Incorporation Service Scams and Lies

I will be the first to admit that the incorporation industry does not always have the best business practices or clarity. We’re based in Nevada and frankly, some of the other firms that operate here should be shut down or have their owners put in jail (and some have!).

Here’s a list of common scams, lies, deceptions and falsehoods to avoid if you’re looking to incorporate or form an LLC using a service in our industry:

  • Hidden State Fees: massively inflated state fees. So a company claims to be only charging “$49” to file your company and then hides another $20-50 in the “State Fees” – compare the TOTAL price! The real state fee can be easily verified on each state’s website. 
  • We’ll do it for FREE! Come on you’re smarter than that. This scam typically involves tying you into a “Legal Service Plan” or other type of monthly billed service whereby you will exceed the cost of incorporation by many times. Don’t fall for it.
  • Lower Service Fees by adding higher shipping fees: Add in $39 in shipping fees and suddenly you’re paying much more for that $49 service. Some companies charge that to the state, back from the state and then finally to you!
  • Exploding Fees: you’re enticed with 6 months or a year of  “Free” or “Discounted” registered agent fees then POW! Those fees explode in the next year or so. We’ve seen “Free” go to as high as $289/year!
  • “Professional” Registered Agent Service: many services are simply using a mailbox at the UPS Store or a friend’s house! Beside’s not complying with law, if your company is sued or misses an important notice – whoops! You’ve now lost a lawsuit by default judgment and the company is late or in administratively dissolved status because the person wasn’t home that day or the UPS Store doesn’t know how to handle official legal mail.
  • Incorporate in Delaware, Nevada and Wyoming to save on taxes! Why this may be true for some companies, for the vast majority it is not and actually might involve higher fees for smaller businesses. Read more about this in our article “Which State to Incorporate?“. Again, there are some great reasons to choose those states, but some act like you need to choose those states and in many cases you do not.
  • Free Bylaws or Operating Agreement! This sounds great, until you find out they are blank. Do you know how long it takes to customize one of those? The chances of somebody involved in a busy startup actually doing that is close to zero. The forms should be personalized from the start.
  • Free Stuff: Wow, you’re giving out free stuff that’s already free (software, forms, etc.) – amazing!
  • Encouraging Multiple Entity Strategies: They’ll tell you you need to have a C-Corporation owned by 2 LLC’s, the LLC’s are then owned by each other and then you start another LLC to lease services and supplies back to your Corporation. While this may be a good asset protection strategy for a high-risk or high-growth company  – it may not be appropriate for a small startup that doesn’t have any revenue yet – perhaps start with one simple LLC and go from there. Each of those entities will cost money to maintain, pay taxes, etc. and can get expensive quickly.
  • Outrageously Priced Corporate Kits and Seals: $100 for a minute book? $40 extra for the seal? $40 for 10 Stock/Member certificates? This is madness.
  • Upsell, Upsell, Upsell: So you’ve ordered your company and suddenly the phone rings off the hook, your email inbox and mailbox are exploding.

Here’s what, Inc. does to bring some sanity back to this industry (and hope others follow our lead!): 

  • We don’t hide state fees. Verify our fees against the state. 
  • Regular Shipping is free, FedEx is reasonable and priced at about our cost.
  • Pricing is upfront for any recurring service, guaranteed not to change.
  • We only use real offices for Registered Agent Services staffed by real people that know how to handle this important mail. This includes scanning, uploading, emailing, phone notification and FedEx of important documents.
  • We tell the truth about Delaware, Nevada and Wyoming as shown in the article linked above.
  • We personalize your Bylaws and Operating Agreements and give you a digital copy to easily edit.
  • You know how to find the Free Stuff – this isn’t rocket science, do a google search for “free accounting software” for example.
  • We’re “Startups Made Simple”, not “Multiple Entity Strategies for your One Person Business that will cost 10 times an LLC”. You can order multiple entities from us of course, but we don’t encourage or advise our clients on this one way or the other. Simple is usually best when starting out.
  • Our Corporate Kits are $69 or $79. This includes the Minute Book, the Seal, 20 Stock Certificates and shipping.
  • We don’t sell your info. If you opt-in to a service (like our email newsletter) you can easily unsubscribe. We protect our clients and our Privacy Policy reflects that.

I hope I’ve given you a good overview of the industry and what to expect. Let us know any other scams or lies in the comments and we’ll update this post.

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