The Fees Involved In Forming an Illinois Limited Liability Company

Often an entrepreneur will start a business and contact an attorney to form an entity. That entity is usually a limited liability company. The LLC is preferred because it is flexible - it can be taxed as a partnership would be taxed and it has liability protection that the partnership does not have. It has many advantages over the traditional corporation because it is more flexible and more adaptable to different circumstances.

Recently, LegalZoom and other online services advertise that they can form limited liability companies for $99. If that is true, why should you choose an attorney?

In Illinois, to form an LLC online the price is $612.75. That price must be paid to the State of Illinois. That fee must be paid even if the purchaser uses LegalZoom or an online service. So, if the quoted price is $99, the LLC will actually cost the client at least $711.75.

Why bother with an attorney?

An attorney can draft an operating agreement, which is the basic contract that governs the LLC. The operating agreement sets the rules of the road for the LLC - who makes the decisions and who gets to contribute capital and, often, who can deduct losses. Unlike any computer program or template the attorney can tailor the operating agreement to the client's actual needs. The lawyer can perhaps add a non-competition clause to prevent a key employee from leaving the new enterprise and starting his own competitor. The lawyer can chose a dispute resolution format - you can select arbitration or litigation in a certain forum. Maybe the LLC also needs a form contract for customers or suppliers. Again, only a lawyer can draft such a contract, after asking the client the right questions.

The LLC can also be designed to have two or three classes of members - each with certain rights and obligations. The benefits of the LLC far outweigh the disadvantages. The corporate lawyer has the skills and ability to design the enterprise to make it flexible and useful for any particular enterprise. Thus, LegalZoom will seem cheap until you talk to a lawyer.

Edward X. Clinton, Jr.