Sunday, April 24, 2005

Should I Use an Online Service to Incorporate My California Business?

Many websites offer online incorporation services for as little and $150 plus state filing fees. Some would argue that the formation of corporations and LLCs is a high-profit portion of the law practices of many corporate lawyers. But even with the money that you might save using an online service, many business owners will still need the services of a qualified attorney.

Incorporating a business is more than just filing Articles of Incorporation and filling in the blanks spaces in off-the-shelf Bylaw forms. New corporations or LLCs will also need other services such as applying for a Federal Employer Identification Number (often called a tax ID number). Some businesses might need to register with the Board of Equalization or other state agencies. Other common services offered by an attorney include:
  • Obtain corporate record book with stock certificates
  • Obtain corporate seal
  • Draft corporate bylaws
  • Conduct organizational meeting
  • Draft corporate minutes of initial meeting
  • Preparation and issuance of stock certificates
  • Preparation of initial corporate resolutions
An attorney will be able to meet with you personally and discuss which type of entity is right for you, the tax consequences of a particular entity selection, or other questions that often can't be answered without personal assistance. For example, will an online service advise you regarding the need to register the issuance of your shares the California Department of Corporations?

Websites that offer online services are usually automated and therefore cannot add in clauses to your bylaws, operating agreements, or corporate minutes that are of a highly specific-nature. After your incorporation is completed you should hire a lawyer for drafting contracts, employment agreements, and other legal documents that a growing business needs.

Although using an online service to incorporate a business might save you money initially, the skill and personal service of an attorney are often needed for even the simplest of transactions. In the end, it is often better and more cost effective to have an attorney provide the complete range of services for your new business entity.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

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