Are you forming a new LLC, but you don’t know where to turn for assistance?
In this Direct Incorporation vs LegalZoom comparison, you’ll find detailed info on their common characteristics, as well as what sets them apart. By the time you’re done, you’ll have a better picture of which one you should use.
With Direct Incorporation and LegalZoom, we’re talking about two of the most popular options in the entire LLC formation industry, and they’re both easy to recommend. However, LegalZoom has a few minor advantages that tip the scales in their direction.
First off, LegalZoom has more experience than basically any other company offering LLC service, as they’ve served more than 2 million business customers. Furthermore, their $79 baseline price point for LLC formation service is considerably lower than Direct Incorporation’s $147 price tag.
If you would like some more information before making your choice, read on to discover all the details of these two respected service providers or check out our list of the top LegalZoom LLC alternatives.
Is There a Better Alternative?
While Direct Incorporation and LegalZoom both have plenty of positives, neither of them is among our absolute favorite companies in this industry.
ZenBusiness is the most well-rounded company in this industry, with great prices and excellent features. IncFile’s best attribute is the fact that they’ll actually form your LLC for free — all you need to pay is your state fee. As for Northwest, they offer the best customer support in the industry, with a high level of personal support compared to most competitors.
6 Things They Have In Common
1) Affordable: Direct Incorporation and LegalZoom can both save you hundreds of dollars over hiring a traditional law firm. Seeing as many LLCs are relatively simple business structures, you may not even need the expertise of an attorney to draft and file your formation documents.
2) Customer Support: Even though it’s much less expensive than a lawyer, a service like Direct Incorporation or LegalZoom can still make your life quite a bit easier than the DIY route. Their customer support reps can help with any questions you might have, saving you countless hours trying to find your own answers.
3) Experience: If experience is a priority for you, both of these companies have plenty of it. LegalZoom and Direct Incorporation have each handled thousands of LLC formations, and they have the expertise necessary to do the job right.
4) Additional Services: If you need other business services, including anything from foreign qualifications to federal tax ID (EIN) obtainment and more, they can help. Both of these companies offer many other business solutions making them one-stop shops for your company.
5) Efficiency: Are you in a hurry to get your LLC formed? That’s no problem for Direct Incorporation and LegalZoom, as they both have ways to speed up your formation. There’s an extra cost associated with expediting your order, of course, but it can be worth it if you’re short on time.
6) Educational: LegalZoom and Direct Incorporation have extensive learning centers on their websites. Even if you don’t end up purchasing services from them, you can find lots of information on everything from formations to ongoing compliance issues.
Side by Side Comparisons
You don’t need us to tell you that paying $79 is always preferable to paying $147. LegalZoom clearly wins this category in a landslide. However, while money is always important, it’s also not everything. With this in mind, let’s continue making our way through this comparison to see if LegalZoom continues to pull ahead or if Direct Incorporation makes up some ground.
With any LLC formation package from Direct Incorporation, you’ll receive a federal tax ID number (EIN) which allows you to file business taxes, hire employees, etc. They also bundle in six months of registered agent service and an S corporation tax election (which most LLCs don’t need). While LegalZoom doesn’t include any of those features in their packages, they do provide a banking resolution to help you open a business bank account.
The two companies have some significant differences in the higher-priced packages. Direct Incorporation’s top-tier package focuses on things like web design and trademark protections, whereas LegalZoom’s top package is centered around expedited processing.
Well, in our opinion, Direct Incorporation sure caught back up in a hurry. The six months of registered agent service is the real prize here, as every LLC needs to designate a registered agent. All told, this category isn’t particularly close, and it pulls Direct Incorporation back onto even footing with LegalZoom.
LegalZoom is one of the industry giants, with more than 2 million business clients, and they’ve been providing online business services since 2001. Direct Incorporation opened in 2003, and as a mid-sized company, they’ve served more than 80,000 customers since then.
Direct Incorporation has a strong service team, with knowledgeable professionals answering the phone and providing ongoing support. Also, many customers mention in their reviews (which we’ll get to in a moment) that they appreciate the quality support they receive. Direct Incorporation reps are available from 10 am to 5 pm ET Monday through Friday.
With LegalZoom, their support isn’t quite as consistent, likely because they’re such a huge operation. The more reps you need answering your phones, the less likely it is that every one of those support agents will be top-notch. One thing that we do consistently enjoy about their support is the extended hours. Their service reps are available from 10 am to 8 pm ET Monday through Friday, and 10 am to 7 pm ET on weekends.
Direct Incorporation’s turnarounds are based on your state of formation, and you can view a list of estimates for every state on their website. LegalZoom does things a bit differently, as they base their estimates on what level of LLC service you purchase. Their top-tier Express Gold package is the fastest (7-10 business days), followed by Standard (15 days), and Economy (30 days).
We strongly prefer Direct Incorporation’s method because we don’t appreciate LegalZoom intentionally slowing down formations based on how much money you spent on their platform.
Registered Agent Service
Every LLC in America is required to designate a registered agent, which is a person or business entity that receives important document deliveries (like service of process) from your state government, informs you of the receipt, then forwards the documents to you. This is so crucial because the state needs to have a reliable means of contacting your business at any time.
LegalZoom provides registered agent service for $299 per year (or $249 for your first year if you add it to your LLC formation service order), which is among the highest rates in this industry. As for Direct Incorporation, you already know that they include six months of registered agent service with any LLC formation package. After that, their rate is a reasonable $159 per year.
Direct Incorporation only has 29 reviews available online, split roughly equally between positive and negative feedback. Overall, it seems like some of their customers are quite pleased with their solid customer support, as well as their efficiency. However, it’s interesting to note that their negative reviews are usually based around nonresponsive and/or unhelpful customer support, so it seems that their support team might be a bit hit or miss.
LegalZoom’s feedback is also rather mixed, but the positive feedback rather easily outweighs negative feedback among their 4,700+ reviews. They do have plenty of customers who like what they have to offer, but others cite problems with inconsistent customer support and billing confusion.
Ease of Use
We give a slight advantage in this area to LegalZoom, as their website is a bit more modern and streamlined than Direct Incorporation’s site. Other than that, both of these providers offer convenient services that are effective and efficient.
With either LegalZoom or Direct Incorporation, you’ll have access to a wide variety of additional services to help you start, maintain, and grow your new LLC. They offer many of the same services as well, including registered agent service, annual reports, doing business as (DBA) names, foreign qualification, amendments, dissolutions, attorney consultations, and more.
However, there are also some services that you can only purchase from one or the other. For instance, only Direct Incorporation offers logo design and web design features, while only LegalZoom offers personal services like last will and testament, living trusts, and divorce papers.
Best Service for LLC Formation?
Direct Incorporation and LegalZoom are among the top LLC formation services online, and they’re both wholly capable of helping you form your LLC. Still, some of you likely remain undecided, so to help you choose we’ll close by reviewing some situations where you may prefer one over the other.
➥ Choose Direct Incorporation if You Are:
While Direct Incorporation’s prices are higher than LegalZoom’s, they include more features, and they also offer more advanced branding services. If these items appeal to you, give them a look.
➦ Choose LegalZoom if You Are:
If you appreciate their brand power and large volume of customers, LegalZoom should satisfy your needs. Also, their baseline price point for LLC formation is considerably lower than Direct Incorporation’s, so if you’re looking to save money, LegalZoom is a good choice as well.
While both of the LLC services in this comparison offer good overall value and have formed thousands of businesses, we think LegalZoom is the better option.
However, in the larger picture, neither of these LLC services are our top pick. We highly recommend checking out our list of the top LLC services to see which is the best option available.
Frequently Asked Questions
Got questions? We’ve got answers.
If I Decide to Use LegalZoom, Which Package Should I Choose?
Our preferred LegalZoom LLC formation package is their $79 Economy plan. This package includes the formation of your LLC, along with a bank authorization letter to help you open a business checking or savings account.
It’s not a great bargain, but both of their higher-priced packages have some rather unnecessary features that make them even less appealing in our opinion.
Does LegalZoom Handle Extra State Requirements Like New York Publication?
Their website doesn’t make the answer to this question particularly clear, so we called LegalZoom’s customer support team for clarification.
They told us that they do not provide assistance with state-specific compliance requirements like publication, because “that step technically occurs after the business entity itself is formed.” It’s a bit of a letdown, especially considering the fact that many of their competitors do provide comprehensive assistance with every possible step of your formation process. For what it’s worth, Direct Incorporation does not offer publication services either.
If you’re looking for a company to handle this step on your behalf, we recommend ZenBusiness or BizFilings.
Which Service Has Fewer Upsells?
This is a major weakness for LegalZoom, as they attempt more upsells than basically anyone else in this industry. By the time you work your way through their order form to the package selection screen, LegalZoom has already attempted $1,080 in upsells!
It’s even more ridiculous when you consider that you haven’t even chosen your LLC package yet, so you don’t yet know what you want to add to it when they’re making all those upsell attempts. Especially compared to a company like Direct Incorporation that keeps the upsells to a minimum, it’s not a great look for LegalZoom.
Do These Services Share My Information With Third Parties?
There are so many companies in this industry that push “special offers” or “free extras” that are actually just info-sharing opportunities for their third-party partners, but both Direct Incorporation and LegalZoom avoid this for the most part.
Does Either of These Services Have a Refund Policy?
Direct Incorporation will only provide a refund less a $40 processing fee if you request it immediately, but once an order has been even “partially processed,” they will not refund your money.
It’s an entirely different story with LegalZoom, as their satisfaction guarantee is one of the best refund policies in this industry. If you’re unhappy for any reason within 60 days of your purchase, all you have to do is request a refund and they will honor it with no questions asked.
Which LLC Formation Website Is Faster?
Direct Incorporation has turnaround times based on each individual state’s processing times, so they vary from a few days all the way up to several weeks, depending on your state.
LegalZoom has a different structure for turnarounds, as they instead base them on which level of service you purchased from them:
- Economy: 30 business days
- Standard: 15 business days
- Express Gold: 7-10 business days
Can I Just Form an LLC On My Own, Without a Service?
You do always have the option to DIY your formation, and quite a few people do indeed form their own LLCs without assistance.
The main issue we have with this is that every state is allowed to create its own rules and regulations for LLC formations, so it can be quite a hassle to figure out exactly what is required in your state. Furthermore, we simply appreciate the peace of mind we receive from professional services like Direct Incorporation and LegalZoom.