Does do it yourself, do yourself in?

An amazing number of people try to incorporate themselves in order to save money. Others go online and choose from thousands of incorporation services available on the Web. The cheapest service providers will not even have an attorney on staff and therefore cannot perform any acts considered to be the practice of law. So, what do you receive from these companies? For a fee they will send you an incorporation document, have you fill it out and they will file it with the secretary of state. Because they are not lawyers, they cannot provide anything other than the most ministerial of functions. And if they do more, they could be guilty of practicing law without a license. While state bar associations don’t change those cases for the most part anymore. That doesn’t mean you are acting in the clear. Most of these services will not tell you about the need for a resident agent, bylaws, operating agreements, minutes, or other necessary paperwork. They will lead you down a rosy path replete with thorns. You will think you are protected, but you are setting yourself up for:

·         Tax pitfalls that will come as a result of not receiving any advice on the tax consequences of your entity choice;

·         Legal ramifications, the worst being that you, in reality, have no liability protection;

·         Management problems because you will not know to properly run your entity; and

·         Logistical issues as you try to open accounts, borrow money, gather investors.

And this is just skimming the surface. The choice is yours, but using a competent attorney and CPA, or a full-service incorporation firm is strongly recommended. Spending several hundred dollars at the start will save you several thousand dollars down the road.