LegalZoom LLC Entity Formation – Is it all It’s Cracked up to Be? (2020 Review)

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Quick Reference

  • Free plan offers a lot of value (state filing fees still apply)
  • Lifetime customer support
  • Free registered agent in the first year
  • Free 1-hour tax consultation
best value
  • Free plan offers a lot of value (state filing fees still apply)
  • Lifetime customer support
  • Free registered agent in the first year
  • Proactive customer service called to discuss next steps
best value
  • No free plan, but pricing is fair and upfront
  • Lifetime customer support
  • Free registered agent in the first year
  • Free business name availability check
easiest

As a business owner, you make hundreds of decisions every day. 

Some of them are simple, brainless choices while others take a significant amount of brainpower to decide. It’s no surprise you fall into bed exhausted at the end of the day (if you get to sleep at all). 

But, choosing a business formation service provider doesn’t have to be one of those impossible decisions. To help you choose, I used LegalZoom’s LLC entity formation services to set up an LLC for my business and wrote an in-depth review of my experience. 

In this LegalZoom review, I cover:

  • How to set up your own LLC with LegalZoom
  • What I like about their services
  • The things I don’t like about them
  • Details about their pricing packages
  • Their (not-so-great) reputation
  • Who to use instead

By the end, you’ll know everything you need to know about LegalZoom. And you’ll be able to make an educated decision about using them (or not) to incorporate your business. Let’s get started!

Summary: High-Level Pros and Cons of Using LegalZoom

As I mentioned, I used LegalZoom to set up an LLC for my business. During the process, I took note of things that stood out to me, both good and not-so-good. Here’s a quick overview of my experience, in case you don’t want to read the full review (no judgment, here). 

What I like (AKA the good stuff):

  • They offer a 100% money-back satisfaction guarantee
  • You can receive support via live chat or telephone
  • The process is straightforward and easy to use
  • LegalZoom has helped set up over 1 million+ LLCs

What I don’t like (AKA the not-so-good stuff):

  • They don’t have any free plans like IncFile or Inc Authority (plans start at $79 + state filing fees)
  • LegalZoom can hold your order for processing for up to 30 business days
  • Pricing plans aren’t clear when you start the registration process
  • Registered agent services aren’t free (unlike many other providers)
  • They charge for an Employer Identification Number (EIN) number

Overall, LegalZoom’s process is easy to follow, although I did find it a bit more complicated than some of the other entity formation service providers out there. Their customer support team seems to be top-notch, although they do try to get your info for marketing purposes at the beginning. 

But, knowing they can hold my order up to 30 business days is a huge let down compared to other services. And they don’t offer a free package or free registered agent services (unlike most other providers). 

At the end of the day, LegalZoom comes out being one of the slower and higher-priced LLC formation companies out there. 

Setting up an LLC with LegalZoom

To get started setting up your LLC from the LegalZoom home page, click on “Limited Liability Company (LLC)” under the “Business Information” header on the left. 

From there, you can enter the name of your LLC. Alternatively, you can skip this step and choose a name later. I already know the name, so I entered it and moved on.

Next, LegalZoom asks which state you’re interested in filing in. After you enter your state, their system will do a quick check against other licensed businesses. If everything checks out, you’re good to move on to the next step.

Then, you’re given the option to enter your phone number or email address to “secure” your order. But, if you read the fine print at the bottom, entering this information gives them permission to call, text, and email you about special offers.

It also mentions your consent isn’t required to move forward.

If you’re anything like me, you get enough spam calls and emails as it is. So, I didn’t enter anything here and moved on. After that, they ask you a series of questions about your business. These questions include:

  • When you want to launch
  • If you’ve formed an LLC before
  • An explanation of what your business does
  • And if you plan to have employees in the next year

After that, LegalZoom tells you about their registered agent services. By law, all incorporated businesses (includes corporations and LLCs) must have a registered agent to receive official legal documents and correspondence from the government.

This could be you, another member of your LLC, or a service provider (like LegalZoom).

Many business formation providers (IncFile, IncAuthority, ZenBusiness) offer registered agent services for free for the first year. But, LegalZoom does not. In fact, they charge $249 for the first year. Yikes!

I decided to appoint someone else as my registered agent instead of paying LegalZoom to do it. However, you need to decide if using LegalZoom as your registered agent makes sense for your business.

Make an educated decision here and be sure you have someone available to act as your registered agent. Who that person or entity is is completely up to you.

Next, they offer you several “essential” add-ons. These include:

  • Operating agreement ($99)
  • Operating agreement + EIN ($149)
  • Operating agreement, EIN, and licenses ($199)

First, operating agreement templates don’t apply to every business. So, it may not work for you and could end up being a waste of money. Second, you can get an EIN number for free through the IRS. Third, you can research which state, federal, and local business licenses you need on your own.

But, bundling these together will save you time and guarantee everything is done correctly.

I chose to move forward without any of these add-ons, but it’s up to you to decide if they’re a good fit for you and your business.

After making your decision, LegalZoom explains their additional business services. Their first offer includes access to an attorney for tax and compliance consultations and access to a library of legal forms. These services start at $39.99/month after a free 10-day trial.

Their second offer includes help with keeping your business compliant through annual reports and other formalities the Secretary of State will require. This service is $280/year after a free 10-day trial. Note: Other LLC formation packages provide this a la carte meaning you only pay for what you need.

I opted out of these services but they might make sense for you. So, decide if they’re a value-added for your business before moving on.

Next, they show you their different pricing tiers and what each one includes.

I chose the Economy plan (more about the pros and cons of each plan later on). Then, you’ll be asked if you’re interested in setting up a business bank account and credit card with Bank of America.

This is a great option if you don’t have a bank account, yet. I already have one so I decided to move on without it. Finally, you have a chance to review your order.

The last step is entering your payment and contact information to finalize your order.

And that’s it! You’re done! Give yourself a big pat on the back and celebrate this incredible milestone for your business. Sending virtual high-fives your way!

What I Like About LegalZoom

After going through LegalZoom’s LLC business formation process, I found some great things I enjoyed about their services. So, I want to go over each of the advantages of LegalZoom and why they matters for entrepreneurs and small business owners.

1. They Offer a 100% Satisfaction Guarantee

Most LLC formation service providers work to fix their mistakes and make things right. But, LegalZoom goes one step further by offering a 100% satisfaction guarantee.

If they mess anything up or you’re unhappy with your services and support, you’ll get your money back (aside from any fees paid directly to the state or other third parties).

With that being said, they don’t guarantee the outcome (AKA acceptance) of documents filed with the government. This means you won’t get your money back because your documents or other filings were rejected.

If you have any problems, you can give them a call during normal business hours within 60 days of your purchase. Additionally, you can exchange your purchase for other services and products.

2. You Can Contact Support Via Live Chat or Telephone

Many companies solely provide support on the phone or via email. With LegalZoom, you can launch a live-chat that opens in a new browser window. This is great because you can save time and get your questions answered quickly without having to call anyone.

But, be aware. They do ask for your phone number before starting a new chat. This is completely optional. But if you do provide it, you give LegalZoom consent to call and text you regarding special offers and discounts.

While this makes things easy, their customer support hours are limited to:

  • 7 am – 5 pm PT on weekdays
  • 7 am – 4 pm PT on weekends

Many service providers don’t offer support on the weekends so, this is definitely a positive. Imagine sitting down on a Saturday ready to get going and running into a snag you can’t get taken care of until Monday. No thanks!

3. The Process Is Straightforward and Easy to Follow

If you feel like every part of starting a new business is confusing, you’re not alone. But, LegalZoom makes forming an LLC easy. Their process flows smoothly and they only ask for one answer or decision at every step.

Staring at a screen with 13 questions can be overwhelming. So, it’s a breath of fresh air to answer one question at a time. You can move along at your own pace and save your progress for another time.

Plus, you can start a chat or give them a call if there’s anything you need help with.

4. LegalZoom Has Helped Set Up Over 1 Million+ LLCs

With experience like that, it’s hard to not be impressed. There is absolutely no doubt they know what they’re doing and they get the job done. Odds are, they’ve seen every scenario and snag you can imagine along the way.

5. They offer more than entity filings

Out of all the entity formation companies we review, only LegalZoom provides a full range of legal services like filing trademark applications, living trusts, estate planning, and more. If you are looking for one company to help with all your legal needs, LegalZoom is probably it.  

What I Don’t Like About LegalZoom

Although my experience with LegalZoom was painless, there are several negative things that stood out to me. So, I want to go through each one and talk about why it’s a problem and what it means for you.

1. There Aren’t any Free Plans (Prices Start at $79 + State Fees)

Starting a new business is expensive. From hosting fees to insurance to inventory and everything in between, you don’t want to spend money on things you can otherwise get done for free. Unless there’s an added benefit that comes along with it.

In this case, there doesn’t seem to be any additional value with LegalZoom’s services compared to other business formation companies. In fact, many of them offer basic services for free (plus state fees).

So, using another service could save you $79 while receiving the same services and support. Furthermore, LegalZoom’s premium packages are more expensive than most of the others I’ve seen out there.

At the end of the day, LegalZoom is a pricey option that doesn’t come with any extra value.

2. LegalZoom Can Hold Your Order for up to 30 Business Days

Unlike other business formation services, LegalZoom holds your order before processing it. Many other providers process orders as quickly as they can. Plus, LegalZoom is a bit sneaky about these processing times, as well.

They do tell you their processing times when you choose a package but it’s unclear what these time frames actually mean. Other than that, you have to dig pretty hard to find information about how long it takes from start to finish.

30 business days is a LONG time to wait, especially when most companies take less than a week to process your order and get things moving. All in all, you have to pay an extra fee or upgrade to a premium package to get the same turnaround time other companies offer for free.

3. The LegalZoom Pricing Plans Aren’t Clear at the Beginning of the Process

When you start their LLC formation process, they don’t tell you anything about their packages or their pricing. There is a line that says “packages start at $79 (plus state filing fees)” but they don’t mention add-ons or premium packages.

In fact, they don’t mention it until the end of the registration process. And, I couldn’t find their full LLC pricing page at all. I eventually Googled it and found it, but it’s concerning why it’s so hard to find in the first place.

If you end up wanting the extra services included in their premium packages, the cost may come as a complete shock. This is extremely frustrating because you have no idea how much you’re going to pay before going through the process.

Transparency goes a long way, especially in the legal industry. Nearly every other business formation service I’ve used is very clear about their pricing and packages upfront.

So, this is definitely a huge negative for LegalZoom.

4. Other Providers Offer Registered Agent Services Free for 1 Year

Early on in the registration process, LegalZoom offers its registered agent services. While many LLC formation companies offer this for free for the first year, LegalZoom charges $249 a year.

As I mentioned earlier, every LLC is required to have a registered agent for each state it does business in. To qualify as a registered agent, a person or entity has to:

  • Be available during normal business hours to receive legal correspondence
  • Accept these communications and deliver them to you
  • Have a permanent and physical address – PO boxes don’t count
  • And give proof of document receipt for legal communications

So, it’s not as simple as putting down your home address, especially if you aren’t there during normal operating hours. But, with other business formation providers, you get this service free of charge for the first year.

For whatever reason, LegalZoom doesn’t offer this to its customers, which could be an expensive drawback for new business owners.

Related: What is a Registered Agent and When Do I Need One?

5. They Charge for an EIN Number

Regardless of the package you choose, LegalZoom offers a federal tax ID number as a paid upgrade. And, you can’t get it without also purchasing an operating agreement. While charging for an EIN number is a common practice, it’s one I don’t agree with.

Applying for an EIN number is free through the IRS. You can do it online, it’s easy, and it takes less than ten minutes. After you’re approved, you can save everything you need to your computer or print for safekeeping.

Related: How to Apply for an EIN

LegalZoom Plans, Pricing, and Add-ons

LegalZoom uses a tiered pricing structure with the cheapest plan starting at $79. Their Standard Plan is $329 plus state fees and their Express Gold plan is $349 plus state fees.

Additionally, you’ll have the option to choose one (or none) of the following add-on regardless of the package you choose:

  • Operating agreement ($99)
  • Operating agreement + EIN ($149)
  • Operating agreement, EIN, and licenses ($199)

Although LegalZoom says these are essential documents, you don’t need to buy them through LegalZoom. You can get an EIN number for free through the IRS. And operating agreements rely heavily on the type of business you have and how it operates.

Blanket operating templates don’t work for every business and could end up being a waste of money. Furthermore, you can find out which business licenses you need on your own.

With that being said, these add-ons may make sense if you want to save time or aren’t sure how to do it on your own. So, always do your research and make the best choice for your business and current situation.

Tier 3 — The Economy Package ($79 + State Fees)

This is LegalZoom’s basic package and includes everything you need to file and register an LLC in your state. In my opinion, this package makes the most sense unless you’re not in a hurry and are interested in other extras (that aren’t required to form your LLC).

This package includes:

  • Name check — they check the Secretary of State to ensure the company name is available
  • Document filing — The filing of LLC state documents, the Articles of Organization for LLCs (also known as a Certificate of Organization) and corporation documents, Articles of Incorporation are fully taken care of by LegalZoom 
  • LLC next steps guide — step-by-step instructions on how to move forward
  • Peace of mind review — they personally review your order for mistakes
  • Lifetime customer support — they’re is available 7 days a week to answer questions
  • Financial account authorization letter — indicates who can open a bank account

Tier 2 — The Standard Package ($329 + State Fees)

This is LegalZoom’s cheaper premium package. This lowers your processing time to 15 business days (as opposed to 30) and includes a few extra things that may be nice have. With this package, you get everything in the Economy Package plus:

  • Deluxe organizer — an embossed binder to help you stay organized
  • Official certificates and seal — 20 personalized certificates and a company seal
  • LegalZoom VIP processing — reduces processing time to 15 business days

To be honest, I’m not quite sure why this package is so expensive. The extras you get don’t provide much additional value. Plus you can create your own organization system at home with office supplies you already have.

And if you’re not in a hurry, 15 extra business days don’t make much of a difference.

Tier 1 — The Express Gold Package ($349 + State Fees)

This is LegalZoom’s most expensive package which includes everything in the Standard Package plus rush processing (7-10 business days) and express shipping. Unless you’re in a hurry to get everything filed and complete, this package provides no additional value.

Additional LegalZoom Services

Aside from LLC formation services, LegalZoom offers numerous other legal services including wills and trusts, contracts and agreements, intellectual property, and general legal advice. In all, they offer 70+ different services including:

  • Incorporating a nonprofit (starting at $99 + state fees)
  • S and C-corporation formation (starting at $149 + state fees)
  • Corporate amendments (starting at $149 + state fees)
  • Dissolution services (starting at $129 + state fees)
  • Annual reports (starting at $55 + state fees)
  • Registered agent services ($299/year)
  • Trademark registration (starting at $199 + state fees)
  • Utility patents (starting at $699 + state fees)
  • Design patents (starting at $899 + state fees)
  • Many more

Reviewing LegalZoom’s Reputation

LegalZoom has a mixed reputation despite its 19 years of experience. But to date, over four million customers have trusted them to get the job done. Furthermore, they have an A+ rating from The Better Business Bureau.

Aside from their A+ review, they have 287 complaints filed against them with the BBB. Several of these complaints state that LegalZoom charged customers to renew services they weren’t aware of and had issues trying to cancel them.

Other complaints mention hidden fees and other subscriptions they did not sign up for. So, always be sure to read the fine print and understand what you’re signing up for before entering your payment information.

For a complete list of all their complaints, click here.

Real LegalZoom Reviews from Users on BBB, Consumer Affairs, and Trust Pilot

Better Business Bureau (BBB)

Overall, LegalZoom has customer feedback from 248 reviews with an average of fewer than 1.5 stars on The Better Business Bureau. Most of the reviews mention errors on LegalZoom’s part and being charged for things they didn’t sign up for.

To see the full list of reviews, click here.

Take a look at what some LegalZoom reviews from customers have to say about their experience with various services they provide:

“Legalzoom sneaks in the ridiculous $14.99/mo service. I had a lot of trouble trying to cancel. I ended up disputing the charge with my credit card company. This is the second time I’ve used them but because of this hassle I probably won’t use them again.” – Ryan N (March 14, 2020)

“Fraudulent. Will continue to make payments on an unauthorized card that doesn’t match the name of the client. Managers don’t return calls. Very difficult to work with, a lot of “fine print” that is not explained when speaking with a live rep. Do NOT USE!” – Kellie K (February 17, 2020)

Although most of their reviews are less than great, there are a few that mention LegalZoom’s expertise, speed, and helpfulness. But, they’re few and far between.

Consumer Affairs

Despite the sea of negative LegalZoom reviews on The Better Business Bureau, they have 521 customer reviews with an average of 3.25 stars on Consumer Affairs. While this is an improvement, they still seem to have their fair share of problems when it comes to customer satisfaction.

Especially in comparison to other business entity formation service providers. To see the complete list of Consumer Affairs reviews, click here.

Take a look at what some of their customers have to say:

“I had LegalZoom create the LLC. The process was smooth. I spoke with somebody to cancel a registered agent aspect of it. Somehow, they chose it for me on accident, and so I got a refund for that. But it went smoothly. Working with LegalZoom was easy. I got it done quickly and I barely had to do anything.” – Ryan (March 3, 2020)

“LegalZoom is a fraudulent company. They have been charging me $395 per year telling me that I have to re-register my LLC every year. I spoke with someone from our state officials who said this is not true and I don’t have to re-register annually nor do I have to pay annually to maintain my LLC. They sent me multiple emails each year even going as far as telling me that my LLC would be canceled if I didn’t renew. They also wouldn’t let me delete my credit card from my account. I asked for months to close my account and they wouldn’t permit it. I finally had to close my credit card account so that they wouldn’t charge it anymore. LegalZoom – you should be ashamed!!!!” – Diane (April 24, 2020)

Trust Pilot

Out of the 70 LegalZoom reviews on Trust Pilot, 88% rate them below average. While there are a handful of positive reviews, many others mention being charged for subscriptions they didn’t sign up for and terrible customer service.

Click here to see the complete list of Trust Pilot LegalZoom reviews. See what these customers have to say about their experiences with LegalZoom:

“They billed me 4 times for a subscription that I did not request for. Scam. They go to your credit card on file and start billing. This is so unfair and refused to give me a refund for the money that I worked hard for and services that I never used. I will never use them again and will tell everyone to beware.” – Cynthia Eguzouwa (April 29, 2020)

“If you use this service PLEASE read the fine print. You may be charged for years unknowingly and then the fee DOUBLES without notice. These lawyers are crafty- read the fine print.” – Rahima Abdullah (March 29, 2020)

TLDR; LegalZoom User Reviews Conclusion

Most of the reviews I found online mentioned fraudulent charges, unknown subscriptions, and awful customer service. While there are a handful of positive reviews and they have an A+ rating on BBB, it’s hard to ignore the sea of less-than-great reviews out there.

You would think that after years of receiving bad reviews, LegalZoom would do something different to please their customers. But, that doesn’t seem to be the case.

Always read the fine print and understand 100% what you’re signing up for before entering your credit card information. From the reviews I read, it seems difficult to cancel these subscriptions and their customer service team appears unwilling to help resolve these issues.

So, your best bet is to make sure it doesn’t happen in the first place.

The Final Word on LegalZoom’s LLC Services (And Who to Use Instead)

If you’re interested in forming an LLC, there are countless service providers out there. Despite LegalZoom’s impressive background, it’s hard to look past the hundreds (if not thousands) of unhappy customers speaking out about their experiences.

Furthermore, LegalZoom’s services are more expensive than other providers and don’t seem to offer any additional value for the price. Their premium pricing packages are a huge jump in cost without providing anything worthwhile.

While LegalZoom is a legitimate business offering legal services and advice, I recommend using IncFile or Inc Authority  to form your LLC. They both offer a free package (and free registered agent services for a year) with the option to upgrade and choose add-ons at your discretion.

And you don’t have to worry about them charging your credit card for years to come. But if you decide to use LegalZoom, be sure you understand what you’re signing up for and read the fine print before giving them any of your information.

Click to get started with LegalZoom.

  • Free plan offers a lot of value (state filing fees still apply)
  • Lifetime customer support
  • Free registered agent in the first year
  • Free 1-hour tax consultation
best value
  • Free plan offers a lot of value (state filing fees still apply)
  • Lifetime customer support
  • Free registered agent in the first year
  • Proactive customer service called to discuss next steps
best value
  • No free plan, but pricing is fair and upfront
  • Lifetime customer support
  • Free registered agent in the first year
  • Free business name availability check
easiest