps number 1, 5 and 6 have been performed, you are not legally incorporated, and it will be only a matter of time before you receive a nasty letter from a government agency saying you owe them something. Even using one of the very best "do it yourself" incorporation services, you will probably have to hire an accountant or attorney to help you with step # 6. One more thing: I've said it before in this column and I'll say it again -- there is absolutely no reason for a small business to be incorporated in Delaware or Nevada unless it is physically located in one of those two states. Forming a Delaware or Nevada entity when you're actually doing business in Wisconsin will not protect you one bit from Wisconsin state and local taxes, and you shouldn't believe anyone who tells you otherwise. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is 'Small Business Survival Guide' (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.