“Why should I use you to set up my business, instead of Legalzoom or Clerky? You cost more money.”
I get that question occasionally from clients, and I usually answer by explaining that all those sites do is provide documents, which may or may not suit your needs. You may not know whether the documents are good quality, and nobody is available to explain every single sentence in the documents, much less make changes. I, on the other hand, provide legal services. And those legal services that I provide include advice on what is best for your business, as well as providing customized documentation to ensure that we are meeting your needs.
Well, last week a prospective client asked me that question, and as I started to formulate an answer, I went to the website of the document provider – incorporate.com, to see what it offered. In this case, we were talking about forming a multi-owner LLC. Incorporate.com didn’t specify as to whether the operating agreement was designed for a single-owner LLC or a multi-owner LLC. There’s a big difference in complexity, as well as in the kinds of issues you need to address, so it was a significant area of confusion on the website. Then I notice a convenient live chat function, so I decided to dig deeper. Here’s the transcript, and I think you’ll find it quite illuminating.
Thank you for choosing incorporate.com. A representative will be with you shortly. You are now chatting with ‘Jaron’
Jaron: Hello, how are you?
you: fine, thanks. So I’d like to know, for your LLC formation package, is the operating agreement a single-member or multi-member operating agreement?
Jaron: The operating agreement can go either way
you: Well, which is it?
Jaron: Is this something you are looking to have set up today?
Jaron: It is whatever you need it to be
you: and does it include transfer restrictions?
Jaron: like heir to heir?
Jaron: Or ownership?
you: like a right of first refusal if my co-owner wants to sell to an outside party
Jaron: Yes, you can include that in the operating agreement. We also provide a guidebook with further instruction on that as well.
you: and all of this is the same price, regardless of what I want included? regardless of whether it’s a single-member or multi-member?
you: all for $385.95
you: How many drafts of it will you do for me, to ensure it’s the way I want it?
Jaron: I can also provide priority handling at no extra charge.
you: how many?
Jaron: Let me double check. Bare with me [spelling error his, not mine – another nice touch from the experts]
you: double check on all those questions, please
Jaron: Sure… one moment [long delay]
Jaron: You can supply the operating agreement after writing it out. We provide the template. You can update it at anytime with written consent. The only time there is a fee is if you have a third party update it
you: So you provide a basic template, and I have to make all the changes? You don’t write these in for me?
Jaron: We do not. You will write them up, we will file them internally
you: So the transfer restrictions and all that aren’t in the agreement you provide. I have to write all that up for you?
Jaron: Correct. We file it for you, you provide the structure that you want.
you: What do you mean, you file it? [note: you don’t file an operating agreement with anyone; it’s a contract between the business owners and the LLC]
Jaron: You will supply us with the language and draft of the operating agreement. Once you notarize it and send it in, we can update it to your liking at anytime [another tip – you don’t have to notarize an operating agreement]
you: Well, if I have to write the operating agreement, why do I pay you?
Jaron: We provide the template. If you want to submit it yourself without our template, than I can customize a package for you to save you money without the operating agreement
you: I want the operating agreement, but you told me you could customize it with whatever I want, and now you are saying that you can’t, that I have to provide the customized language. Is that correct?
Jaron: Yes, meaning you can make the operating agreement anyway you want it. There is no structure that you are stuck to.
Jaron: If you need to update or make changes, we can do that. No fee
you: But I provide the language
Jaron: We provide a template. You can use it if you wish
Jaron: Or provide your own language [kind of like going to a restaurant, but bringing your own ingredients and cooking them yourself]
you: One last question. On your website, you say the Ohio LLC filing fee is $125 plus a $5 document retrieval fee. But the LLC filing fee in Ohio is $99. Why the difference?
Jaron: I will get you the breakdown, one moment [long delay]
Jaron: Sorry for the delay
Jaron: $125 is the LLC filing fee of for Ohio anywhere
you: Not according to the Secretary of State’s website.
Jaron: You will have to go to the Secretary of State yourself to retrieve the documents without the $5 fee in addition
Jaron: Yes I see the $99
you: I’m not talking about that. I’m asking why you charge $125 for the basic filing fee, when according to the Ohio secretary of state website, the filing fee is $99 [note: the Ohio Secretary of State actually lowered the filing fee from $125 to $99 several months ago, something other states should consider doing. I’m talking about you, Illinois, Texas, and Massachusetts]
you: so please explain
Jaron: I am really sorry about the confusion. I am not sure why the fee is more. All of the service companies charge the $125 rate… I honestly do not know why but I will happily discount it for you.
you: No, I’m just concerned that you wouldn’t know what the correct fee is. Aren’t you the experts?
Jaron: Yes, most times there are things like “Walk in fees” that are built into the price. I think that may be the case here but for some reason it is not listed. Most of our state fees include the full breakdown. I am not sure why Ohio does not. I apologize
you: There’s no walk-in fee. Ohio lowered the filing fee several months ago, and you just don’t take the time to ensure that you are charging the correct amount.
So let’s note a few key things from the chat:
- The representative wasn’t very knowledgeable. That’s always a troubling sign.
- The representative started out by promising that I could get anything I wanted (at that low price), but quickly had to backtrack when I pressed him on the issue. By the time we were done, I was going to have to write the operating agreement myself!
- The company’s website was out-of-date when it came to the Ohio filing fees, and when I asked about it, the representative basically made up an answer out of thin air (or pulled it out of his ###, if you prefer). If I hadn’t forced the issue, they would have overcharged me.
- The representative was also completely wrong about the $5 document retrieval fee. Some state’s charge to download documents, but Ohio isn’t one of them. This is an unnecessary and dishonest fee, and you shouldn’t have to pay it.
I hope you have a better idea now of what you get with these document services, and why I charge more money.
Follow me on Twitter @PaulHSpitz