What Are Your Primary Concerns of Setting-Up an LLC on LegalZoom?

3 Replies

I was wanting to set up an LLC in California on LegalZoom for myself. No other members, just me. Will open a bank account under the LLC name.

But some say it's really risky to do without an attorney, and will come back to bite you. Do you think there is not as much to worry about if it's a single-member LLC? Pretty straight-forward?

@Josef Roberge   Good question. Internet services like legal zoom are the easiest by far to "pierce the corporate veil" and have you held personally liable. Don’t be cheap. Hire a lawyer. Specifically a lawyer who specializes in Asset Protection to ensure it is done correctly. 

All LLCs are not created equal. Basic one pagers, no-frill filings do not contain asset protection, heck I have even seen the filings with incorrect names etc. I have litigated many of these cases and loved seeing legal zoom documents.

Internet services do not provide:

  • -No comprehensive advise on how to structure business and investments to achieve an overall AP plan;
  • -No attorney to sere as organizer, initial member, and/or registered agent in order to maximize anonymity;
  • -No sophisticated company agreement that deters creditors from taking control of your company;
  • -No advise on how to move property into the LLC after it is formed;
  • -No advise on how to use the LLC in conjunction with a land trust;
  • -No advise on how to set up and arrange the LLCs finances, including LLC accounts, injecting capital, or loaning money to the LLC;
  • -No advise on how to maintain the LLC liability barrier to prevent plaintiff's from "piercing the veil"; and
  • -No follow – up questions answered by a lawyer after the LLC is formed.

You goal should NOT be to just establish an LLC as cheap and fast as possible. The goal should be to establish an LLC that includes sophisticated AP provisions beginning with the very first documents filed with the state. If not, your veil will be easily pierced and you will be held personally liable.

Originally posted by @Josef Roberge :

I was wanting to set up an LLC in California on LegalZoom for myself. No other members, just me. Will open a bank account under the LLC name.

But some say it's really risky to do without an attorney, and will come back to bite you. Do you think there is not as much to worry about if it's a single-member LLC? Pretty straight-forward?

I'm not an attorney, so I cannot tell you what specific problems you may run into by choosing LegalZoom, as opposed to a lawyer. Just like in any other professional field, an expert (assuming he is, in fact, an expert, because not everyone is) always does a better job, and it always costs more.

That said, here is what I've been told by many of my attorney friends. The #1 reason LLCs fail to protect their owners is not an LLC poorly set up. It is an LLC poorly run. If you do not separate the LLC money from your personal money, if you do not follow required procedures and formalities, if you're generally sloppy (and that describes the majority of LLC owners) - then it does not matter who creates your LLC. It will fail. You may just as well not create one at all.

@Josef Roberge

Not sure about CA but I don't think it's a fatal mistake in PA to use services like Legal Zoom for a single-member LLC to get your filings and operating agreement. Note that I said single-member LLC --- for multi-member LLC, it's akin to legal suicide.

Probably the biggest difference is that the lawyer --- as part of the underlying fee --- will typically answer various questions and give you some basic advice on how to practically operate an LLC. I supposed the need for this depends on how sophisticated the investor is. But I've seen people do some ridiculous things because they didn't know better.

When I used to practice more as a lawyer, I treated as single-member LLCs as the "get to know each" project. Compared to other areas of practice, commercial/transactional practice relies almost entirely on repeat clients and referrals. So you try to do your best to make sure that your new client feels good and ready to do what they need to do. Sometimes you bill less than the hours you spend talking since almost all lawyers understand why newer clients are afraid of getting a massive bill. 

Even if it skews their realization rate, I think most lawyers do this in practice. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.