Entity formation is the most boring work done at the Offices, but it is important that entities be formed correctly and most of the individuals forming entities on their own are doing it wrong and doing it wrong in a manner that could be exposing them to liability.
One of the primary purposes in new entity formation is often to ensure limited liability for equity owners. A professor of corporate law once said that in order to cement the limited liability from a legal perspective, one must “sprinkle the corporate pixie dust” on the new corporation. The “pixie dust” is the corporate formalities—not just filing with the Secretary of State, but adopting By Laws and holding an initial organizational meeting with minutes entered into the corporate books and records.
Most stand-alone entity formation shops do a perfectly adequate job of providing clients with the paperwork and filing with the Secretary of State. What they often don’t do is follow through with their clients and ensure that the corporate formalities have been observed in reality—often the Office sees clients with an unopened envelope containing board resolutions and by laws mailed from an entity formation company. We follow through with our clients because they are ongoing clients who we work with on ongoing matters, not just LLC formation a la carte.
Lastly, there are complexities that can arise in entity formation. Corporate names may contain “trigger words” requiring additional governmental approvals. Certificates of good standing, transfers of entities between jurisdictions, incumbency certificates. All items we can handle more quickly if we know the entity was properly formed with the appropriate corporate formalities, meetings, minutes, etc.