February 17, 2016

There Ain’t No Such Thing As A Free Lunch, Part 1

One of the most rewarding things we do here at the Law Offices of P. Andrew Torrez is work with start-ups and other small businesses to develop a strategy that allows those businesses to grow while anticipating and protecting them against future litigation risks. We recognize that cash is tight and, quite frankly, hiring a lawyer can be expensive. We often see small businesses trying to cut corners on expenses by using pre-packaged legal services. These websites purport to walk you through filling out your own legal forms.

Let me start with the uncomfortable (for many of my colleagues) truth: there’s nothing inherently wrong with using a non-attorney form service. But – as the title of this article reminds us – there ain’t no such thing as a free lunch. Let’s take a look at a hypothetical and see if cutting corners now would pay off for your small business or prove more costly in the long run.

Scenario: A Startup Needs to Organize

Here’s another uncomfortable truth: it’s not that difficult to file organizing documents for an LLC in most states. In Maryland, for example, you can probably learn how to do it yourself in an hour or two. If you live close to the State Department of Assessments and Taxation in downtown Baltimore, and you don’t mind spending another hour or so filling out forms and waiting in line, you can probably handle things yourself. You won’t have access to a lawyer to discuss whether an LLC is the best corporate form for your small business (it probably is, though), or to remind you about annual compliance filings, or otherwise help you through the process. For a cash-strapped startup, though, those might be reasonable tradeoffs. Others may decide that it makes sense to pay a professional a few hundred dollars to avoid the hassle and inconvenience of doing it on your own.

What about those legal form services that walk you through filling out the forms yourself? I decided to check out a popular service that advertises on TV. By the time I entered my information, I had racked up nearly $1,200 in fees, with many of them recurring automatically each year for things like serving as a registered agent and insuring compliance with future filings. Moreover, by the time I got to checkout, I had five more “services” marketed to me including an (unnecessary) credit check, offers to set up a business checking account and a credit card (with yearly fee), a third-party payroll provider, and discount website creation services. At the end of the day, I could have easily walked away paying thousands of dollars just to set up my LLC.

I don’t know of any lawyer who would charge $1,200 or more just to organize an LLC, and I certainly don’t know of any who would try and upsell you on other “services” while doing so.

This post isn’t legal advice (please see our disclaimer) – just good common sense. If you’re a business professional, start a relationship with a lawyer whom you can trust. The more your lawyer knows about your financial situation, the better equipped they are to help you reduce expenses. Many of us know exactly what it’s like to be in the position of trying to get a small business off the ground. Don’t be afraid to ask us if it makes sense to use a pre-packaged form or service; a good lawyer will level with you. And remember: there ain’t no such thing as a free lunch.

February 17, 2016 Blog