When it came to registering a small business, I had a few questions off the bat. How should I set up this business: a partnership, LLC, C corp? What service should I use to do it? I've started technology startups before but the needs of a small business are slightly different and so are the tools out there that cater to them. Google was naturally the first tool I jumped to to help me answer this question. After reading a couple articles defining the pros and cons, I settled on an LLC as the right balance between protection of personal assets, flexibility, and simplicity. There are a lot of great blogs out there answering specific basic questions like these for people so this part was quick and easy.

Next up was to decide what service to use to register my business as an LLC. I'm sure many businesses will opt for finding a lawyer at this point but business registration has mostly become comoditized by online sites that can do it quicker, cheaper, and just as well as a lawyer. Searching on google will give you tons of options but you quickly realize their pricing isn't transparent and you can't easily distinguish their quality differences. I had heard the most about LegalZoom and Rocket Lawyer so I focused my effort on trying to decide between the two of them. These two companies spend a lot on marketing so that when I am in this position of wanting to start a business, they are on the top of my mind and all that marketing worked! After answering a few questions on each site, LegalZoom gave me the most confidence with it's better user experience. That's all it really took. I didn't want to waste too much time on this phase since it felt like the outcome would be mostly the same regardless of which site I chose.  

With LegalZoom decided on, I was expecting the rest of the process to be pretty straight forward but I was surprised by how many options are thrown at you right away. One of the first big decisions I was confronted with was deciding on a registered agent. I had to do some research on what a registered agent even was. It is basically a person that most states require you to have that will accept legal documents like tax forms and notices of lawsuits on your behalf. You can choose to be your own registered agent but that is an additional level of responsibility you might not want. LegalZoom gives you the option of having them be your registered agent for $159 for the first year with an automatic renewal rate that is subject to change according to the hidden terms. For simplicity, I just opted for this option.

Right after selecting a registered agent, you are presented with another choice. This time you must select between three options on documents ranging from $99 to $199. I splurged on the complete coverage that includes an EIN and required licenses along with an operating agreement. I'm not even sure if you can legally operate a business for very long with the other packages.

What follows after that is a series of monthly subscription upsells that seem designed to scare you into signing up for different LegalZoom subscriptions so they can make money from you monthly. Having access to legal help and staying compliant do seem like they would be useful in the long run but I decided to opt out and take my chances for now to avoid committing to pay even more upfront  just to register my business. Now that I am aware of these options though I might go back in the future and sign up for these depending on how things progress.

The next step, and supposedly the last one, is selecting an LLC package. The filing fee for an LLC in New York is $210. LegalZoom offers 3 packages for filing that cost an additional $7o, $329, and $349 on top of the state fee. The biggest difference that I could tell between the three options is how quickly the filing will be done. I initially balked at the big jump from $79 to the next option costing $329 so I picked the cheapest option even though it would take 3 times as long.

After finishing that step that claimed to be the final one, I got one final offer to open up a small business checking account with Bank of America. This option may be timely but I am also experiencing fatigue at this point from going through so many choices that I was unsure about, some of which seem tangential to my main objective of registering my business. Despite this I opt to let them contact me since setting up a bank account would be my next logical step (blog post to follow). I will have to wait until the filing is done and I get my EIN before I can open the account though.

After that I am finally done! Everything ended up costing just under $500 even after declining many add-on options. This is higher than I was expecting but didn't seem unreasonable given it includes the state filing fee which is $210.

Actually, just kidding! I wasn't really done yet. Shortly after I thought I was finally done for real, I got a call from someone at LegalZoom asking me for some missing information and also letting me know that what I had paid for did not include the price of using LegalZoom as a registered agent. Apparently this is only charged after your documents are submitted to the state. This adds an additional $115 to the cost and brings the total upfront cost to $603. This is more than the $500 a typical venture funded start up would pay with Stripe Atlas and can be a lot higher depending on certain options you choose. Stripe Atlas also claims to provide more than $100,000 in credits from partners but the economics of getting a small business costumer on your platform is understandably very different than getting a startup that could eventually be worth more than $1 billion dollars.

On the call, I also wondered if I really wanted to wait 30 days for the filing to ne completed. I decided to ask if it could be expedited and surely it could be for an additional charge of $129 which I thought was worth it to be able to move on to the next steps faster. I can now expect the whole filing to be completed on December 5th. The LegalZoom mobile app actually has a useful status tracker for keeping track of the filing status.

This whole process was not too long but didn't instill in me a lot of confidence that I had made all the right choices and required me to have a lot of trust in the service I chose. My main takeaways from the experience:

  • Registering a business is a highly competitive and comoditized space
  • Brand recognition is one of the only distinguishing features
  • Little pricing transparency
  • High pricing variability
  • A lot of new business jargon for new businesses to learn
  • Fees can rack up quickly
  • Potential for many complimentary referrals like bank accounts and legal help
  • Element of lock in since you are likely to choose other services from the company that does your business registration since it will work together well

It took me a lot longer to write this post than it did to actually register but I got a lot out of thinking critically through each step. I will continue documenting the process of starting up a small business and my learnings along the way. Would love to hear from you if you have any feedback!