Given the rise of the use of online companies to form corporations, many people ask why they should use an attorney to form a business entity such as a corporation. The reason is because online companies do not do three important things that business owners must address when they incorporate.
What online companies do:
They do what you tell them to do.
They file articles of incorporation.
They obtain Federal Employment Identification Number (FEIN).
They appoint the initial director(s) of the corporation.
Send the customer a notebook with a bunch of forms.
They might draft organizational minutes and bylaws and file SOI with state.
What online companies don't do:
Do not finish organizing the corporation.
Do not issue stock.
Do not file necessary notices to make stock issuances lawful.
Most importantly they don’t address the Three Crucial Questions business owners miss.
The Three Crucial Questions are:
What type of entity, where, and why?
What is the entity’s capitalization?
What happens if: a partners dies, becomes disabled or says “I’m out of here”
These issues are vital. Why do you want a LLC in Delaware? What are you paying for your stock; what are you putting into your corporation? What happens if you die or just quit working in the business?
The online companies won't help with these issues and others. An attorney can help business owners to work them out. Business owners who don't work through these issues are asking for serious trouble.
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