Food for thought for the would-be entrepreneur (part 3 in a series)

I can feel you getting impatient!  All you really want to know is, How do you do it?

To form any business entity, you have choices.  You can meet with an attorney, or you can do it with one of those online companies, or you can call a number from a radio ad, or you can do it online, all by yourself.  Let’s look at these for a minute.


I know all you do-it-yourselfers like the idea of skipping straight to the federal and/or state websites where the only cost is the state filing fee, but, beware!  You sure aren’t getting any expert advice at all if you choose this method.  Too many times, I’ve seen the person actually only do half the filing.  NJ for instance, is a 2-part process, and the IRS is completely separate.  Don’t rush into this!

Radio/Online Solution

If you follow the advice of the radio/online ad, it is highly likely you will get no advice.  None.  Not legal advice, not tax advice, nothing.  Think about it:  their business model is just luring you in to spend money on a standard product which may or may not be suitable for your needs.  Additionally, NJ, like other states, has peculiarities which are not taken into consideration by the easy ad options.  From what I’ve seen, pretty much everyone who used this method got a shiny binder full of meaningless papers.  It may be cheaper than the lawyer, but it’s hardly better than DIY.


It is hoped that an attorney will give you solid, dependable, legal advice, and basically explain all the different choices, and the ramifications of each, as it pertains to the state where you live and work.

Unfortunately, you have to make sure you have an appropriate attorney!  A wills-and-estates attorney isn’t the best choice for forming your business.  Neither is a personal injury attorney.  Or a divorce attorney.  Or a real estate attorney.  And maybe not even your well-meaning brother-in-law.

You need to find someone who specializes in business matters or you won’t get very good advice.  You are going to pay more to the attorney than to anyone else, so you should make sure you get one that is worthy.  Then, ask questions!  You’re paying for it:  get your money’s worth!


Sadly, I’ve seen all of these methods fail.  DIY folks can end up being registered for the wrong state tax forms.  The online/radio solution ignores a state basic, or provides a feature that is useless in that state.  Sure, Mr. DIY might not complete all the steps…but I’ve seen the radio/online solution and the attorney fail in this same way.  One fellow paid $800 to an attorney to become a sole member LLC…but he did not even get a federal ID number.  Some attorneys just log into the online solution and read the screens to you.  Other attorneys make a big deal out of doing all the paperwork longhand, mailing it in, then making you come back when it’s all been completed; I think this is just a ruse to let you think it is more complicated than it really is.  A really crazy one was a fellow whose trusted banker insisted he could do it for him for free:  he was trying to establish a bagel deli, but he ended up registered as a farm with seasonal labor.

In reality, for most small entities, the entire process can be done online in about an hour…if you know what you are doing.

Please be careful.  Please do your due diligence!