How to Start an LLC or Corporation Yourself

In an earlier article, we gave some tips on how to find a good lawyer to help you set up your new business. But you don’t always need a lawyer’s help. If you’re the only owner, you can start an LLC or corporation by using an online business formation service.

Here’s how.

(Article and pricing chart updated 8-9-2022.)

What Is a Business Formation Service?

A business formation service helps entrepreneurs file the paperwork to apply for an LLC or corporation. Most of them can help you start your LLC or corporation in any state in the US. They usually have a physical office in these states, so they can be your registered agent for service of process too.

Technically, you can apply for an LLC or corporation without going through a service. But business formation services do this many times a day, so they know the correct forms to use and can make sure the forms are filled out correctly.

These business formation services often bundle additional services with the packages you buy. For example, some packages include an operating agreement (if you’re starting an LLC) or bylaws (if you’re forming a corporation). Even though you don’t have to file these documents with the state, they are an important part to starting an LLC or corporation.

When Should You Start an LLC or Corporation Yourself?

If you have investors or co-owners, then you should work through a lawyer to form your LLC or corporation. They can guide the conversation between you and your co-owners on how to divide work and profits, and then write up the documents so that everything is clear.

This discussion between you and your co-owners is very important. Inevitably, you and your co-owners will disagree on how to run the business. It would be much easier for everyone—and for the survival of the business—if you’ve talked through and have already decided on a process to solve these disagreements.

But, if you’re the sole owner of your business, then you don’t need to have these ownership-related conversations. You’d be the sole decision maker. So, you can skip the lawyer and work directly with the business formation service to file the paperwork to start your LLC or corporation.

What are Some Popular Business Formation Services?

When you do an internet search for how to start an LLC or form a corporation, you’ll see a lot of names and advertising pop up. We researched the most-mentioned companies and shortened them to four that we recommend. We think you’ll do fine using any of them.

Here’s a little information about each service. The listing order does not reflect an order of preference. Under each section, we link to their price sheet.

ZenBusiness

ZenBusiness can help you start an LLC or form a corporation in any state. It’s a no fuss filing service. You can also use them as your registered agent for service of process.

We used ZenBusiness to form our LLC. However, they’ve since changed their pricing and many important services now cost extra. Some of these services are on the pricier side.

Inc File

Inc File can help you start an LLC or form a corporation in any state. They offer a bare-bones filing service for $0. But, this starter bundle doesn’t offer many of the services we consider to be important. They do include their registered agent for service of process services for free the first year.

You’ll have to pay extra to get other services. But Inc File’s pricing is reasonable compared with the other servies we profle in this article.

Northwest Registered Agents

As the name suggests, Northwest Registered Agents started out as registered agents for service of process. Then they branched out to helping business owners start LLCs and corporations. They offer some business operations-related templates for free. You can use these templates even if you didn’t use them to form your business.

Swyft Filings

Swyft is yet another established business formation filing service that can help you incorporate or start an LLC in every state. If you’d like them to be your registered agent for service of process, you’ll have to pay separately.

Services That Didn’t Make Our List

We looked into a couple more popular filing services, but they didn’t make our recommended list because:

• BizFilings. BizFilings is a bit pricy. It also seems to be more focused on serving businesses outside the US wishing to form US corporations or LLCs.
• Inc Authority. Inc Authority has a basic LLC formation or incorporation plan for $0. However, when you add all the services we consider to be important, the price turns out to be higher than their competitors’. What’s more, you’re only able to see their price list after you’ve started the sign-up process. We believe this comes too close to bait-and-switch, so we’re not comfortable recommending them to you.

Which Service is Important When Starting an LLC or Corporation and Which is Fluff?

If you look at the pricing charts of these corporate formation services, you’ll typically find three tiers of packages. Higher tiers offer more services than lower tiers. But which services are necessary? Which ones just fill space?

Here’s what we think.

Services You Will Need

Registered Agent for Service of Process

An agent for service of process is a person or entity that will receive your important communications. These communications include official communications from your state and notices about lawsuits filed against your business.

Agents for service of process must have a physical location (i.e. a physical office). You can be your own agent if you own, e.g., a physical store. However, if you run a home or internet-based business or you don’t live/operate in the same state as your LLC or corporation, then you really should hire an agent. This way, important communications get to you fast and no stranger comes to your home to deliver documents.

The fees for registered agent serivces in our comparison chart below are all $120+/year. We found a reputable company called Harbor Compliance that charges $99/year. You’ll get a 5%-10% discount if you sign up for 2+ years. You can simply turn down the registered agent service when you file your LLC or corporation. Then hire Harbor Comliance to be your registered agent afterwards. There may be a small filing fee with your state when you name them as your agent.

Operating Agreement or Bylaws

If you’re setting up an LLC, some states will require you to have an operating agreement, but other states do not. Regardless of requirements, it’s a good idea to have one anyway.

If you’re setting up a corporation, you’ll definitely need a set of bylaws. The bylaws are a part of the corporate formalities for corporations.

With LLCs, most business formation services will send you a template operating agreement, with or without your LLC name and address filled out. The operating agreement for a single member LLC is usually written in broad language to give you maximum flexibility on running your LLC. Be sure to read it so you know what’s in there. Then, sign it and keep it in a safe place.

With a corporation, you will need to have a set of bylaws. For a single-shareholder corporation, you’ll probably get a template bylaw drafted to let you run your corporation with maximum flexibility that the law allows.

Be sure to understand what’s in the bylaws. You might have to refer to it from time to time, so you can follow all the corporate formalities. For instance, the bylaws will set out how you can call your annual shareholder meetings, so you’ll need to have written records for sending out notices and for holding the meeting. Don’t forget to sign the bylaws and then keep it in a safe place.

Organizational Meeting Minutes

This is needed for corporations as a part of the formalities in forming a corporation.

Name Availability Search

States won’t register two LLCs or two corporations with the same name. But the difference can be as small as switching from Inc. to Corp. It makes sense to check the name ahead of filing to see if you need to make a quick change to ensure the filing process goes quickly and smoothly.

Business formation services usually include name availability checks in their service.

We have an article on how to pick a business name that is likely to be available.

Annual Report Service

With every state, you’ll need to file a report every year or every two years to tell the state you’re still an on-going business. Typically, this is an easy form to fill out yourself. However, if you’ve never owned an LLC or corporation before, you might want to hire the business formation service to file the document for you for a year or two. Once you become more comfortable filing this yourself, you can stop the service.

Every corporation needs to hold an annual shareholder meeting. For LLCs, this isn’t always necessary (the operating agreement will specify if you need to have one). The record of these annual meetings are kept internally and do not need to be filed with the state.

Services You Won’t Need

Obtain Employer Identification Number (EIN)

You’ll need an EIN when your LLC or corporation files anything with the IRS. Some business formation services offer to get the EIN for you for an extra fee.

But you can get your own EIN for free. It only takes a few minutes. Just go to the IRS website and fill out an electronic form.

Banking Resolution

The Banking Resolution is a document officially giving someone—usually you—the authority to open bank accounts on behalf of your LLC or corporation. This document is often added as an additional service for an additional fee.

You won’t need to pay for this. Most commercial banks have their own Banking Resolution template to give you. You fill that out, sign, and the bank keeps it in their records. If your bank doesn’t have one, you can easily find templates for free on the internet.

Corporate Kit

A corporate kit is basically a fancy binder for you to keep your Articles and bylaws or similar formation documents. Some of them come with fancy-looking printed stock certificates for you to issue to yourself. Others come with an official corporate seal for you to imprint on your official documents.

You don’t need a corporate kit. Having one is like buying yourself a Best Boss plaque to put in your office. It might look nice and impressive, but it’s totally useless.

Domain Name and Website

We do recommend you get a domain name and website. However, business formation services are not the places to buy them. Take a look at our domain name and website article and follow the links in that article to find the information you need.

You can spend as little as $12/year to get your domain name, website, and business email all together.

IRS Form 2553 (Election to be Treated as S Corp)

For LLCs, if you only have one owner (single member LLC), then by default the IRS treats you as a sole proprietorship and you file your taxes as yourself, using Form 1040. However, if you have more than one owner, you can elect to be treated as an S corp, and Form 2553 is the form you use.

A corporation uses the same form to tell the IRS that it wants to be treated as an S corp.

You can get this form from the IRS for free. No need to pay extra for it.

Comparison Chart of Top Four Business Formation Services

Here’s a comparison chart of our top four business formation services. Each service typically has three pricing tiers, but you can also buy the lowest tier and add the extra services you need.

We list the least expensive tier below, and then we list the price of each extra service that we believe you’ll need to start a single-member LLC or form a sole shareholder corporation.

Information You’ll Need Before You Start the Application Process

Once you decide which service to hire, you’ll need to gather some information or make some decisions about your LLC or corporation before filing the paperwork.

We cover what information you’ll need to start your LLC in this article. The article also explains some LLC-specific jargon.

We cover the information you’ll need to form your corporation in this article. We also explain corporation-specific vocabulary.

Additional Services You Might Need in the Future

Business formation services tend to discount their initial services so that you sign up for their recurring services like appointing them to be your registered agent for service of process or have them help you file your annual reports.

There are other documents you might have to file with the state from time to time to report changes to your business. These include:

• Change of business address
• Change of agent for service of process
• Change of management
• Business closure

You can file all these change requests yourself, but you can also have your business formation service file them for you.

Business Formation Services are Great if You’re the Only Owner, but It’s Safer to Use a Lawyer if There are Multiple Owners

Forming a business entity isn’t very hard. Mostly, it’s just filling out the right forms and finding the right template to tweak to fit your situation. What’s difficult is knowing which form to use and how to tweak a master template.

If you have multiple owners of your business, we urge you to go through a lawyer. Good lawyers will take the time to help you and your co-owners work through issues that tend to come up when two or more people run a business together. This way, you can agree ahead of time on what to do when different situations arise. The lawyers will still use a template for the agreements, but they will tweak it correctly to fit your needs.

But, if you’re the only owner of your business and want to start an LLC or a corporation, it’s actually pretty easy to do it yourself. There are standard forms to fill out and send to your state, and there is only a limited amount of information you’ll need to fill out those forms.

You’ll still need an operating agreement or bylaws for your LLCs or corporation. When there’s only one owner, the standard templates are often written broadly to let the owner do what they want with minimum formalities.

Business formation services will help you with the forms, the filings, and the template agreements. This is why it’s safe for you to use a business formation service instead of going through a lawyer.

Interested in starting and running a small business? Here’s the beginning of our step-by-step guide: What to do right after getting that great business idea.

DISCLAIMER: This article does not constitute legal or accounting advice. Instead, it contains general information. The information gives you the background you’ll need to hit the ground running when you do go get advice from a lawyer or accountant. Only lawyers and accountants properly licensed in your state/country are qualified to give you legal or accounting advice.