LegalZoom is the biggest and one of the best known online legal services companies. Starting in 1999, they claim to have served a staggering 3.6 million customers and launched over 1 million LLCs. LegalZoom offers entity formation, trademarks, patents and contracts in addition to all the personal legal services they offer. Even though they are the biggest, how does LegalZoom fare against entity formation companies like IncFile and ZenBusiness that offer no-cost formation services?
Overview of LegalZoom LLC Formation Services
When forming an LLC with LegalZoom, you get:
- Verification of business name availability
- Preparation and filing of the Articles of Organization with the Secretary of State
- Financial Account Authorization Letter, also known as a Banking Resolution, which allows the members to open a bank account on behalf of the LLC
- Lifetime customer support is available 7 days per week (Gold Express Package)
- 100% satisfaction guarantee
Even though LegalZoom has served a lot of people, the big question on our minds is whether they affordable and do they do a good job? Let’s look a bit closer.
LegalZoom offers a wide array of services for businesses, but in this review, we will look specifically at their LLC formation services. Pricing to start an LLC with LegalZoom varies with three packages priced between $79 and $349 plus state LLC fees.
Economy Package – $79 – The Economy Package pricing of $79 (plus state fees) offers almost everything the more expensive Standard and Express Gold Packages offer. What’s missing is a deluxe organizer, official certificates and seal, priority processing and shipping and lifetime customer support. The organizer, certificates and seal are not required for an LLC, but are helpful in organizing the LLC formation documents. The Economy Package is $250 less than the Standard Package and provided you don’t need the fast processing, you can purchase the organizer, certificates and seal from [xyz-ihs snippet=”LLC-Binder”] for around $50.
According to customer support, it takes 30 days for LegalZoom to process the Economy Package. We’re not sure why it takes that long for them to submit the paperwork (other than to push you into one of the more expensive packages) to the Secretary of State, but compared to most other formation services, 30 days is a really long time to wait. Don’t forget, this is in addition to the time for the state to process the paperwork which can take on average an additional 3-4 weeks.
Standard Package – $329 – The next pricing bracket, which is a big jump in cost from the Economy Package, is the Standard Package which costs $329 plus state filing fees. You get all the features of the Economy Package plus the deluxe organizer, official certificates and seal and VIP processing. VIP processing for the Standard Package is 15 days for LegalZoom to send the paperwork to the state.
Express Gold Package – $349 – The last package includes faster VIP processing (7-10 days), rush processing with the Secretary of State, express shipping of the filed documents and lifetime customer support.
There is a large gap in pricing between the Economy and other packages. Unless you have to get your LLC formed quickly, you can save a considerable amount of money with the Economy Package.
In addition to the package fees, there are several upsells [xyz-ihs snippet=”LegalZoom-LLC-Link”] will try and sell you on. Some of these may not be necessary for your LLC, so let’s look at each of them and see what is necessary.
Registered Agent $159 – Every corporation and LLC will need to name a registered agent. This is simply a person or company that is the single point of contact for the LLC, should important tax or legal correspondence be sent to the company. The registered agent must have a physical presence in the state, be over the age of 18 and generally available during normal working hours. Provided the owner lives in the state, they can be the registered agent for the LLC
LegalZoom charges $159 annually for a registered agent which is higher than the average cost of $100-$150.
Operating Agreement – $99 – An operating agreement isn’t a required document in most states, but is highly recommended, especially for multi-member LLCs. The operating agreement is official documentation for how the LLC operates.
Operating Agreement plus EIN – $159 – This upsell adds the registration of an EIN to your LLC for an additional $60. An EIN is short for Employer Identification Number which is like a Social Security Number for a business. Even though their sales page says the EIN is mandatory for opening a business bank account, if your LLC is only owned by one person and there are no employees, the owner’s Social Security Number can be used, though there’s no harm in getting one. An EIN is free and takes only a few minutes to fill out directly with the Internal Revenue Service.
Operating Agreement, EIN and Licenses – $199 – In addition to the operating agreement and EIN, LegalZoom offers a service where they research all the licenses and permits your business will need. The license and permit research may be the most valuable upsell, but you can find other services such as [xyz-ihs snippet=”Business-License-Research”] offering the same thing for only $99.
Tax and Legal Guidance – $39.99 per month – Another upsell is unlimited 30-minute consultations with attorneys and tax professionals, in addition to a library of legal documents. You do get a 10-day free trial, which can be a really good deal if you just have a few questions and then cancel the service before the free trial is over.
Compliance Services – $280 per year – The last upsell from LegalZoom is pretty pricey for what it does. LegalZoom will file your annual report and other formalities such as updating corporate minutes which your LLC won’t need anyway. Filing the annual report is quick and easy for most owners to do themselves.
[xyz-ihs snippet=”LegalZoom-LLC-Link”] is probably the best-known online legal services company, but how well does this name recognition translate into customer satisfaction? We found three different credible review sites with a sufficient number of customer responses. Even though LegalZoom has helped a lot of businesses, it seems there may be some issues with their quality.
- The Better Business Bureau, shows LegalZoom has been accredited since 2001. They have an A+ Rating but a terrible 1 star average rating from 178 customer reviews.
Trustpilot rated them as Poor with a TrustScore of 1.9 / 5.
- ConsumerAffairs was a little better as there were 432 ratings in the last year, scoring LegalZoom with 3 / 5 stars.
Why choose LegalZoom?
LegalZoom handles many legal aspects from entity formation to wills to patents and trademarks, contracts, legal advice and much more. LegalZoom is more expensive than many of the entity formation companies, however their list of services is much more broad than most providers, making LegalZoom a better choice for businesses needing services beyond entity formation.
LegalZoom’s biggest asset is the length of time they have been in business and the fact they have helped over 1 million businesses. However, after looking at the online reviews, there are a lot of questions whether they can be trusted to take care of your business’s legal needs.
Another major downside to using LegalZoom is the very lengthy amount of time to send the formation paperwork to the state. The 30-day processing of the Economy Package may be the longest of all the providers and is really unacceptable since they are holding the documents internally. Below is the estimated formation time from the LegalZoom website:
If you are only really interested in forming your LLC or corporation, a service like IncFile or ZenBusiness may be a better option because of their lower prices (free in some cases), faster processing and better online reputations.
Do I have to use LegalZoom to form my LLC?
No! You can file an LLC or corporation without using an entity formation service or attorney. You can learn more with our guides to forming an LLC for free in every state. While you can do it yourself, some states are more difficult than others and is why having a formation service like LegalZoom is beneficial since they do this work every day.
Learn more about LegalZooom’s formation services