Should I use an attorney for LLC/S Corp formation

[Sean Salandy]

I've recently met with both an attorney and CPA (separately) about entity formation. They both offer formation services at vastly different costs. The attorney will charge nearly 8 times as much to form a Series LLC than would the CPA. Although I know I can do much of this myself, I would rather take advantage of either the attorney or CPA's services. The attorney will spend time creating a custom Operating Agreement (the company will only have one member) while the CPA will create one using a template. Should I spend the relatively larger amount of money (close to $8000) on the attorney's services or should I use the CPA? How much of a big deal is it to have a custom Operating Agreement? (It was suggested by the CPA to form a Series for my buy and holds and an S Corp for my flips. ) Thanks in advance.

[Michael Hayworth]

Brain tumor? Setting up a single-member LLC is not exactly brain surgery. If you had a sprained ankle, some people would choose to self-treat, some would go see the family doctor, but I sure wouldn't pay $8000 to an orthopedic surgeon.

There are very good times to use an attorney, and when you use one, you want to get a good one, but this is well-trod ground and the state-specific from the major LLC setup sites will work perfectly well for most people. If you had a partner and needed to carefully define roles, a well-crafted operating agreement might be important, but that's not Sean's situation.

In fact @Sean S, you may not even need an operating agreement. Some states don't require them for a single-member LLC. I operated my property holdings company for years without one until an asset manager for Wells Fargo.- the worst of the major banks to work with on REOS - refused to sign off on a sale of a property I particularly wanted without seeing my operating agreement. I pointd out to him that Texas doesn't require one, and I didn't need one. But this guy was new and refused to budge without being able to check off his "operating agreement" box. I created a one-line operating agreement that says "Michael makes all the decisions," filed it with the state, sent it to him and said "Here's your operating agreement." And when you think of it, it's a perfectly accurate description of how a single-member LLC makes decisions.

I have 3 LLCs for 3 very different businesses, ten years in business, negotiated literally thousands of contracts, have had to be a both a plaintiff and a defendant in court, and the verbiage of my operating agreement has never been an issue. One of my businesses sells services to other small-business owners. Out of my 200 business-owner clients, probably the majority are single-member LLCs. I've heard lots of them say, "Damn, I shouldn't have taken my eye off my bookkeper." Never heard anyone say, "Man, I wish I had crafted my operating agreement more carefully."