Can you save money by forming an LLC yourself?
Executive Summary: No, but you might break methandienone dianabol pills picadinho even.
This is a question we hear often. Most people understand that they need an attorney to prosecute or defend a lawsuit. However, when starting a new business, individuals often figure they can do it on their own. So the question is, can you save money by forming an LLC yourself?
In the short term, the answer is probably yes. However, there is a caveat. This warning is because, in the long term, whether or not you are saving money is a gamble. As Grandpa Morris might explain it:
Harry Callahan: I know what you’re thinking. ‘Did he fire six shots or only five’? Well to tell you the truth, in all this excitement, I kind of lost track myself. But being this is a .44 Magnum, the most powerful handgun in the world, and it would blow your head clean off, you’ve got to ask yourself one question: ‘Do I feel lucky?’
First, a scenario where you might save a few bucks. If you are the only member [“member” means owner] of the LLC, and you never end up in a dispute with anyone over ownership of the entity, and you never end up in a lawsuit with a third party, you might get away with forming your own entity.
However, beyond the above scenario, things become questionable. For example, if there are multiple owners and you do it yourself, there is a lot of risk. In fact, this is how the story starts for a large number of the lawsuits between members that our firm is currently prosecuting or defending. The issue is that when things are good, not having an operating agreement [an operating agreement is the governing document for an LLC] drafted by an attorney is not a problem. However, when things go bad, and there is nothing in place, you just bought a very expensive lawsuit which will often paralyze your business in addition to the time and expense of litigation.
90% of clients who come to us for business formation don’t end up having any issues later.
90% of our litigation clients did not hire an attorney to get things set up correctly.
In addition to litigation, there are myriad other factors to consider. For example, what happens when your partner in the business passes away. Does his or her spouse take over their share? Do you get along with their spouse?
Another factor is the registered agent. Every LLC has to name a registered agent. This is the person or entity that is designated to accept service of legal documents for your LLC. As far as our client, we insist on being appointed as the registered agent. While this does not directly prevent a third party from suing you, it can help to prevent and even react to litigation.
Initially, it is more professional [intimidating] to have a legitimate local law firm as your registered agent. Let’s consider two examples of registered agents:
Morris Law Center
Joe Smith, 123 Sahara Ave Apt 1089
The law firm is significantly more professional than Joe at his apartment. It also suggests that you have an attorney on retainer to take care of anything should someone come after you.
In addition, were you to be sued, the lawsuit would be in your attorney’s hands the minute it is served. This means you will have an email from your attorney that day letting you know you have been sued, why you were sued, and what you need to do to respond. On the other hand, imagine being served at home on December 23. Not only is your holiday ruined, but you might not find an attorney until January, meaning that you could lose a week of valuable response time.
So can you save money by forming an LLC yourself?
No, but you might break even.
The risks of not setting things up correctly, along with the benefit of having an attorney serve as your registered agent, add up to breaking even at best if you form your own LLC. However, for the minimal cost to have an attorney do it, you receive a lot of benefit.
$500 now can save you a $50,000 problem later.
And finally, as we always say, “If you think you might need an attorney, you probably do.” Contact us to set up a consultation.
We love answering questions!