LegalZoom vs. Professional LLC Formation: What You're Really Paying For

Meta Description: Discover why LegalZoom's $79 LLC filing could cost you thousands. Learn what professional LLC formation includes that online services miss.

The $79 LLC That Costs $10,000 in Mistakes

You've seen the ads. "Form your LLC for just $79!" LegalZoom, IncFile, and a dozen other online services promise cheap, fast LLC formation. And they deliver—exactly what you pay for: a basic filing with the state.

The problem? That's like buying a car without an engine and wondering why it won't start.

After 40+ years forming LLCs and cleaning up DIY disasters, I've seen this pattern hundreds of times. Real estate investors and business owners save $1,000 upfront, then lose $10,000+ when their asset protection fails in court.

Here's what you're really getting—and missing—with each option.

What LegalZoom Actually Gives You

Let's be clear: LegalZoom and similar services aren't scams. They do exactly what they promise:

- File your Certificate of Formation with the Texas Secretary of State ($300 state fee + their service fee) - Get you a Tax ID number (EIN) from the IRS - Provide a generic operating agreement (usually not Texas-specific) - Maybe offer registered agent service (for an extra fee)

That's it. You get the legal equivalent of an empty shell—a company that exists on paper but has no real asset protection.

The Hidden Costs Add Up Fast

LegalZoom's advertised $79 price? That's misleading. Here's what you actually pay:

- Base filing: $79 - State fee: $300 - Expedited filing: $100+ - Operating agreement: $100 - Registered agent (annual): $299 - EIN: $70 - Compliance monitoring: $329/year

Real first-year cost: $1,200-1,500

And you still don't have real asset protection.

What Professional LLC Formation Includes

When you work with a Texas attorney who specializes in asset protection (not just any attorney—most don't understand Series LLCs), here's what you get:

1. Strategic Structure Design

We don't just file paperwork. We analyze:

- Your specific assets: How many properties? What values? Growth plans? - Liability risks: Property types, tenant situations, equity levels - Tax optimization: Single-member vs. multi-member, S-corp elections - Estate planning integration: How LLCs fit with trusts, succession plans - Series LLC vs. multiple entities: Often saves $5,000+ in annual costs

LegalZoom provides: Generic single-member LLC template Professional provides: Custom structure for your exact situation

2. Texas-Specific Operating Agreement

This is where DIY LLCs fail in court. A proper Texas operating agreement includes:

- Charging order protection language (critical for asset protection) - Multi-member structure even for single owners (to prevent "alter ego" piercing) - Capital contribution documentation (proves separation from personal assets) - Distribution restrictions (protects from creditor claims) - Manager vs. member-managed structure (affects liability and control) - Dissolution and buyout provisions (prevents partner disputes) - Texas-specific statutory language (generic templates often cite other states' laws)

I've reviewed hundreds of LegalZoom operating agreements. Most have: - ❌ No charging order protection - ❌ Single-member structure (easily pierced) - ❌ Generic language from Delaware or Nevada law - ❌ No asset protection provisions - ❌ No distribution restrictions

The result? When a lawsuit comes, the corporate veil gets pierced and creditors access your personal assets.

3. Complete Banking and Tax Setup

LegalZoom gets you an EIN. We make your LLC actually functional:

- Bank account setup (with proper documentation banks actually accept) - Initial capital contributions (documented to prove separation) - Chart of accounts structure (for clean bookkeeping from day one) - Tax classification election (Form 2553 if S-corp makes sense) - Quarterly tax payment setup (avoid penalties) - Record-keeping systems (maintain corporate formalities)

4. Lawsuit-Proof Compliance Training

This is worth more than the formation itself. We train you on:

- What NOT to do: The mistakes that get LLCs pierced - Proper fund separation: Never co-mingle personal and business funds - Required documentation: Meeting minutes, resolutions, member decisions - Insurance requirements: What coverage you actually need - Title and deed transfer: How to properly move properties into the LLC - Annual compliance: What Texas requires each year

Case study: Client came to me after LegalZoom LLC. He was using the LLC bank account for personal expenses, had no operating agreement signed, and co-owned with his wife as community property. When he got sued, the LLC provided zero protection. We had to restructure everything while fighting the lawsuit. Cost him $15,000 in legal fees he could have avoided.

The Series LLC Advantage

This is where professional formation really separates from DIY services. LegalZoom can't even offer this option properly because it requires legal analysis.

Standard approach (LegalZoom method): - 5 rental properties = 5 separate LLCs - 5 state filings ($300 each = $1,500) - 5 tax returns ($500+ each = $2,500+/year) - 5 registered agents ($300 each = $1,500/year) - Total ongoing cost: $4,000+/year

Series LLC approach (professional structuring): - 1 master LLC with 5 series - 1 state filing ($300) - 1 tax return ($500/year) - 1 registered agent ($300/year) - Total ongoing cost: $800/year

Savings: $3,200/year, every year. Over 10 years? $32,000 saved.

But here's what LegalZoom won't tell you: A poorly structured Series LLC is worse than no LLC at all. The series must be properly established, documented, and maintained or they collapse into a single entity—destroying your asset protection entirely.

When LegalZoom Makes Sense (Rarely)

I'll be honest: there are situations where LegalZoom is appropriate:

- Very low-risk businesses: Online consulting, digital products - Minimal assets: Under $50,000 in total business assets - No real liability exposure: No customers, no employees, no physical products - Single-state operation: No plans to expand - Already familiar with LLC law: You're willing to research Texas statutes yourself

For real estate investors? LegalZoom is almost never appropriate. The liability is too high, the asset protection requirements too specific, and the cost of failure too devastating.

Real Cost Comparison: 5-Year Analysis

Let's look at real numbers for a real estate investor with 5 rental properties:

LegalZoom Route (5 Separate LLCs)

Professional Series LLC

Plus, the professional formation actually protects you when you get sued.

What Happens When LegalZoom LLCs Face Court

Here are real examples from cases I've consulted on:

Case 1: Slip-and-Fall at Rental Property - Client used LegalZoom single-member LLC - Operating agreement never signed - Co-mingled personal and business funds - Judge pierced the corporate veil in 10 minutes - Result: Personal assets attached, $150,000 judgment

Case 2: Partnership Dispute - LegalZoom LLC with two partners - Generic operating agreement had no buyout provisions - No documented capital contributions - Business deadlocked, had to dissolve - Result: Lost $80,000 in legal fees, 2 years of litigation

Case 3: Creditor Claim - LegalZoom LLC, no charging order protection - Creditor obtained judgment against member - LLC had no distribution restrictions - Result: Creditor foreclosed on LLC membership, took entire business

Every single one of these disasters was preventable with proper formation.

The "Good Enough" Trap

The most dangerous phrase in asset protection: "It's probably fine."

LegalZoom's LLC might hold up in court. It might provide some protection. It's probably better than nothing.

But when someone sues you for $500,000, do you want "probably fine"? Or do you want a structure that's been tested in Texas courts, drafted specifically for your assets, and backed by an attorney who knows the case law?

What to Do If You Already Used LegalZoom

Don't panic. Most LegalZoom LLCs can be fixed. Here's the process:

1. Review your operating agreement: Does it have charging order protection? Multi-member structure? Texas-specific language?

2. Check your compliance: Are you maintaining proper separation? Documentation? Corporate formalities?

3. Assess your current risk: How much liability exposure? What assets need protection?

4. Get a professional review: Most attorneys (including me) offer a free initial consultation to identify gaps

5. Restructure if needed: Often we can amend the existing LLC rather than starting over

Cost to fix a LegalZoom LLC: Usually $1,500-2,500 Cost of getting sued with bad protection: $50,000-500,000+

Bottom Line: What Are You Really Protecting?

Here's the question that matters: What's the value of your assets?

- Under $50,000: LegalZoom might be adequate - $50,000-$250,000: Professional formation recommended - $250,000+: Professional formation essential - Multiple properties or businesses: Series LLC almost certainly saves money

The math is simple: Professional LLC formation costs $2,000-4,000. A lawsuit that pierces a bad LLC costs $50,000-500,000+.

You wouldn't buy a $300,000 house with a $79 home inspection. Why protect it with a $79 LLC?

Get It Right the First Time

I've spent 40+ years forming LLCs and Series LLCs in Texas. I've set up over 120 Series LLCs for real estate investors and business owners. And I've cleaned up hundreds of DIY disasters.

The pattern is always the same: Save $1,000 today, lose $10,000 tomorrow.

If you're serious about protecting your assets, do it right the first time.

Free consultation: Let's review your situation and determine what structure makes sense for you. No obligation, no pressure—just honest analysis of your options.

📞 Call: 512-464-1110 📧 Email: david@pcfo.net 📅 Schedule: Book a free consultation

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About David Disraeli: 40+ years of experience in financial planning and asset protection law. Over 120 Series LLCs formed. A+ BBB rating. Specializing in Texas real estate investor protection and estate planning integration.