People often ask me about forming a business.
Eventually the conversation takes an ugly turn.
A turn toward incorporation firms.
What they do.
Why people should use them.
If they’re worth the cost.
You’ve no doubt seen them marketed before.
You probably visited a website or two as well.
I personally hate them.
You’re so much better off doing your own business incorporation and saving the money for real necessities.
How Business Incorporation Services Work
On the surface, business incorporation services look like great resources.
In some cases it is.
For example: if you have a complex business structure or have foreign people involved, or operate in multiple states this would be a great way for you to get the job done without worrying if you forgot any info.
But for the majority of people, and especially those of you reading this very site, it’s totally unnecessary.
First you think you’re paying for a simple service like a business formation.
Then when you’re finished with the state-required info, the shitstorm begins.
First you’re presented with options for services that seem like requirements which aren’t such as business documentation services or online registration.
Looking at LegalZoom, first we notice the fees starting at $149–and that’s for a 30-day turnaround (business days at that)–not including state filing fees.
You can get an instant formation with most states on your own–some may take a couple of days to process–but that’s without paying anything extra!
Then you are presented with services that are add-on charges but are totally free, and again, very simple to accomplish on your own like obtaining an EIN.
Take LegalZoom again; the company will charge you up to $79 for obtaining an EIN for your business, and will send you compliance reminders for $69 (and that’s per year which isn’t specified nor does that service have any notation to signify there may be more info!).
For most people it’s a total waste of money made to look like a business-saving service.
And do you know what you get from most of the incorporation services?
Well, maybe some will give you a binder with your incorporation documents and a corporate seal to make it look all official and worth the fee.
But the truth is, none of that stuff is relevant these days anyway.
Your Articles of Incorporation or Organization are stored online in most states, and you can always just scan them if you do it by hand to keep digitally.
Be honest now, how many of you even know what a corporate seal is or what it would be used for?
Unless you are filing articles for a complex organization, you can do your own corporate filing, and save the fees you would have otherwise spent for marketing, website design work, or any other business need.
How Hard Is Incorporating Yourself?
Most, if not all states only require the bare minimum in order to file Articles of Incorporation or Organization.
You basically just need a few pieces of information to be on your way:
- Company name, mailing & physical addresses
- Responsible party’s name & address
- Registered agent’s name & address
- Officer(s) or Member(s) [for LLCs] name(s) and address(es)
- Number of authorized shares (for an S-Corp)
- Sometimes you may need a business purpose but the standard line of “The purpose of the corporation is to engage in any lawful activity for which corporations may be incorporated in this state” almost always will suffice.
Heck, some states like Michigan don’t even require any information for the single-member LLC member/manager (the person who “owns” the company) or any person for that matter.
That’s really not a whole lot of information, and the difficulty of gathering it all is relatively non-existent, especially if you’re running a small business in which the same person acts in all of those capacities.
It literally takes all of 10 minutes max to complete the process.
Is saving 10 minutes really worth spending $100+!?
I don’t think so, and all of the people I’ve “helped” do it themselves didn’t think so either.
Disclaimer: By “helped”, all I did was hang on the phone with them as they filled out the forms. I honestly didn’t need to do a dingle thing for them!
Look, I’m the first to tell people to outsource tasks in which they aren’t experts or don’t have anything to do with making money.
That advice generally comes with 2 exceptions:
- You simply don’t have the free cash to pay for someone else to do the job, or
- It’s something you can absolutely do on your own without much time or effort spent
When it comes to incorporation–a small S-Corp or forming a single-member LLC or partnership–that latter exception comes into play.
Of course, there’s always a drawback to DIY, and particularly in business matters but. this is one of those times when you should be doing something on your own rather than outsourcing tasks.
Based solely on the simplicity of the task and how much you’ll be saving it is worth the few minutes that incorporating will take out of your day.
And just to make it super-easy (dare I say foolproof?) you have this handy-dandy map that will take you to the exact page for each state, so you won’t mistakenly use a site that charges a service fee to “do it yourself”!
Just click on your state below to be taken to its central site for business registration:
Obtaining Your Own EIN
Remember that $79 to have the EIN obtained for you?
Well, that’s just as easy to get on your own.
All you do is visit the IRS Online EIN Application.
From there you simply enter much of the same information as you used when registering your business:
- Business name
- Member/Shareholder info
- State of incorporation
- Business structure (Sole Proprietorship, LLC, Corporation, etc)
And then you’ll have to add just a few more pieces of info for classification purposes:
- Reason for applying (new biz, started hiring employees, change in structure)
- Employee info (if any–for payroll tax purposes)
- Principal industry
- Specific product/service offering(s)
That’s pretty much all there is to it.
And the best part?
You get your brand new EIN on the spot–no need to wait.
Oh yeah, and if I hadn’t mentioned it before, obtaining an EIN yourself costs nothing!
Save Lots Of Money By Incorporating Yourself
Let’s do a little math here:
- Minimum savings by incorporating yourself: $149.00
- Savings for getting your own business EIN: $79.00
Just by doing 2 things on your own you will save at least $228.oo!
That’s a lot of money, especially if you are just starting out and putting your own cash into the business.
And the best part is that not only will you save money, but you’ll also save time because the DIY methods yield practically instant results which means you can then turn around and get your new business its very own bank account and credit card without having to wait weeks for the incorporation service to “get around to your order”.
And the quicker you can get the nuts-and-bolts of your business in place, the quicker you can start getting to work making money!
Let’s hear from the readers now: how have you gone about forming your business and obtaining your business EIN? Let us know what method you used and how it worked out for you…especially if you have/had multiple businesses and can compare the two methods for your fellow readers!