Why should I use an attorney rather than an online site to form my business?

I was recently asked why someone should spend the money on an attorney rather than form his or her (or their) company through an online site. The answer, I found, was rather simple. There are two main reasons to use an attorney: an attorney will help ensure that you pick the right entity for your situation and an attorney *should* create (with your input) and explain all the documents necessary to get you company up and running.

When someone who isn’t skilled in the law goes to an online website, he or she may choose to set up a limited liability company thinking that is the best entity structure for his or her company and disregard forming a corporation. However, if that same person had gone to a skilled business lawyer, he or she may have been led through a series of questions, like those I ask my clients, to determine whether an LLC is correct. A skilled business attorney may discover that for one reason or another, a corporation is best. Or a skilled business attorney may discover that an LLC is correct and be able to guide clients through the choice of whether to make it member-managed or manager-managed.

In addition to helping a client choose the best business entity, a business attorney will help a client prepare the documents necessary to run the business including paperwork through the state, federal, and possibly city level. For instance, when my clients walk out the door after I set up their business, I try to ensure that all their documents are done (unless it is something that they personally have to do and I cannot as their attorney) and that they understand exactly what is in them. The last thing I want is someone to leave unsure of what their by-laws or operating agreement says. If you get a document from an online site, you don’t know if the provisions in it are what you need (for instance, the last thing you want is an utoh, I don’t have any provisions for when my partner gets divorced and now the business is facing failure because of it). In addition, you may not understand all the provisions in it (for instance, the last thing you want is an utoh, I didn’t realize that the way that clause was worded, a personal bankruptcy means a lot of problems). When you hire a business attorney (and again, I caution that you need to find out what services your attorney is providing – is he or she just writing the documents and throwing you out the door or is he or she going to go over the documents with you?), your business attorney will probably ask you lots of questions to see what you need in your documents and then explain them to you.

Filing online is quick and it is easy. However, if you don’t know what you are doing, it could end up costing you big time down the road. Hiring an attorney gives you the peace of mind knowing that someone who knows the ins and outs of forming a business is taking care of you and ensuring that you know what you are doing and why.

*I say should, because you have to check with your attorney to find out exactly what he or she is doing for you. Some attorneys may only prepare the major company documents (Articles with the Secretary of State and your operating agreement or by-laws) while others may do much more to ensure that you are set up with the Secretary of State, any other state agencies, the IRS, and any other entities you need to file with. Always ask what are you doing for me and what do I need to do once I leave to make sure you don’t think you are totally set up and find out you aren’t.