Why Use An Attorney To Form A Professional Corporation?
Why should I use an attorney to form a professional corporation when there are sites like Legal Zoom out there? I hear this question frequently, so let's look at the reasons.
You hear the radio commercials. You see the banner ads. Yes, there are cheap formation services on the web. These services basically put you into a mill and hammer out the incorporation filings. The fees they quote don't include the Secretary of State fees and thus are a bit misleading, yet there is no doubt they are cheaper than most attorneys and I am one. So, why not just use them? The answer involves understanding what these services do and do not provide.
Practice of Law
You must be licensed in California to practice law. This is true in any state. That being said, you do not have to be licensed to simply file or provide forms. This is essentially what incorporation services are doing. You fill out some questions that are translated to a form and filed with the Secretary of State. Once approved, you are then provided with the articles, a corporate book and a disk of boilerplate forms. The services cannot really answer any questions you have because this would be practicing law. This is where the problems start.
The articles of incorporation of a professional corporation are one part of the formation process of the business. Just as important, however, are bylaws, minutes, share issuance and so on. The problem is statutory law and the boards for your profession require that you comply with certain guidelines. For instance, the Medical Board and Legal Bar require certain share transfer limitation language be included on the share certificates of the corporation. This is not something a cheap filing service can or does provide.
Then there are issues surrounding the bylaws. Bylaws are essentially the layout of how the corporation will operate. The different licensing boards require different language in the bylaws. On top of this, negotiations are needed where there are two or more professionals that will be shareholders. How will you handle various situations such as voting majorities, retirement, death and shareholder who doesn't do their fair share and so on. Then there is mandatory language related to shareholder and officer restrictions. The short and sweet of it is this isn't something that can be handled by a form. It requires someone that can actually think and knows the issues.
Get What You Pay For
As a professional, I shouldn't have to tell you that you get what you pay for with just about anything. Professional corporations are no different. Using a cheap formation service to form your professional entity is a mistake because if your initial formation and launch is not handled correctly, the entity is worthless to you. If you feel comfortably risking problems with lawsuits, the IRS or the licensing board overseeing your profession, then use the formation services. If you prefer to sleep at night, use an attorney whether it be myself or someone else. Contact me today to learn more.
The articles and content on this site is provided as education information for our readers and does not constitute legal advice or an offer of legal representation. The information provided is based on California law. Every legal situation is highly dependent on the specific facts present. These articles are general in nature. Make sure to consult with counsel in your state to learn the specifics on your situation.