Do I need an attorney to incorporate?

As a business owner, it's important to decide which corporate structure fits your company's needs. Owners may decide to form an LLC or to incorporate.

When you make a decision to incorporate, you can do it yourself without hiring an attorney. But that isn't always the ideal decision.

How to incorporate without an attorney

It is relatively easy to set up a corporation. Many states have forms online to set up a corporation. Essentially owners need to do the following:

1. Select and reserve a name for the business.
2. Obtain a registered agent.
3. Draft and file articles of incorporation with the Secretary of State.
4. Once you receive approval, pay the mandatory incorporation fees.

Advantages of a DIY incorporation

It is definitely tempting to incorporate on your own because it's less expensive than hiring an attorney. "While state fees generally total between $100 and $250, the average attorney charges that by the hour," says Matthew A. Dolman, a Florida-based attorney with Sibley Dolman Gipe Accident Injury Lawyers, PA.

In addition, in most states, the process is easy, available online, and doesn't necessarily require guidance from an attorney. "For a solo owner, when you are just starting and are too small for a major lawsuit risk, there is nothing wrong with saving a little money by doing a DIY incorporation," says Ryan Reiffert, a Texas-based attorney.

Advantages of hiring an attorney

Owners who are unclear about the process of incorporation may want to hire an attorney. Peter Home, with the firm Geoff McDonald & Associates, says, "An attorney can guide you through the process as well as teach you the ins and outs of how your company will need to operate once incorporated."

A legal consultation can help an owner determine which corporate entity will be most advantageous and how to get the most out of incorporating the business. Attorneys can also highlight the downfalls of different entities in terms of liability and tax, as well as show you how each different option will have varying effects on the business.

Specific reasons to hire an attorney to incorporate

"There are certain instances where having an attorney help draft and file formation documents is really advisable, such as creating a 501(c)(3) charity or in the event you want to raise capital and have multiple classes of stock," says Marc Snyderman, founder and CEO at Snyderman Law Group, PC.

Another potential risk factor that calls for attorney involvement is the relationship between the company founders. "When people who are not family—or do not have a relationship of absolute trust like a household essentially does—come together to incorporate, then an attorney should be used for the planning documents," says New York-based attorney Andrew Rozo. "Doing business with friends and strangers often leads to issues and corporate breakups that can be extremely messy and stressful without corporate documents that have relationship breakdown in mind," Rozo says. In this situation, an attorney can plan for contingencies.

Dolman offers some perspective for those contemplating DIY incorporation versus using an attorney. "Ultimately, if you have the money to spare, it's well worth it to have an attorney guide you through the process of incorporating. You'll not only save time but also stress, as you'll have a live expert available to both answer your questions and advise you on how to proceed. However, if money is tight, the process is absolutely something you can do yourself."