FORTUNE Small Business:

How do I become an LLC?

Lawyer and FSB editor Adriana Gardella helps unravel the legal issues that vex business owners.

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(FORTUNE Small Business) -- Dear FSB: I'd like to turn my coaching business, a sole proprietorship, into an LLC. How do I do it? Lawyers are costly. Is there another way?

- Tanya DeKnight, Owner and Coach
Tanya Stan Coaching
Sunman, Ind.

Dear Tanya: Many online legal services will file the paperwork needed to set up a limited liability corporation at prices ranging from $10 in Delaware or Nevada to $149 in other states.

For example, LegalZoom charges $139, plus state filing fees (usually about $500), for a basic LLC registration and $369 for a "deluxe package," which includes express delivery of your finished paperwork within seven to ten business days. Some sites, such as mycorporation.com, also clearly explain the nature of an LLC and its pros and cons.

But if you're worried only about paperwork, Anthony Mancuso, a lawyer who has written books about LLCs, asks, "Why pay a service when you can file yourself for the cost of state filing fees?"

To do so, go to the website of the secretary of state for your state. Mancuso notes that it is wise to hire a lawyer to help you weigh the pluses and minuses of forming an LLC - especially the effect on your tax status - but the paperwork is fairly easy to complete without paying extra legal fees. In many states you can file online. In others, including Indiana, the secretary of state's site gives clear directions for filing by mail.

Online legal services have drawbacks.

"You can find good legal help on the Internet," says Marc Lauritsen, head of the American Bar Association's e-lawyering task force, which sets policy for lawyers practicing online and writes guidelines for consumers seeking online legal help. "But nobody vets the websites to ensure their advice is sound. And in most states communications with an online legal service aren't protected by the attorney-client privilege, which means they aren't necessarily confidential."

However, when it comes to forming an LLC, Lauritsen says, "the process is so standardized that you should be fine if you hire an online service or do it yourself. If you use an online service, check with the secretary of state to ensure your papers were filed properly." To top of page

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