Note: LegalZoom is now a sponsor of the AskPat Podcast. If you do choose to use LegalZoom to incorporate your business, enter the discount code “Pat” at checkout. (Editor's Note 09/2015)
In my last post, I discussed exactly why I started my own company, Flynndustries, LLC—but here I'll tell you exactly how it was accomplished in only 30 minutes.
Traditionally, if you wanted to start your own company it took quite a bit of work. First, you'd have to fill out your state's “Articles of Organization form” after first determining if your business name is available, then mail that to the Secretary of State Office, get an employer identification number (EIN), and fax that to the IRS. Then you wait until your papers are approved, and get lawyers to do some more paper work and blah blah blah. My point is—it took a long time.
Luckily, you can do pretty much anything on the Internet these days, including starting your own business. I used LegalZoom [Full disclosure: I earn a commission if you buy through these Legal Zoom links.], which was relatively inexpensive, and their customer service is superb.
Here are the 3 basic steps involved with forming an LLC with LegalZoom:
Step 1: The Questionnaire
Here, you'll answer a number of questions which will help them determine the best package for you, as well as the pricing in the end. Here are some things that you should research before you proceed:
- Would you like help from LegalZoom to apply for a federal tax identification number (this is the same as the employer identification number)? You can have them just fill out the form for you to send to the IRS yourself, or they can send it to them automatically for you.
- What State would you like to file in? This could be the state that you reside in, but it doesn't have to be. A number of companies file for their LLCs specifically in Nevada or Delaware because those states have different policies, laws and fees that may benefit the business owner. There are a lot of things that a business needs in order to file for a business in a state they are not located in, such as a registered agent in that state (which is a physical address in that state where any documentation would be sent to if the company were to be sued), but I can see the benefit. I decided to file for my LLC in the same state I reside in, which is California. Here is a helpful article that explains more.
- The Name of Your LLC (and some backups): You'll need to know what you want to call your business, and LegalZoom will check to see if that business name is already taken. You should also have 2 alternative names that can be used just in case your initial name for your business is already taken. Note that you can usually do a check yourself on your state's website. Here is California's website as an example.
- Your LLC's Business Address: This was an issue for me at first. I was living with my parents while I was doing business from home, so I didn't want to put in my parent's address. Even if I were living and working in my own home, I still would not want to enter my personal address. Why? Because your business address should be separate from your personal address. Then I thought, how about a P.O.Box number? Unfortunately, that doesn't work either. The Secretary of State office will not accept P.O.Box numbers. So, what can you do? You can get a real physical address at a mailbox place other than the post office, like at a mailboxes etc. or UPS store. I got mine at a UPS store and it was only 100 bucks to have my own business address that qualifies as a real business address. Your mailbox number becomes your suite number, and it looks much nicer on your letterheads and any documentation that you need to fill out for your business.
- How Will Your Business Handle Ownership? You'll need to know who will manage the company (a single member, all members, or a manager), the number of members in your LLC, and the name, capital contribution and percentage ownership of each member to the company.
- How Will Your LLC be Taxed? You have the choice of a pass-through entity such as a partnership or sole proprietor (remember how I said that your LLC can just be taxed through the owner's personal income tax in my last post), or as a corporation. Most people (92%) choose the first option.
- Will The LLC Operate Under a Different Name? A lot of companies operate their services and businesses under different names than their legal name that they filed with.
You'll have a chance to review all of your answers in your questionnaire before you submit and process a payment. You'll have a choice of 3 different packages that you can buy: the Economy Package, the Standard Package, and the Gold Package. The prices range from $150.00 to $350.00, plus any additional items and services that you may want from them, which you can review if you get to this point. I went for the Gold Package, hehe!
Step 2: Sit Back and Relax
After you submit and pay, LegalZoom will do all of the filing and mailing of the required paperwork for you. It was really easy, and it doesn't take very long, only about 7-10 days.
One thing to note here, which I was EXTREMELY pleased about and thankful for, is that LegalZoom's customer service is wonderful. I received emails every once and a while with updates on the status of my LLC, and they even helped me save $800 dollars!
Here's what happened…I filed for my LLC in mid-November. The State of California has an LLC fee of $800 annually for all LLC's in the state. That's pretty high compared to other states, but I was willing to pay that to get the benefits of an LLC in my home state of California. Anyways, LegalZoom emailed me and said that if I were to wait to file until after December 17th, I would avoid paying the $800 for an LLC for 2008 and only have to pay next year (now this year) in 2009. Of course I waited the 20 or so days, and was extremely pleased at their careful attention to detail and making sure I was saving my money. Awesome. After December 17th, I got another email saying they had finally sent the forms over to the Secretary of State Office.
Step 3: Get Your Stuff
So, a little over a month later (it would have been sooner but I waited it out to save the $800), I received a package in the mail. This is what I got:
A binder/folder with the name of my company:
Here's what's inside. Included is a CD with business forms, some helpful instructions, and also that black pouch:
Inside the pouch was this! A company stamping tool to make documentation official. Sweet:
Tabbed Sections (Certificate of Organization, Operating Agreements, Minutes, Certificates, Membership Ledger, and Miscellaneous Forms/Permits):
All this stuff is pretty cool, but I know that just filing on LegalZoom and getting cool official looking items is just the beginning. There's still a lot of things I need to do and learn.
I'm Still a Noob
I am the CEO of my own company, but I'm still a little in the dark of what exactly I should do and how exactly to handle everything. Some of you may think this is a stupid move, but I beg to differ.
Doing it this way forces me to learn everything I need to know. Also, I know that jumping into the deep end and “just doing it” is what needs to happen in order to get things done sometimes and that increases the chances of me getting to where I want to be. That's how I became successful making money online, and that is how I plan to become a successful business owner too.
I plan on posting a lot about what I learn, and I think this opens up a lot of topics that many people have questions about that I will hopefully shed some light on, for them and for myself.
I know I'm going to need help, which I am already in the process of finding. You can be sure I'll keep you posted on what I do, how I do it, and how you can do it better too.
Everything you read on The Smart Passive Income Blog, including this post, is just reflection on my personal experiences with making money online and owning a business. I am not a lawyer, and I'm simply just trying to make your job a little easier. I cannot guarantee anything and will not be held liable for any of the information I post on this website. Please remember that everything I write and comment about is my own formed personal opinion about the subject matter. You should always form your own conclusions and perform your own actions based on those conclusions.
For those of you who own your own business already, do you have any helpful websites or resources that you could point myself and the SPI readers to? Please feel free to offer your advice and comments below.
If you plan on starting your own business soon, please note that there are other websites besides LegalZoom to incorporate with. However, if you do choose to go the LegalZoom route, I would very much appreciate if you used the link below to do so. I am an affiliate and will earn a small commission thanks to you.