DIY vs. Business Formation Services: Which Is Right for You?
Compare filing your business yourself versus using a formation service. Learn the costs, pros, cons, and which approach makes sense for your situation.
When you’re ready to make your business official, one of the first decisions you’ll face is how to handle the formation process. Should you file the paperwork yourself, or pay a service to do it for you? Both approaches can get you to the same destination—a legally registered business—but they differ significantly in cost, time investment, and peace of mind.
This guide breaks down both options so you can make an informed choice based on your specific situation.
What Does Business Formation Actually Involve?
Before comparing your options, it’s helpful to understand what forming a business actually requires. The specific steps depend on your business structure and state, but most formations involve several core tasks.
Choosing and reserving a business name requires searching your state’s business database to ensure your desired name is available, then reserving or registering it.
Filing formation documents means submitting the appropriate paperwork to your state—Articles of Organization for an LLC or Articles of Incorporation for a corporation.
Designating a registered agent is required in every state. This is a person or service authorized to receive legal documents on behalf of your business.
Creating governing documents such as an operating agreement for LLCs or bylaws for corporations, while not always legally required, is strongly recommended.
Obtaining an EIN from the IRS is necessary for tax purposes if you have employees or operate as a corporation or partnership.
Some states have additional requirements like publishing a notice in local newspapers (New York, for example) or filing initial reports.
Option 1: Forming Your Business Yourself
Filing directly with your state is the most economical approach and gives you complete control over the process.
How DIY Formation Works
The process starts with researching your state’s requirements. Every state has different rules, fees, and forms. Your Secretary of State’s website is the authoritative source—the National Association of Secretaries of State maintains a directory of all state business filing offices.
Next, you’ll prepare your formation documents. For an LLC, this typically means drafting Articles of Organization that include your business name, registered agent information, business address, and management structure. Many states provide fillable PDF forms or online filing systems.
You’ll then submit your filing and pay state fees. Most states allow online filing, which is faster than mail. Processing times range from same-day to several weeks depending on the state and whether you pay for expedited processing.
After approval, you’ll complete post-formation tasks including:
- Obtaining your EIN (free through the IRS website)
- Creating an operating agreement or bylaws
- Opening a business bank account
- Obtaining any required licenses or permits
What DIY Formation Costs
The primary expense is your state’s filing fee, which varies significantly:
| State | LLC Filing Fee |
|---|---|
| Delaware | $90 |
| California | $70 |
| Massachusetts | $500 |
| Texas | $300 |
| Wyoming | $100 |
You can find your state’s exact fees on the SBA’s state business resources page.
If you need a registered agent and can’t serve as your own (some states require a physical in-state address), commercial registered agent services typically cost $50 to $300 per year.
Optional expedited processing adds anywhere from $25 to $500 depending on the state and how fast you need approval.
Total DIY cost: typically $50 to $500, depending on your state.
Pros of DIY Formation
- Cost savings — You avoid service fees that can range from $79 to $500 or more
- Direct control — You’re not relying on a third party to get details right, and you understand exactly what was filed
- Educational value — Going through the process yourself helps you understand your legal obligations as a business owner
- No upsells — Formation services often aggressively market add-ons you may not need
Cons of DIY Formation
- Time investment — Researching requirements, preparing documents, and navigating state filing systems takes time—potentially several hours for first-timers
- Higher risk of errors — If you’re unfamiliar with legal terminology or your state’s specific requirements, mistakes can cause delays or complications
- You’re responsible for compliance — You’ll need to track and complete ongoing requirements like annual reports yourself
- Limited support — If you have questions, state offices may be difficult to reach and can’t provide legal advice
Who Should Consider DIY
DIY formation makes sense for:
- Entrepreneurs comfortable with research and paperwork
- Simple business structures in states with straightforward requirements
- Those forming in their home state where they can easily serve as their own registered agent
- Anyone on a tight budget where every dollar counts
Option 2: Using a Business Formation Service
Formation services handle the paperwork and filing on your behalf. Popular options include LegalZoom, ZenBusiness, Incfile (now part of ZenBusiness), Northwest Registered Agent, and Rocket Lawyer.
How Formation Services Work
You start by selecting a package. Most services offer tiered pricing with different features at each level—typically a basic package for just the filing, a standard package with added features like an operating agreement template, and a premium package that includes registered agent service, compliance alerts, and more.
You then provide your information through an online questionnaire covering your business name, address, member or shareholder information, and management structure.
The service prepares and files your documents with the state on your behalf, often checking name availability first. Processing time depends on your state plus the service’s internal processing time.
Once approved, you receive your formation documents, and many services provide a digital dashboard where you can access your documents and manage compliance tasks.
What Formation Services Cost
Pricing structures vary, but here’s what to expect:
Base service fees: $0 to $299 depending on the service and package level. Some services advertise “$0 + state fees” for basic packages but heavily upsell add-ons.
State filing fees: Passed through at cost—same as DIY.
Registered agent service: Often $100 to $300 per year. Frequently included free for the first year, then billed annually.
Common add-ons:
- Operating agreement templates: $30 to $100
- EIN filing: $50 to $100 (free if done yourself)
- Compliance monitoring: $100 to $200 per year
- Business licenses research: $100 to $200
Expedited processing: $50 to $350 for faster state filing.
Total first-year cost with a formation service: typically $150 to $600+, depending on your package and add-ons.
Pros of Using a Formation Service
- Convenience — Someone else handles the research, paperwork, and filing
- Reduced risk of errors — Reputable services know each state’s requirements and file thousands of formations
- Bundled services — Many packages include useful extras like registered agent service and document templates
- Additional support — Customer service teams can answer questions (though they can’t provide legal advice)
- Speed — Some services have relationships with state offices or optimized processes that result in faster turnaround
Cons of Using a Formation Service
- Higher overall cost — You’re paying for convenience with service fees on top of state fees
- Aggressive upselling — Many services push add-ons during checkout, some of which provide little value
- Recurring fees — That “free” registered agent service often auto-renews at $150 or more per year
- Less direct control — When a third party handles your filing, it can be harder to catch or fix errors
- Variable quality — Not all services are created equal—some have poor customer service or make mistakes
Who Should Consider a Formation Service
Formation services make sense for:
- Entrepreneurs who value time over money
- Those forming a business in a state with complex requirements
- People who want a registered agent service anyway (bundling can make sense)
- Anyone who’s uncomfortable with legal paperwork and wants guidance
- Those forming in a different state from where they live
Head-to-Head Comparison
| Factor | DIY | Formation Service |
|---|---|---|
| Cost (basic LLC) | $50–$500 (state fees only) | $150–$600+ (including state fees) |
| Time investment | 2–5 hours | 30 min–1 hour |
| Error risk | Higher if inexperienced | Lower with reputable service |
| Ongoing support | None (you’re on your own) | May include compliance reminders |
| Learning opportunity | High | Low |
Questions to Ask Before Choosing
How complex is formation in your state? Some states like Delaware and Wyoming have simple, streamlined processes ideal for DIY. Others like New York (with its publication requirement) or California (with its various forms and fees) can be more complicated.
What’s your time worth? If spending three hours saves you $200, that’s effectively $67 per hour. For some entrepreneurs, that tradeoff makes sense. For others, that time is better spent elsewhere.
Do you need a registered agent? If you can’t serve as your own registered agent (common if you’re forming in a different state or don’t have a physical office), you’ll need to pay for one regardless. In that case, a formation service bundle might offer better value.
How comfortable are you with legal documents? If reading legal language makes your eyes glaze over, a formation service’s templates and guidance might prevent costly mistakes.
Are you forming a simple or complex business? Single-member LLCs with straightforward structures are easy to form yourself. Multi-member LLCs or corporations with complex ownership structures might benefit from professional assistance—or even an attorney.
A Middle Path: Hybrid Approaches
You don’t have to choose strictly between DIY and full-service. Several middle-ground options exist.
File yourself but pay for a registered agent. This gives you control over the formation process while outsourcing the ongoing registered agent requirement. Many registered agent services cost just $50 to $150 per year without the formation service markup.
Use free or low-cost resources to prepare, then file yourself. The SBA and IRS provide extensive free guidance, and your state’s Secretary of State website typically has instructions and sample documents.
Consult an attorney for complex situations. For the initial setup, then maintain it yourself going forward. A business attorney can ensure your formation and governing documents are solid, and you handle routine compliance. This costs more upfront but provides genuine legal expertise rather than form-filling services.
What About Legal Services?
It’s worth noting what formation services are and aren’t. They’re document filing services—they help you complete and submit paperwork. They’re not law firms (though some, like LegalZoom, offer access to attorneys for additional fees), and their staff typically cannot provide legal advice.
For most simple business formations, legal advice isn’t strictly necessary. But there are situations where consulting an attorney makes sense:
- Businesses with multiple owners — Equity splits, voting rights, and exit provisions should be carefully documented
- Regulated industries — Specific licensing and compliance requirements benefit from legal guidance
- Intellectual property concerns — If your business relies heavily on IP that needs protection
- Complex tax situations — When your business structure has significant tax implications (often requires an attorney working alongside a CPA)
An hour or two with a business attorney typically costs $200 to $500 and can provide peace of mind that a formation service cannot.
Making Your Decision
There’s no universally right answer—the best choice depends on your circumstances.
Choose DIY if:
- You’re forming a simple business structure
- Your state has straightforward requirements
- You’re comfortable with research and paperwork
- Budget is a primary concern
- You want to understand exactly what you’re filing
Choose a formation service if:
- You’re forming in a state with complex requirements
- Your time is better spent on other aspects of your business
- You want bundled services like registered agent anyway
- You’re uncomfortable navigating legal paperwork
- You’re forming in a state where you don’t reside
Choose an attorney if:
- You have multiple business partners with complex arrangements
- Your business involves significant assets or liability concerns
- You’re in a heavily regulated industry
- You want customized governing documents rather than templates
Regardless of which path you choose, the most important thing is getting your business properly formed. A legitimate business structure protects your personal assets, establishes credibility with customers and partners, and sets the foundation for future growth.