Need to create an LLC or corporation for you business? I have good news for you: you may be able to finish this task in under an hour WITHOUT paying for an overpriced business formation service like Incfile or LegalZoom.
If you want to pay $350-$500 to one of these companies, then knock yourself out. For everyone else who prefers to save that money and invest it into your new business or side hustle, read on to find out how.
Experience with Incfile
Before I tell you the best alternative to these business formation services, let me tell you what it’s like to work with one so you don’t waste your time.
I used Incfile several years ago to create an LLC and overall the process was smooth until I asked them a fairly basic question. Their customer support team responded (no exaggeration) 4 months later!
Despite this experience with them, I tried them again recently (before I realized how much of a rip-off these formation services are) and I almost wasted my money with them again. However, several days after completing the transaction, I received a hostile “you must comply” email telling me that I must send them a photocopy of my credit card via email. Here’s a small excerpt from the email coped below:
No … sorry, Incfile. I am not sending you a photocopy of my credit card through an unencrypted channel to sit in the inbox of one of your offshore customer support representatives (and be forwarded who knows how many times).
I understand that some businesses have their own protocols that they want to create for their own reasons, but no other company asks me to send a photocopy of my credit card. Furthermore, if they are not going to accept my money, then they shouldn’t wait 4 days to tell me that! (which is how long it took before I received this email).
But! … in hindsight they did me a favor because they made me take a closer look at their service and how “scammy” these business formation and registered agent services are.
Keep reading to find out how to create your business entity on your own, at no cost, in a fraction of the time.
Go Directly to Your State
Rather than flush your money down the toilet by using one of these entity creation services, go directly to your state’s website where you will apply for an LLC (or corporation, etc.).
This website will be different for every state, but you can find the site in under 30 seconds with a quick google search. Look for websites that end in .gov or something similar. Here are the sites for California and Texas, but in this example I will be following the Florida process for business creation.
If you’re thinking of shopping around different states to find which one has the lowest formation fees, don’t bother. Create your business in the state that you live; otherwise, you will end up having to do twice the work and pay more because you still have filing requirements within your state even if you create a business in a different state. Keep things simple and create your business in the state that you live.
Florida Example - Sunbiz.org
If you are creating your entity in the state of Florida, then you can expect to follow a very simple process. You will be required to answer the same questions and provide the same information that you would to a business creation service.
Simply go to Sunbiz.org and follow the instructions on how to create an LLC (or whichever entity type is right for your business).
The entire process for me took about 10 minutes. After I paid the fee (which in Florida is currently $125) I received a confirmation email and confirmation of payment.
One thing to note about your state’s formation fee: you can’t avoid it. This is a fee that you will pay in addition to the cost of paying a business formation service like Incfile, LegalZoom or ZenBusiness.
Once you receive your confirmation of payment, this does not mean that your LLC has been created. Now you are in the queue and they will review your application. Wait for an email notification from your state that tells you that your LLC is now created.
In Florida, I received this confirmation in 6 days. I filed for creation of the LLC on Saturday and by the following Friday morning I had confirmation.
"Fast Filing"
Note: one of the add-ons that Incfile and other LLC creation services will try to sell you is “fast filing”. The price ranges but it will probably be around $30 to get your application submitted to the state quickly. Otherwise they tell you that the LLC creation will take about 1-2 months. That’s a lie and a scam! If you basically paying them to sit on your hands unless you agree to pay them more for “super fast filing”
This is yet another reason to avoid these services all together. When you go the process directly with your state, you will be required to answer all the same questions and provide all the same information to a business formation service. They are not making the process easier as there is no one (other than bots) that answer any questions that you might have.
All they do is slow down the process of entity creation and take a couple hundred dollars of your money on top of what you owe to the state.
No thank you!
What About a "Registered Agent" Address?
One of the primary selling points of business formation services is that they can serve as your “registered agent”. It’s true that you will need to give your state the name and address of your registered agent.
However, it’s still a waste to pay for a registered agent service. Here’s why:
- Your name will NOT be hidden by hiring a registered agent and someone can still find your name by searching the state’s database of registered companies.
- The address is ONLY for receiving legal notifications. You cannot use it as your business mailing address.
On the first point, many of these services will sell privacy as a benefit of using a registered agent. But it’s not very private when you’re name is still available on the state’s database. It’s true that they can hide your home address, but there’s a better, cheaper alternative.
You will need to have a mailing address for your business anyway so why pay for a registered agent address AND a business mailing address? It’s far more economical to buy a business mailing address and use THAT as your registered agent address. After all .. you name will not be private so there is no point in trying to hide it. And since you’ll likely have to pay for a business mailing address, there’s no point to paying a registered agent which only serves as a location to send legal documents.
If you have a retail location or an office where customers physically visit you, then there is absolutely no point to a registered agent address because you’re not trying to hide your address. In all likelihood, you want the public to know where your located.
If you have an online business or some other type of business where you don’t want your home address revealed, buy a business mailbox and use THAT as both your business mailing address and your registered agent address.
For a business mailbox, you have the option of using a local service like a UPS Store that you can physically go and pick up your mail. Or … you can buy a “virtual mailbox” that serves as your business address. When a virtual mailbox service receives mail on your behalf, they send you a notification and give you the option to either open, scan and email the letter as an attachment, or forward it to your home address.
There are many of these services out there and I personally used Traveling Mailbox to serve as my virtual business address.
What about an EIN number from the IRS?
To get an EIN number for your business, there is DEFINITELY no reason to pay a formation service for this.
The IRS even warns about paying for this service when you can get it for free from www.IRS.gov directly.
Here is what the IRS has to say about paying a service for an EIN number. The screenshot below was taken off of the IRS website (you can click the screenshot copied below to be taken to the page on the IRS website where they discuss this).
You still want to give your money to these business formation services? Go ahead and knock yourself out… I personally prefer to do it myself in less than 20 minutes and save a couple hundred dollars.