How to incorporate a company on the internet – Part 9

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…

Help incorporating a business – Part 8

.. 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….

How to incorporate online – Part 7

… 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…

How to incorporate a small business online – Part 6

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…


Incorporating a small business – Part 5

So after a week of filling out the online questionnaire with Legal Zoom in order to incorporate a small business, here’s how far along we are on their progress bar…

In other words, we have to accelerate this – I don’t want to still be doing this series of posts during Christmas.  It also tells us that their “15 minute” estimate might have been just slightly off.  It doesn’t help that I have to start over from scratch every time I leave their site to do other things.   Hey, Legal Zoom, since you’re saving the information I enter (I can tell because the forms are pre-populated with my choices), can’t you save my place, too?

But, I digress. The next screen following the Compliance Calendar that I mentioned last week has three sections for stock, fiscal year, and corporate minutes. They all sound daunting, but the reality is that for most small corporations, these are all pretty easy questions to answer:

1 – How many shares of common stock can the company issue? Legal Zoom offers some basic help with answering this question, along with a suggestion that for new corporations with just a few shareholders, the amount can be an easy round number like 1000. So that’s what I’ll enter, although part of the reason it’s a little easier for me is because I don’t live in one of these states:

New York
New Mexico

2 – What is the par value of the shares? The most common answer to this when forming a new corporation is 0.01, which is their default.

3 – Next it asks when the end of the fiscal year is for the new company, and the most common answer, especially if you’re an S-Corp, is December 31.

4 – The final question on this screen involves the maintenance of corporate minutes and offers to provide what basically sounds like a template for them for $69-$99/year.  I think I’ll pass.

… to be continued…

How to incorporate a small business on Legal Zoom – Part 4

To continue this series of posts, your next screen on Legal Zoom asks you to provide your corporation’s address. That’s pretty self-explanatory, but its next question might not be. It involves defining the corporation’s registered agent — in other words the individual who will be identified on public record as the “stakeholder” for the company. 

Legal Zoom offers an upsell option here, where they can act as your registered agent on your behalf, although this comes with a hefty annual price.  In most cases, the person filling out this form on Legal Zoom would probably choose to be their own registered agent.    And if you choose the latter option, as I did, you have to provide the address for the registered agent, which is typically the same address as the corporation’s.

The final question in relationship to addresses and registered agents is another up-sell option Legal Zoom calls their “Compliance Calendar” which comes with an annual fee of $69. According to Legal Zoom, their Compliance Calendar automatically notifies you of important state and federal deadlines and tax requirements.  Yes, like most service companies, Legal Zoom charges nominal fees for completing steps you can complete yourself for free – that’s the cost of knowledge and convenience.

Stay tuned next week as we get into the fun stuff — common stocks, fiscal years, and corporate minutes…

Incorporating a small business on Legal Zoom – Pt 3

… continuing on with the step-by-step process of incorporating a small business on Legal Zoom…

11. After you enter your state of incorporation and your proposed business name and hit the CONTINUE button, it asks: Would you like us to help you obtain S corporation status?  It offers 3 options:

  • Yes, obtain my S-Corp status with the IRS
  • Yes, prepare my S-Corp form only
  • No (which means you want a C-Corp)

Here’s the help that Legal Zoom supplies in regard to this question: “An S corporation is treated as a pass-through entity for tax purposes. This avoids double taxation and may simplify your taxes. LegalZoom can obtain S corporation status for you, or we can prepare IRS Form 2553 so that you can more easily obtain it on your own. Please note that we can only help if the corporation has a fiscal year ending December 31.  Please note that one of the restrictions that apply to an S corporation is that it cannot have any preferred stock. You may only have common stock.  Preparation of IRS Form 2553 is included with the Gold Incorporation Package — otherwise, a $45 charge will apply. To have LegalZoom obtain S corporation status for you, an $80 charge will apply ($35 with the Gold Incorporation Package). If you would rather be a C corporation, select no. Which is better? There is no right answer to this question. The majority of our users form S corporations. You may wish to consult with an accountant to see which type of corporation is best for you.”

I’m going to obtain S-Corp status for my business, and I’m going to have LegalZoom obtain it for me for $80. I have better things to do.

12. Same thing with the next question: Would you like us to help the corporation apply for a federal tax identification number?

  • Yes, please obtain my tax ID for me.
  • No, prepare the form only
  • No

I’m going to have them obtain my tax ID for me.  That’s why I’m using  a service. It’s going to cost me $79.  When I look at my normal hourly rate, I have to ask myself how long it would take me to figure out how to do it on my own, then to actually do it, and then to deal with the anguish afterwards if I did it wrong.  Probably more than $79.

As I continue to draw parallels between this process and our online process of helping authors publish and market books at Outskirts Press, this is another similarity. We offer similar services/upgrades through the process. For instance, our authors are presented with the option early in the pre-production process to have us officially register their copyright for them with the U.S. Copyright Office. They can do this on their own, just like I could obtain my S-Corp status on my own, but it’s just easier to let someone else do it all for you. At least, that’s how I feel…

13. Then it asks: Are you a doctor, dentist, lawyer or other licensed professional seeking to form a Professional Corporation? If so, please check this box.

Personally, I’m saying No to that one, which means I leave the box blank.


… to be continued…


Incorporating a small business on Legal Zoom – Pt 2

… Continuing from where we left off yesterday as we incorporate a small business on Legal Zoom step by step…

6. Select your state. I’m choosing Colorado. You have to choose the state either from the drop down box or by clicking on the graphic (if you know your geography), followed by clicking the orange Continue button.

7. Next you see a Progress Bar, some information about the process–including the claim that most people complete it within 15 minutes–and the first two questions.  Personally, I’m finding this interesting due to some similarities with our publishing site at Outskirts Press, which demonstrates in some ways that internet site best practices are not industry specific.

For instance, before our Version 4.0, we had a “progress bar” for the pre-production process.  For a variety of reasons, we removed it, but I’ve always wanted it back.   We also notify authors of how long the pre-production process will take, by saying “most authors complete it in X amount of minutes.”  In our case, we say it can be done within an hour.  That’s probably as realistic as Legal Zoom’s 15 minutes, but I digress.

8. The first question it asks is: Would you like to form a new corporation, or convert an existing business to a corporation, and the default answer is “Form a new corporation” which is the one I’m choosing.

9. You also get a chance to re-confirm your state again.  It may seem repetitive, but this is actually a trick of website design. What this site has done is introduced the process with the “fun” (and easy) exercise of clicking on a big map.  They could have just come straight to this text-intensive screen and not missed any steps, but their user-tests probably informed them that people seeing THIS screen first bailed on the entire thing.  People like clicking on graphics. They don’t really like reading websites.  This is why our Version 4.o website design at Outskirts Press has icons for every option/service we offer. But… I digress again.

10. Next question: What is the proposed name of the corporation? Please type it in EXACTLY as you want it to appear. (The name must end with “Corporation,” “Incorporated,” “Corp.” or “Inc.”)  – Here’s where you get one of the benefits of using an online service. They’re going to “test” the availability of your name.

11. It also asks for two different alternative names to the Proposed Name of the Corporation question it asked above.  Personally, I wasn’t prepared to have to have 3 total company names — I had a hard enough time coming up with one!   So I just attempt to hit the SAVE AND CONTINUE button without supplying any alternatives, and it works.  I guess if my name isn’t available, I’ll cross that bridge when it comes…

… to be continued…

Incorporating a small business on Legal Zoom – Pt 1

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 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…

Comparing Online Services for Incorporating a Small Business

Over the past several posts I’ve been blogging about incorporating a small business and have detailed the benefits of doing so followed by the general steps.  Not surprisingly, as the CEO of Outskirts Press, I believe using a professional online service to help you do something conveniently and easily is better than absorbing the learning curve of trying to figure out how to do it yourself.  It’s easier to go to a site and click  “ADD TO CART”  than it is trying to figure out how to register an ISBN, register a Copyright,  apply for a Library of Congress Number,  calculate the spine width of a book cover,  resample images to 300 dpi,  incorporate bleeds into a cover design,  format an interior in InDesign, and…..   Well, you get the idea. Sure, a writer could do all that herself, I suppose.    Why on earth would she want to?  Does she want to be a publisher, or does she want to be a published author?

I don’t want to incorporate businesses for a living. I just want one. So I’m going to find a service to help me, and to that end, I’ve found two comparison sites:

Compare Legal Forms

… and Top Consumer Reviews

Let’s look at only the services evaluated by both:

Compare Legal Forms also lists Incorporate, BizFilings, CorpNet, and Rocket Lawyer, while Top Consumer Reviews also lists The Company Corporation, My Corporation, My Law Daddy, and Corporate Creations.  If I were giving legal advice (which of course, I’m not, since I’m not a lawyer), I might recommend looking into all those alternatives, but for the sake of brevity, we’ll just compare the two options that are represented on both sites.

Compare Legal Forms doesn’t review the services, but rather lists their features. Top Consumer Reviews offers a review and a rating for each service it lists, and in their case, they consider Legal Zoom to be superior to My New Company.   I also happened to ask a CPA his opinion and he also recommended Legal Zoom, at least for me — your specific needs may vary. But that just goes to show, when possible, it’s always nice to hear or read what other people have to say, too.  For instance, we make our authors’ comments and testimonials readily available on the Internet (and we add 3 new ones each week) so anyone can review them by clicking here.

So… Legal Zoom it is… Stay tuned next week as I incorporate a business on Legal Zoom, step by step…