LegalZoom Review: Registering Your LLC

LegalZoom Review

LegalZoom is an online service founded by several high-profile lawyers, including Robert L. Shapiro, offering low-cost options for LLC, Corporation, Trademark, Copyright, and Patent registrations. The service is devised for any person to simply answer a series of questions about their business, while LegalZoom’s system fills out and files all appropriate forms on their behalf. Unlike hiring a lawyer, the fees you’ll pay through LegalZoom as substantially less (as stated in their “up to 85% less than lawyer fees ad campaign). When registering LLCs through LegalZoom, the business owner will receive detailed automatic emails that chronicle the registration process of their LLC. Depending on the registration package chosen, a helpful LLC Kit will be sent, including various documents and tools needed to finalize registration and maintain the LLC.

The LegalZoom LLC Registration Process from Start to Finish

This section will take you through the steps involved in registering an LLC with LegalZoom. In short, you’ll answer a series of general questions online, as LegalZoom retains your answers and uses them to manually fill out all of your registration forms with the Secretary of State. Each step of the process is communicated to you via email, until your registration is complete.

Selecting an LLC Package

Before you begin your registration process with LegalZoom, you’ll have to choose one of their three packages: Economy, Standard and Express Gold. We highly advise that you do not choose their “Economy” package, as it will not include the Deluxe LLC Kit (something you’ll really need, since it includes an official metallic company seal) nor does it include 20 stock certificates or a membership transfer ledger. Therefore, choosing the “Standard” package minimizes your costs while giving you an invaluable LLC Kit.

If you cannot wait up to 35 days for your LLC package to arrive and would like LegalZoom to complete your Federal Tax ID application for you, go for the Express Gold package. Important: note that if you choose the Standard package and elect LegalZoom to complete your Federal Tax ID application for an additional $70, you’ll actually be losing out by paying more money while not enjoying the additional inclusions of the Express Gold package, such as the 40 Business Forms CD-ROM and priority rush service.

LegalZoom LLC Questionnaire

Once you select the option to form an new LLC, LegalZoom’s LLC Questionnaire will begin the process by asking you several simple questions:

  • I would like to…” – Choose “Form a new LLC”
  • Would you like us to help your LLC apply for a federal tax identification?” – By selecting yes, LegalZoom will help fill out the additional paperwork required in obtaining your Federal Tax ID #, which is the key identifier for your LLC. It’s an additional fee. Once you register for your LLC, your state government will automatically send you a letter in the mail containing your Corporate ID Number, as well as a web address pointing to the registration form for your Tax ID. You may either take the chance and fill out the form yourself, or simply have LegalZoom do it for you (recommended). Personally, I prefer the peace of mind in knowing that LegalZoom is completing all of my paperwork to perfection, rather than chancing it on my own.
  • In what state would you like to form the LLC?” – Be sure to do some research here. Best practice dictates that you should form an LLC in the state where you reside, as doing otherwise will result in being classified as foreign qualification. In these cases, you will have to conform to taxation requirements for both your current state of residence, as well as the state in which your LLC was registered in. This can prove to be more costly, even if the LLC laws appear to be more beneficial! To be safe, it’s highly advised to select your current state of residence here.
  • What is the proposed name of the LLC?” – This is important, as it will be the official name of your LLC. Everything counts, including punctuation and capitalization! Be sure that you have typed out the name of your company as you’d like it to appear, as it will be printed on the shares of stock, your official metallic seal, and other documents that will be mailed to you. Below this field, you’ll be able to provide alternate names that you’d use in case your initial choice is not available.
  • What is your LLC’s business address?” – This is where it helps to have a P.O. Box (read more about this). If you don’t have one, simply use your home address, as your home will be your base of operations.
  • Are you a doctor, dentist, lawyer or other licensed professional seeking to form a Professional LLC?” – Answer this in the manner that it applies to you.
  • Would you like the LLC to automatically dissolve on a certain date?” – This is basically an absurd option in most cases. Be sure to choose “no,” unless you have a pre-determined reason not to.
  • Who will act as the LLC’s registered agent?” – Let LegalZoom be your registered agent. Basically, they will be processing your forms for you, which is why you chose them in the first place.
  • Would you like ownership in the LLC to be expressed in percentages or in units?” – In mostly all cases, people elect to express ownership in percentages if they are running a small company (especially if they are the only person in the company). The opposite applies for larger LLCs, where “units” are a more optimal choice for growth and expansion.
  • How will the LLC be managed?” – The answer to this question depends on if your LLC is being run on your own, or if you have other shareholders being declared. Also, you’ll need to know that a “manager” is someone elected by members to manage the company (like a director-level professional), whereas a “member” is a subordinate within the company. If you elect to have your members manage the LLC, then the top executive (that’s you, and/or your CEO, CIO, etc.) are directly responsible for running the company. If you’re the only person in your LLC, simply choose to have it be run by “its single member.”
  • Will the LLC have officers?” – If you’re the only member of your organization, choose no. Otherwise, choose yes, and you’ll later be required to define who they are, what their capital/$ contribution is, and what their ownership percentage or units are.
  • Please select one of the following statements regarding transfer of ownership interests” – As the tip suggests, most states default the option where the majority of other members must consent to any transfer. You’re safe to choose this option. If you elect to make them be freely transferable, you will have the ability to transfer ownership as you please, as will your officers – with or without your consent. Choose whichever option you are personally comfortable with, keeping the relationship you have with your officers in mind.
  • The IRS Code requires each LLC to designate one member as the “tax matters member” who will represent the company in connection with all examinations by tax authorities. Who is the tax matters member?” – Input your name here.
  • What member or manager of the LLC may the IRS contact if they need more information on your application for a tax identification number?” – Input your name and information here.
  • How do you want your LLC to be taxed?” – Here, you can exercise the right given to you by the government as an LLC owner. You can be taxed as either a “pass-through entity” or a corporation. A good rule of thumb is to always choose the first option, “pass-through entity,” as it enjoys single taxation. If you choose to be taxed as a corporation, you’ll need to fill out an 8832 form with the IRS, and if you elect to be taxed as an S-corporation, you’ll also need to fill out a 2553 form.
  • What is the end of the LLC’s fiscal year? (You are free to choose any date you wish, but for simplicity most people choose December 31.)” – Go with LegalZoom’s suggestion, and choose December 31st, unless you have any alternate reason not to.
  • Will the LLC operate under a trade name which is different from its legal name?” – You don’t actually have to publicize your business as your registered LLC name. For instance, if I run Blue Widgets LLC, I can do business as WidgetMan as my trade name. WidgetMan, however, is Blue Widgets LLC. If you desire to do business with a trade name that is different than your LLC name, select “yes,” and LegalZoom will fill out a Trade Name Application for you. Otherwise, most people select “no,” and simply publicize their business as their registered LLC name.
  • Does the LLC anticipate hiring any employees in the next 12 months?” – If you don’t know if you’ll be hiring in the next 12 months, it’s always safe to just say “no” here.
  • Do you expect to have $1,000 or less in employment tax liability for the calendar year? (If you expect to pay $4,000 or less in wages, you can select Yes.)” – Simply follow these directions – most people will choose “no.”
  • Does your LLC own a vehicle with a taxable gross weight of 55,000 pounds or more? Only include vehicles that were designed to carry loads on the highway.” – Once again, follow the directions here, based on the nature of your business.
  • Will your LLC operate a casino, or does your LLC’s business involve gambling or wagering?” – You guessed it! Follow the directions.
  • Does your business need to file Form 720 (Quarterly Federal Excise Tax Return)? Note: This is not common.” – This truly is an uncommon form that only applies if you are selling gas or fuel, tractors, air or trip transportation services, insurance policies issued by foreign companies, fishing equipment, electric outdoor motors or bows & arrows. Download the Form 720 here.
  • Does your business make or sell alcohol, tobacco or firearms?” – Another simple answer question.
  • Which of the following best describes the company’s primary business activity?” – Be sure to select the most relevant business category that applies toward your business, as it will help define what industry you’ll be classified within!
  • Please describe your primary business activity.” – Borrowing closely from the previous question, this is your opportunity to write a brief yet highly descriptive statement of what your business is about. Your best bet here is to be broad, but not vague.

The final steps in your application review a couple promotional options that you are free to accept or decline, and finally, a review of all of your answers. I’d advise you to print this particular page for your records, in case you need to reference it again in the future. Once you’ve confirmed your information, you’ll be able to finalize your order. A confirmation email will be sent to you with your order number.

Final Cost of Registering an LLC with LegalZoom

All packages’ final prices will include state fees. Don’t be alarmed when a $249 price tag winds up being around $660 after taxes and filing fees! Regardless of how you register your LLC, it’s inevitable that you’ll have to pay these state fees. Here’s a breakdown of what I paid:

  • Standard Package: $249.00
  • State filing fee: $175.00
  • Registered agent fee: $149.00
  • Tax ID Obtainment (this was optional, but I decided to pay for it): $79.00
  • Shipping: $9.95
  • GRAND TOTAL: $661.95
  • LegalZoom Post-Registration Process

    1-2 Days After Registration

    Within a day or two, an email will arrive stating if your desired company name has been taken or not, further explaining that if it is available, it is not set in stone until all articles have been filed by the state. Another email will be sent to you when your articles have been successfully filed, stating that you are now considered a legitimate LLC, able to take advantage of all benefits. Congrats!

    1 Week After Registration

    An important email should arrive approximately a week later, with directions to access your NRAI (National Registered Agents, Inc.) account. Be sure to use the username and password provided to you at the website. This account holds various tools, including 24-hour contact access to a corporate service specialist, various pre-filled forms and documents, and an administration panel that lets you access and change your company information and client reports. The “Corporate Records” tab on this website will be your friend, as it lists the vital statistics of your company and its registration status.

    On the same day in which you receive your NRAI login information, you’ll also receive a reminder from LegalZoom that you’ll have to fill in some corporate minutes to safeguard your corporate standing. Doing so will protect your company from losing its liability protection, maintaining tax advantages and other benefits. In order to do this, simply visit the “Corporate Minutes Order” on LegalZoom’s website. Once again, corporate minutes are simply “meeting minutes” in which statements are made about meetings you’ve held, pertaining to your company. If you’re the only person in your LLC, it will simply be a “meeting with yourself,” as strange as that may sound.

    Approximately 1.5 – 2 Weeks After Registration

    Typically within a couple more days beyond this point, a final confirmation will mention that the Secretary of State has sent your articles back to LegalZoom, and that they will ship them to you.

    Finishing Up

    LegalZoom will send a ‘thank you’ letter within your kit, that will outline the next steps that must be taken to finalize your LLC registration. The first thing you’ll want to do is complete the SS-4 form and send it directly to LegalZoom in the provided envelope. This will create your FEIN (Federal Identification) number, which will be sent back to you.

    • Next, you’ll need to register with your state’s division of revenue (if necessary). The application is usually located on your state’s revenue website (LegalZoom will provide the exact URL for your convenience).
    • Your next plan of action will be to complete your corporate minutes. Much like LegalZoom’s LLC application process, this is a simple series of questions and text fields that you’ll out.
    • Don’t forget – now is the time to create a new bank account, and apply for a business credit card.
    • This is also a great time to consider getting a trademark on your company name, as it will protect your company name from being used by others in commerce. Learn more about registering a trademark.

    Where to Go Next: A list of LegalZoom LLC Registration Packages
    Read more about the difference between incorporations & LLCs