Considering LegalZoom™? You'll Be Shocked By This Comparison of Prices and Services
Getting the Unexpected
It's generally true that you get what you pay for. When you use a traditional attorney to provide incorporation services, you expect to pay more than using an online incorporation service. Attorney-provided services invariably provide better quality services and products, but you'll pay more than an online service and it will take longer.
Nationwide Incorporators turns this adage on its head. All information is provided, and all documents and formed prepared by, an experienced corporate attorney, but at less cost than LegalZoom.™ Let me make that point differently: Using LegalZoom™ to form your corporation or LLC instead of Nationwide Incorporators will a) cost you more, b) provide lower quality documents, c) require you to handle more tasks yourself to properly complete your formation, and d) provide questionably trained "Customer Care" representatives to attempt to answer your questions rather than an experienced corporate attorney. Surprised? Read the details below and become a believer.
Overview of the Numbers
Look at the two cost comparisons below. One shows the costs of the two companies for forming a general business corporation and one for forming a limited liability company. The examples are for California entities, but other than the variation in state filing fees, the formation services and costs are generally the same for every state. Note: Costs based on published fees as of January 1, 2015 and are subject to change.
Comparison of Top Incorporation Packages
Both companies offer three different formation packages. I selected the top package for both companies. LegalZoom's™ Express Gold Incorporation package is priced at $369 and Nationwide Incorporators Priority Premium Incorporation package is priced at $350. There are additional, optional services offered by both companies, commonly selected by customers, that are included in the following tables for the end cost.
Some services are bundled by one company and not the other and the labeling of a service may be slightly different. Be sure to read the notes carefully. They explain important differences in the level of service provided by Nationwide Incorporators that otherwise would be overlooked if you mistakenly assume that the same label for a particular item indicates the same level of service.
Nationwide Incorporators $350
|Name availability check|
|Name reservation||Holds name for 60 days|
|Prepare/file Articles of Incorporation|
|Personalized bylaws||We fully customize with officer names; no blanks|
|Action by Incorporator|
|Initial Director's Minutes||Fully customized from scratch with your information; not a preprinted form with blanks like LegalZoom|
|Deluxe Corporate Kit|
|Stock Transfer Ledger||We fully customize for the initial issuance of shares|
|Corporate Minutes Forms|
|Customized Stock Certificates||We complete the certificates for the initial shareholders, not blank certificates like LegalZoom|
|State Filing Fee||
|Prepare form for Federal Tax ID (EIN)|
|$49||Obtain EIN from IRS||We obtain the EIN the day we receive your filed Articles|
|Prepare S Corp Election Form||$60|
|$35||File S Corp Election with IRS|
|$69||Minutes Manager||We prepare fully customized minutes for free for 2 yrs; no CD of sample forms|
|$35||Prepare CA Tax ID Form||$50|
|Obtain CA Tax ID from EDD||We can usually obtain your EDD acct. number in 24 hrs.|
|Unlimited Free Ongoing Support||Provided by an experienced corporate attorney, not a "customer care specialist" reading from an approved script!|
LegalZoom's™ Additional Services (aka "Upselling")
The bottom line: you pay more with LegalZoom™ and get much less. But there's still more to understand about LegalZoom's™ business model. If you go to LegalZoom's™ website and check their package details, you'll notice a few other major differences. First, you'll see a listing of additional services that have no counterpart offering by Nationwide Incorporators. These include such items as LegalZoom's™ "Peace of Mind Review™" and "$50,000 Peace of Mind Guarantee."
The second thing that you'll notice is that there is a long list of additional products and services offered by LegalZoom™ before you check out. These include everything from free 30 day trials of various items to applying for a new credit card and much more. There's a word for this--it's called "upselling" and is done for one simple reason: to entice you to purchase more products or services and therefore produce additional revenue for LegalZoom.™
A detailed discussion of these additional products and services is beyond the scope of this article, except for the topic of how LegalZoom™ handles registered agent services. I discuss this below after covering the difference in LLC formation costs and services. Because the "devil is in the details" in truly understanding what LegalZoom™ is offering you, these upselling practices are covered in a companior on LegalZoom™ in our Featured Articles. That article provides a revealing analysis of the legal disclaimers and other "fine print" that LegalZoom™ is confident you won't take the time to read.
Comparison of LLC Formation Costs and Services
Let's now take a look at a pricing and service comparison between LegalZoom™ and Nationwide Incorporators for forming a California LLC. Since many of the services are the same or analogous to forming a corporation, I'm going to skip the long table and get to the bottom line cost for both companies' top LLC formation package and then add a few important notes.
LegalZoom's™ top package is priced at $359. Our top package is priced at $350. Both include preparing and filing Articles of Organization, membership kits, seal and certificates, an operating agreement, and shipping of the kit. Our package includes preparing the federal tax ID form and obtaining the federal EIN from the IRS. LegalZoom™ charges extra for obtaining the EIN. When adding this extra cost and the state filing fees, here are the total costs:
Nationwide Incorporators: $425.00
But here are important factors to consider:
"Personalized" or Truly "Customized" Operating Agreements
LegalZoom™ provides a "personalized" operating agreement. This "personalization" is limited to adding the LLC name to an otherwise standard agreement plus inserting the names, addresses and ownership percentages of the members on the last page of the agreement. Each agreement is the same otherwise, and doesn't change whether it's a member-managed or manager-managed LLC, single-member or multiple-member.
Nationwide Incorporators prepares a customized operating agreement from scratch for each LLC. The customization is based on specific information provided by each client, information that goes well beyond what LegalZoom™ obtains from its customers. If changes are required (e.g., members are later added or removed, percentages changed, etc.), we can easily prepare an amendment to your agreement and related documentation.
Preprinted vs. Fully Customized and Completed Certificates
The membership certificates LegalZoom™ provides are not personalized at all to indicate the issuance of units or ownership percentages to the initial members. The certificates aren't numbered and don't even display the LLC name. They are essentially blank with any specific information, which the customer must provide.
We order membership certificates that are printed with each LLC name and are numbered. We then complete the certificates in full for the initial members. We also prepare a customized membership ledger and update this ledger when we amend the original agreement for you with changes in members or percentages.
LegalZoom™ Upselling: Choosing Your Registered Agent
Okay, let's return to the one important example of "upselling" by LegalZoom™ that I mentioned previously. It occurs when a customer completes LegalZoom's™ online questionnaires. There's a screen asking the customer to select a registered agent. By default, LegalZoom's™ name is automatically listed as the corporation's registered agent. Many people don't know exactly what a registered agent is but they're informed by the questionnaire that it's required by law, which it is. The questionnaire then says, "LegalZoom™ can help protect your privacy as well as keep you in good legal standing by providing reliable and affordable registered agent services."
As an inducement, LegalZoom™ explains that your credit card won't be charged the first $159 annual registered agent service fee for 6 months. What LegalZoom™ does not make clear to you is that if you live in the state where you're forming a corporation or LLC, you can name yourself as the registered agent and avoid paying this $159 annual fee to an outside company.
So why would LegalZoom™ want you to incur this additional and unnecessary annual $159 expense? Quite simply, because LegalZoom™ receives a substantial portion of each customer's annual $159 payment, which becomes an important and sizeable annuity to LegalZoom.™
No Upselling with Nationwide Incorporators
By contrast, when you complete our online incorporation questionnaire, we clearly explain that you can act as the corporation's registered agent if you live in the formation state. Also, if you happen to complete our online questionnaire and request that we provide registered agent services, we will contact you to confirm that you understand this expense can be avoided and gladly refund this portion of your online payment. In short, we strongly believe that it is unethical not to clearly explain to customers that this expense could be avoided, especially when the company concealing this information is secretly profiting from this lack of transparency.
The Bottom Line
Now you know. We don't have the financial resources to become a household name like LegalZoom™, but we'll continue to spread the word that there's a better, faster, less expensive, and more professional alternative to LegalZoom. After reading this article, maybe you'll help do the same.
Learn More About
- Considering LegalZoom™? You'll Be Shocked By This Comparison of Prices and Services
- LegalZoom™ Exposed: The Important Details They Don't Want You to Read!
- Choosing the Best Type of Entity and Tax Classification for Your Business - A 2015 Update
- Using a LLC for Real Estate Investments: Traps for the Unwary
- How to Choose the Right Business Entity
- LLC Advantages and Disadvantages
- Personal Liability and the LLC: Insights from State Statutes and Court Decisions