[Hidden-tech] Starting an LLC?

[Foster, Scott]

I may be late to the discussion, but as a business attorney practicing here in the valley, I thought I would chime in on the discussion about forming an LLC and the merits of using a service to help you form the LLC.

While completely self-serving, I would not recommend using such a service for many reasons, but they all boil down to this - if you know what you are doing, then form the LLC yourself for no additional cost (as suggested by a few others), if you don't know what you are doing, then talk to someone who does - in 15 minutes you can learn a great deal.

The first question that I ask someone who wants to form an LLC is why?  In many cases the entrepreneur is better served keeping the $500 filing fee in their pocket.

If we get over the "Why" threshold, I then turn to taxation.  How do you want the LLC to be taxed?  As a sole proprietorship (report everything on your Schedule C)?  As a partnership?  As a corporation (C or S)?  There are merits to each classification, but you need to be aware of the default classification and either be comfortable with that default or know how to elect to be taxed otherwise.

How do you want the LLC to be managed?  By its members or by a manager (or managers)?  If by a manager, then you need a written operating agreement.

How many owners will the LLC have?  If you are the only owner, then this discussion is pretty short!  But if you will have more than one owner, or if you think there is someone to whom you want to offer equity (either outright or pursuant to a restricted equity agreement), then this discussion can take a while.

Other topics to be covered are registering the LLC with MA DOR, getting an EIN, ensuring that the name is available, and hiring employees, among others.

Finally, many of these online service companies will automatically sign you up to have them serve as your "resident" or "registered agent."  While this is necessary if you form a company in Delaware, you can be the resident or registered agent in MA (assuming you live here).  That tip alone can save you a couple of hundred dollars per year.

Bottom line:  Take the money you might have spent with an online service, add a little more to it, and get some actual services for your money.  You might even meet someone who enjoys hearing about your business and thinks of others that might be interested in helping you - using their personal network to help your business grow.  Hard to put a price on the value of a relationship.

Thanks, Scott

Scott W. Foster, Partner
Bulkley Richardson
1500 Main Street, Suite 2700 | P.O. Box 15507 | Springfield, MA 01115-5507
Direct: 413-272-6258 | Fax: 413-785-5060
sfoster at bulkley.com<mailto:sfoster at bulkley.com> | www.bulkley.com<http://www.bulkley.com>
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