Tag: incorporating

This is the last posting of a 9 part series about using Legal Zoom to incorporate a small business.  Part of the reason I did this was to draw a comparison between two online services (incorporating a business and publishing a book), seemingly vastly different — and yet the online process had consistent similarities.  One could argue that both of these objectives (incorporating a business and publishing a book) can be done without the convenient services of an online company.  That’s true, and then one has to ask one’s self whether the learning curve and time expenditure is worth the money saved.   I’m not an attorney or a CPA, so I don’t want to learn the in’s and out’s of incorporating a company — I just want to incorporate one!  Ergo, Legal Zoom. By the same token, most writers don’t want to learn the in’s and out’s of publishing a book – they just want to publish one! Ergo, Outskirts Press.

So even though the industries that Legal Zoom and Outskirts Press exist in are very different, they have a lot in common, as demonstrated by this 9-part series.   To complete that comparison, I’m going to soon publish a similar blog series covering the step-by-step process of someone using Outskirts Press to publish a book.  But first, we’ll take a break next week and talk about Google+.

So, that brings us to the final step of Legal Zoom — paying!  Here’s the last screen I get, which is a comparison chart, designed in a manner to promote upsells:

What is this screen missing?  The cost!   Now you have to imagine that Legal Zoom conducted some tests on this screen to see which was more successful – including listing the price here or not. But, if they did, frankly I’m surprised this was the result.  Asking someone to commit to something without knowing the final price is asking a lot of an internet customer.  Sure, I realize clicking the “continue” button isn’t a “commitment” per se, but it still seems like a pretty big oversight for this page.   Only by selecting each package and clicking the “Continue” button can you see what the cost of each one is, which I’ll do for you:

Economy: $99 (plus whatever upgrades you selected during the course of the process) – so my total with this package ends up being $317.95
Standard: $239 (plus whatever upgrades you selected during the course of the process) – so my total with this package ends up being $457.95
Express Gold:  $369 (plus whatever upgrades you selected, although some of those upgrades are supposed to be included) – so my total with this package ends up not making any sense, because the screen shot above indicates my Fed ID number and my subchapter S election are supposed to be included – only by reading the fine, fine print do you see that they’re NOT actually included with this package — they’re just cheaper.)  Should that really be a check-mark, then?  Probably not.

I’m going with the economy rate of $99, which gets to $317.95 awfully fast. Of course, they add on a $9.95 “shipping and handling” fee, and it’ll be interesting to see the actual postage on what I receive — probably $2.25.      I’m not particularly bothered by this, I’m just making a point:  All companies have necessary profit margins.  Anyone who expects otherwise  probably doesn’t own a business.  The same thing happens when you hire a lawyer for $200 a hour and the minute you walk out the door, the lawyer hands it to a paralegal who makes $80 a hour. 

And boom, presto, they say I’ll have my documents in about 35 days and my new business will be officially incorporated.  Ahh, isn’t it nice having a service company take care of things like incorporating businesses and publishing books for you?  I think so…

.. continued from yesterday…. and all this week and last week…

Okay, it’s been a long time coming (and certainly longer than the 15 minutes Legal Zoom said it would be), but we’re almost wrapping up this online process of incorporating a small business online with Legal Zoom.  We’ve taken care of the federal stuff. Now, we’re on to the state questions. The wording here may be different depending upon what state YOU’RE doing it in, but for me, Legal Zoom asked me this:

Most companies that do business in Colorado or have employees there must register with the Colorado Department of Revenue for state tax purposes.

Would you like us to prepare your Colorado Business Registration to register your business with the state and request your Colorado account number? (An additional $49 fee will apply.)

I personally don’t have an immediate need for this, and saying “No” doesn’t prevent me from incorporating, or getting a local account number later, so I’m answering no. This answer depends upon the type of business you are incorporating or your intention on hiring local employees anytime soon (in which case you might answer yes).  If you will need a state tax license you would also say yes. Basically, if you’re opening a retail store or restaurant (or something else that sells tangible physical goods to local, physical customers) you would answer yes.

Legal Zoom then asks if you want a “free consultation” with a marketing firm concerning website design.  This is a clever co-op up-sell with a partner they’ve procured.  Great for them, and perhaps a good idea for others, but I don’t personally need it, so that’s another “No.”

Wow – then the next screen hits me up with what amounts to an advertisement for American Express.  It went from clever to … shameless?  “Start building credit for your company!” the headline screams. I think I’ll pass.

Then, it says they’ve received all the information they needed. Whew – finally!

So how’s it all end (remember, thus far I haven’t given Legal Zoom a penny)?  Let’s find out tomorrow with the big finish to this two-week series….

… continuing on from yesterday, we are filling out the part of the Legal Zoom online incorporation forms that focus on the Federal Tax ID application.

1. Do you expect to have $1,000 or less in employment tax liability for the calendar year? (If you expect to pay $4,000 or less in wages, you can select Yes.)  I’m answering yes because as the sole stockowner of my company, I’m not required to give myself employment tax liability.

2. Does your corporation own a vehicle with a taxable gross weight of 55,000 pounds or more? Only include vehicles that were designed to carry loads on the highway.  – Well, since you are just starting your corporation with the completion of this form, it’s doubtful your corporation owns ANY vehicles at the moment, even if you do personally. So perhaps what this question should say is WILL your corporation own a vehicle that you plan to use for the purposes of this company, with a taxable gross weight of 55,000 pounds or more.  That sounds awfully big (like construction equipment big), so the answer is most often “No.”

3. Will your corporation operate a casino, or does your corporation’s business involve gambling or wagering?  – Uh, no.

4. Does your corporation need to file Form 720 (Quarterly Federal Excise Tax Return)? Unless your company sells the following, the most likely answer is “No.”

• Gas and other fuel;
• Tractors;
• Air or ship transportation services;
• Insurance policies issued by foreign companies;
• Fishing equipment;
• Electric outdoor motors; or
• Bows and arrows.

5. Does your business make or sell alcohol, tobacco or firearms?

The final question on this screen asks: Which of the following best describes the corporation’s primary business activity?

If you are an independent consultant working for another company or two, there’s no need to limit yourself to THEIR type of business here. You would just select “Consulting” which is second only to “Retail Store” on this alphabetical list (even higher than Accommodation and Accounting) for a reason – “Consulting” is a nice catch-all, although remember that this answer will play a role in determining whether your company name and trade name (if provided) are acceptable.

If you chose “Consulting,” the next screen will ask you if you provide your companies (clients) with operating advice and assistance. Unless you’re consulting as an tempoary COO,CEO, CFO or some other executive-level position, the most appropriate answer here is probably “No.” It also asks what your primary type of business is.

The purpose of these last few questions is primarily so Legal Zoom knows what kind of “forms” and templated agreements to try to up-sell to you, which comes with a $8/month subscription. I think I’ll pass.

… to be continued…

Over the past two weeks I’ve been using Legal Zoom to incorporate a new small business and have been posting the progress. We are now at the stage of the process where we are defining principals.  It asks for the director, the president, the treasurer, and the secretary.  Did I say I was starting a small business? I am! All those people are me, and there’s nothing wrong with that when you’re first starting out.  These are the same answers I provided back in 2003 when we incorporated Outskirts Press, and now look at it – a back-to-back-to-back Inc. 5000 honoree of the fastest-growing companies in America.  So, you just never know…

If you have other people involved with your new small business, you can certainly enter them instead, and the screen on Legal Zoom even has space for additional officers if you have established those already, although you can leave that optional section blank if you want.

…And that brings us to stockholders… Here’s where you divide the number of shares you set on the previous screen among the principals of your company. Since it’s me, myself, and I, I am the sole stockholder with 1000 shares, each of which is worth $0.01 so I will be providing a capital contribution into this company in the amount of $10 in cash (if you’re in Texas, you have to contribute more).   Offer your address again and then declare whether you have a joint owner. If you’re married, the answer to this is probably “Yes” but that’s between you and your spouse.

Next you provide some contact information for the IRS. All pretty self-explanatory. Finally, this screen asks you if you will be operating under a trade name.  In most cases, you might answer “No,” but if you think you might have one or more DBAs (doing business as), then answer “Yes” here, although be prepared to provide your different trade name on the next screen.  Lastly, Legal Zoom asks if you are planning on hiring any employees in the next 12 months (and if so, be prepared to say how many from among three different categories).  It’s easiest to say no to both of these since answering “No” doesn’t prevent you from starting a DBA or hiring someone if you need to.

If earlier in the online process you requested Legal Zoom to complete your Federal Tax ID application for you, the next screen covers that information, which we’ll cover next time…

So you’ve decided to incorporate a small business and you’ve looked at all the available options for doing it and have selected an online service called Legal Zoom to help you with many of the formalities. Okay, me, too! So let’s do it…

1. Go to LegalZoom.com and click on Business Services from the main menu tabs and then choose Incorporation (S-Corp, C-Corp) from the sub-menu. You will see this screen:

2. Click the orange Get Started button.
3. Click the orange Get Started button again. Weird, but okay…
4. You’ll probably have to register as a new user to their site at this point…
5. Select the state that you would like to incorporate in. For some very brief considerations on that topic, read my previous posting here. (And for better advise, consult with a tax advisor or accountant).  Most people incorporate in the state they live in…

6. I’m going to select Colorado for my incorporation, so the remaining screen shots may vary slightly, but I’m assuming the general process and look of the site will be roughly the same… and we’ll continue here with the next posting…