Filing an LLC on My Own vs Formation Company

Are you ready to take the leap into entrepreneurship but unsure whether to file your LLC on your own or enlist the help of a formation company? You’re not alone! 

Many aspiring business owners face this crucial decision, weighing the allure of DIY independence against the convenience and expertise a professional formation service like doola can offer. 

In today’s blog, we’re diving deep into both options—exploring their pros and cons—so you can make an informed choice that aligns with your goals and budget. 

Whether you’re a seasoned pro looking to save some bucks or a first-time founder seeking guidance, we’ve got all the insights you need to navigate the world of LLC formation. 

Let’s get started!

Why File an LLC?

Filing an LLC (Limited Liability Company) has become a popular option for business owners in recent years. This structure combines the benefits of both a corporation and a partnership, providing limited liability protection for its members while also allowing for flexibility in management.

Meaning, if your business incurs any debts or legal liabilities, they will not affect your personal assets, protecting you from being affected by business issues.

Unlike corporations, which have a strict hierarchy and defined roles, LLCs offer more flexibility in terms of management. 

The members can manage the company themselves and decide how much control each member has in decision-making processes, making it easier to work together with partners.

Also, an LLC allows profits and losses to “pass-through” to each member’s personal income tax return, avoiding this double taxation issue.

You also have an option to elect corporate tax treatment if needed, depending on your specific situation.

This provides significant flexibility when it comes to choosing the most advantageous tax structure for your business.

However, the most lucrative benefit of an LLC is less paperwork compared to corporations or partnerships. making it easier to form and less costly to maintain compliance with state laws. 

This means less time consuming administrative tasks for small businesses who want more time focusing on growing their operations instead of dealing with complicated legal requirements.

The DIY Approach: How to File an LLC on Your Own

The process of forming an LLC can seem daunting, especially for those who are unfamiliar with the legal and administrative requirements. 

However, it is possible to file an LLC on your own without hiring a formation company, which may be cost-effective for some individuals, but requires careful research and attention to detail.

Step 1: Choose a State

The first step in filing an LLC on your own is choosing the state in which you want to form your company. 

Most people choose their home state for convenience, but some states offer more favorable tax laws or lower filing fees. 

So, it’s important to research the regulations and requirements for each state before making a decision.

Step 2: Choose a Name

Next, you’ll need to choose a name for your LLC that is unique and follows your state’s naming guidelines. 

This usually means including ‘LLC’ or ‘Limited Liability Company’ at the end of your chosen name. 

You’ll also need to ensure that the name isn’t already taken by another business in your desired state by visiting their official website or their office.

Step 3: Prepare Your Articles of Organization

Required by all states for forming an LLC, Articles of Organization serve as legal documentation, which outline key information, such as its purpose, management structure, and registered agent details. 

In the DIY approach, you need to prepare this document yourself. However, many states provide fillable templates on their website to make this process easier.

Step 4: File Your Documentation

Once you have completed preparation of articles of organization as per the guidelines, you will need to file these documents with the Secretary of State office or on their website. 

Each state has different filing fees ranging from $50-$500 dollars so it’s best do some research beforehand to know what costs you can expect.

Step 5: Apply for Permits and Licenses

Depending on what type of business you’re running there may be additional licenses or permits that must be obtained before operating your LLC. 

Check with your state and local government offices to determine what is required for your specific business.

By taking this DIY approach, you can save money and have a better understanding of the legal requirements for running an LLC. 

However, for those who are not comfortable handling the paperwork themselves or who simply want assistance throughout the process, hiring a formation company may be a better option.

Advantages of Filing an LLC Yourself

While many people may opt to hire a formation company to assist them with the process, there are also several advantages to filing an LLC yourself.

✔️ Cost-Efficient

Hiring a formation company can be expensive and not always necessary, especially if you have a good understanding of the incorporation process. 

By doing it yourself, you can save hundreds or even thousands of dollars that would have otherwise been spent on professional services.

✔️ Complete Control

When forming an LLC on your own, you have complete control over every aspect of the process. 

You get to decide on all the details such as business name, location, registered agent, and ownership structure without having to compromise with anyone else’s ideas or preferences.

✔️ Speed

Filing an LLC on your own can often be faster since you don’t have to wait for others to review and file your paperwork. 

With online resources available from state-specific websites and comprehensive guides provided online, completing all necessary documents and submitting them can typically be done within a matter of hours.

✔️ Learning Experience

Filing an LLC on your own gives you the opportunity to learn more about the process and gain valuable knowledge about running a business in general. 

This experience will not only benefit you in future ventures but also help in minimizing any potential mistakes that could occur while making critical decisions for your business.

✔️ Better Understanding of Your Business

Taking responsibility for forming your LLC allows you to intimately understand all aspects of your business structure, from legal requirements. 

By doing everything yourself, such as registering with local authorities, getting necessary licenses and permits, and developing an operating agreement, you will get to hone your specific needs and capabilities as an entrepreneur.

Professional Services: Using an LLC Formation Company

While some individuals may opt to file for their LLC on their own, using a formation company can offer benefits for you and your business.

One of the key benefits of hiring an LLC formation company is the expertise they bring in setting up your business structure. They ensure that all necessary documents are completed accurately and on time, reducing the chances of delays or rejections from government agencies.

Moreover, using a formation company can save you valuable time and effort by outsourcing this task to professionals. So, you can focus on other important aspects of your business such as developing products or services or establishing marketing strategies.

Another advantage of using a professional formation company is that they typically offer additional services beyond just filing for an LLC. These may include obtaining necessary licenses or permits, preparing Article of Organization, drafting operating agreements or bylaws, obtaining EIN, and more. 

These services vary depending on the specific needs of your business but can be incredibly helpful in ensuring all necessary steps are taken to get your business up and running smoothly.

Furthermore, when working with an LLC formation company, you have access to their resources and support even after the initial setup is complete. 

As your business grows and evolves over time, a reliable formation company will help you by providing ongoing compliance support, bookkeeping services, and tax assistance to ensure your business remains in good standing with state authorities.

Last but not least, utilizing a professional formation service also offers peace of mind, knowing that all legal requirements are being met correctly. This can help prevent future issues or disputes that may arise due to errors in the initial formation process. 

Additionally, if any legal concerns do arise, your chosen LLC formation company is equipped to handle them, saving you from potentially costly legal fees.

Comparing DIY vs. Formation Services: Which One Fits Your Needs?

When it comes to forming an LLC, you have two main options: do it yourself (DIY) or hire a formation service. So which one is right for you? 

Firstly, let’s look at the advantages of going with a DIY approach.

One major benefit is cost savings. Filing an LLC on your own can cost as little as state filing fees, which typically range from $50-$500, depending on where you live. This is significantly less than what most formation companies charge for their services, which can range from $100-$1,000 or more.

However, there are also potential downsides to consider when taking the DIY route. The biggest disadvantage is that there is little room for error. 

Filing paperwork incorrectly or missing important steps could result in delays and added expenses down the road. 

Also, depending on your comfort level with legal processes and requirements, completing all necessary tasks solo may be overwhelming or daunting.

A professional formation company like doola takes away much of the stress involved in forming an LLC by offering expertise and guidance throughout the entire process. 

We specialize in handling all aspects of business formations and have extensive knowledge of state laws and regulations concerning LLCs. 

We also offer additional services such as Registered Agents, obtaining federal tax ID numbers like EINs, drafting Operating Agreements, and more.

Another benefit of using a formation company is streamlined processing time compared to navigating through various government agencies on your own. 

We know the filing deadlines, required forms, and the best way to file documents to expedite your LLC’s setup.

Essential Steps for Filing an LLC (Whether DIY or Professional Service)

When it comes to filing an LLC, there are a few essential steps that must be followed, regardless of whether you choose to do it yourself or hire a professional formation service.

It may seem like a lot of work, but taking these necessary steps will ensure that your LLC is properly formed and legally recognized by the state.

1. Choose a Name for Your LLC

The first step in forming an LLC is choosing a name for your business entity. This name must be unique and not already taken by another business in the state where you plan to form your LLC. 

In the DIY approach, you have to check the availability of your chosen name, while a formation company can take care of it on your behalf.

2. Select a Registered Agent

A registered agent is responsible for receiving legal documents and notices on behalf of your LLC. 

This could be either an individual or a professional service, but they must have a physical address within the state where you are forming your LLC.

As a DIYer, you will need to find and designate a registered agent yourself, whereas professional Registered Agent services often include this as part of their formation package.

3. Create an Operating Agreement

While not always required by states, creating an Operating Agreement is highly recommended for any newly formed LLC. 

This document outlines how your company will operate and govern key areas such as ownership percentages, decision-making processes, and profit distribution.

DIYers must draft their own operating agreement while considering all legal requirements, whereas professionals take care of everything without any room for error.

4. Apply for An EIN

An Employer Identification Number (EIN) is essentially like a social security number for businesses. It’s needed when hiring employees or opening business bank accounts.

This is a critical step in the formation process, and both DIYers and professional services can apply for an EIN on behalf of your LLC. 

However, using a professional service can be more efficient as they are familiar with the application process and can often expedite the approval timeline.

5. Submit Annual Reports & Pay Fees

Most states require LLCs to file annual reports that include important information about their company, such as changes in ownership or management. 

So, once your LLC is formed, you must comply with any ongoing requirements, such as holding regular meetings and keeping accurate financial records.

This process can be complex and time-consuming for DIY-ers, while professional formation services are well-versed in this requirement and can handle it efficiently.

Is an LLC the Right Choice for Your Business?

LLCs offer a unique blend of benefits that make them a popular choice among small business owners. 

However, before jumping straight into forming an LLC for your business, there are a few things you need to consider. 

Firstly, depending on your state’s regulations, forming an LLC can involve some administrative work, such as filing paperwork with the secretary of state’s office or publishing formation notices in newspapers.

Secondly, while LLCs offer limited liability protection for their members – this may not always be absolute. If certain conditions such as commingling personal and business assets or fraudulent actions by members are met — creditors may still legally pursue personal assets within an extent.

Lastly, certain states prohibit certain professions from operating as LLCs, such as doctors, lawyers, and accountants — who are required to operate as professional corporations instead.

Why a Formation Service May Be the Smarter Option

A formation service specializes in helping entrepreneurs establish their businesses by handling all the necessary paperwork and legal requirements on their behalf. 

These services offer assistance throughout the entire LLC formation process, from selecting a business name to obtaining necessary permits and licenses. 

But why should you consider hiring a formation service instead of filing an LLC on your own? Here are some key reasons why:

🎯 Expertise

Filing an LLC involves having a good understanding of state laws and regulations, which can be overwhelming for those without any legal background. 

By working with a formation service that has experienced professionals familiar with state-specific rules and procedures, your LLC is formed without any delays or mistakes.

🎯 Time-Efficiency

The entire process of forming an LLC requires extensive documentation and multiple steps that can take up significant amounts of valuable time for busy entrepreneurs. 

Outsourcing this task to a formation service frees up your time so you can focus on other aspects of your business.

🎯 Saves Money

While some may assume that hiring a formation service is more expensive than filing an LLC on one’s own, it could actually save money in the long run. 

Formation companies typically offer packages at affordable prices compared to hiring individual lawyers or accountants for different tasks involved in setting up an LLC.

🎯 Ongoing Support

Beyond just helping to form your LLC, many formation services also offer ongoing support for businesses. 

This includes assistance with filing annual reports, obtaining necessary permits and licenses, and other essential functions like bookkeeping to keep your business in good standing.

Form Your LLC Today With doola LLC Formation Services

Incorporating your LLC can be overwhelming, especially if you have never gone through the process before. 

The paperwork, legal requirements, and all the red tape can break any entrepreneur’s spirit before they even start. 

However, with doola’s LLC formation services, you can incorporate your business with peace of mind.

Our comprehensive packages include everything from basic formation services to more extensive features such as Registered Agent Services, business banking setup, and EIN acquisition.

We ensure that all the required documents are accurately completed to meet state regulations, saving you time and energy while giving you peace of mind that your LLC is formed properly. This includes everything from obtaining necessary permits and licenses to drafting Articles of Organization and Operating Agreements. 

Once your LLC is officially formed, we provide assistance in operating as a legal entity, maintaining proper records, and filing taxes correctly as an LLC.

Book a free consultation today to learn how we can take away the added stress and potential risks of filing an LLC on your own.