Based in Sydney, Australia, Foundry is a blog by Rebecca Thao. Her posts explore modern architecture through photos and quotes by influential architects, engineers, and artists.

Are There Disadvantages of Using LegalZoom for a Startup Incorporation?

When incorporating, small mistakes - especially with following through with requirements after filing with the state - often result in big consequences. Important transactions such as incorporating often involve secondary requirements that extend beyond the boilerplate legal documents you will find on sites like LegalZoom. Furthermore, regulations regarding formation are always subject to change which means that you could miss some vital updates that result in a faulty or incomplete application.

Without criticizing LegalZoom or any similar service, I would advise you to take a look at the disclaimers on the DIY sites since there are some pretty significant caveat emptors that will quickly reveal their limitations. Also, you run the risk when using DIY legal forms because they are largely standardized and may leave out important details specific to your company.

Startups that rely on cheaper options such as LegalZoom to incorporate can actually end up financially weaker as a result. Hiring an attorney to incorporate your startup over using LegalZoom can provide the following benefits:

  • An attorney will provide you with trustworthy and direct advice on the appropriate type of business entity for your startup and the right state to incorporate in;
  • An attorney will help you complete the tedious tasks following incorporation - such as naming a board, issuing stock, and completing any publication requirements;
  • An attorney will anticipate foreseeable legal issues (such as IP rights) regarding your startup and advise you accordingly;
  • An attorney representing a startup during formation will have a greater familiarity and better handle to represent the startup at a later point;
  • An attorney will discuss tax implications for choosing your respective business structure;
  • An attorney may provide alternative pay structures than the pay systems used by sites like LegalZoom;
  • An attorney will put your mind at ease when you wonder if “you did it right”; and
  • An attorney will save you the time that you need to grow your company at this initial, important stage.

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