I'm forming a single-member LLC for a tiny side business and trying to keep costs down. There are $50 basic templates online, but I'm worried they'll miss something important. Do I really need a lawyer or a paid service, or is a basic template enough if I'm the only owner and have no employees?
LLC Formation
Is a basic template enough for a single-member LLC?
Depends on your state and what you mean by 'template.' A bare articles of organization filing is usually fine if you just need an entity.But you still need an operating agreement, even for a single member, and that's where cheap templates often fall short.
I used a $39 template for my LLC three years ago. No issues so far. But I later found out it didn't include an EIN or a proper operating agreement. Had to scramble when I opened a bank account ngl.
What kind of business? If there's any liability exposure, like consulting or physical work, a template won't protect you if it's filled out wrong. The filing itself is simple, but the ownership and dissolution clauses are where a lawyer earns their money.
Templates are fine for the formation docs. The operating agreement is the one I'd look at closely. Even a single member should have one. A lot of free ones online are generic and don't mention contribution, distributions, or what happens if you die. My state's secretary of state site actually has a free sample that's better than the paid ones.
That's a good point about the secretary of state. I'd also say a basic template is probably enough unless you're planning to bring in investors or convert to a multi-member later. If you are, better to pay up now.
I've seen too many cheap templates leave out the required registered agent consent form or use the wrong address formatting, and the filing gets rejected. That's not a legal issue, just a waste of your time. If you're comfortable reading the state statutes for your entity type, a template is fine. If not, a local lawyer might charge $500 flat to set it up right and you'll have someone to call if something weird happens.
I didn't need a lawyer for mine. The bank only cared that the operating agreement existed and matched the filing. But mine is a very low-risk business.
One more thing: if you ever want a business loan or credit card, some lenders get picky about how clear the ownership section is. Worth keeping in mind.
My state doesn't require an operating agreement for single-member LLCs, and I'm not planning on employees or investors. The secretary of state sample looks decent. I'm leaning toward using that and setting a calendar reminder to review it yearly.