You want to start a Limited Liability Company. You have your vision, your business name, and the motivation to make your dream a reality. But you want some help getting started, so you’ve decided to hire a business formation service.
But that leads to a big decision: which service should you use? There are a lot of options available, but they’re not created equal. Two popular services are LegalZoom and Direct Incorporation.
In this guide, we’ll give you a side-by-side comparison of these two services. Then you can pick the right service for you.
Rocket Tip: Looking for the best and most affordable LLC formation services? Compare the top 3 options (ZenBusiness vs Incfile vs Northwest) to see how they stack up.
Our philosophy: What makes a formation service “good?”
Ultimately, the “best” incorporation service online boils down to a matter of opinion. Which one is best for you depends on what you want from a service. But that said, there are certain qualities that make one formation service better than another. Whenever we evaluate an LLC formation service, here are some questions we like to ask:
- Does this service give me a good value for what I’m paying?
- Does this company have a proven record of supplying high-quality service?
- What is the quality of this company’s customer service?
- How easy is it to use this service?
- How quickly will my business be formed?
A good LLC formation service will receive high marks in these categories. We’ll consider the answers to these questions in our in-depth comparison below.
LegalZoom vs. Direct Incorporation: What’s the difference?
On the surface, LegalZoom and Direct Incorporation seem to accomplish the same purpose: helping you form your LLC. And while that’s true, the difference between them goes much deeper than that. We’ll give you our full analysis in just a moment, but here are a few key differences:
- LegalZoom has an impressive customer volume of more than 3.6 million customers. Over a million of those customers are businesses, giving them one of the most impressive client lists in the industry.
- Unlike a lot of their competitors, Direct Incorporation offers unique logo and web design options. If you want to establish the visual aspect of your brand, then Direct Incorporation can make it happen.
Both LegalZoom and Direct Incorporation can help you make your new business a success. But to give you a better idea of which is right for you, let’s jump in to the specifics.
Pricing and packages
Whenever you make a purchase, you want to know that what you’re buying is truly worth the cost. The same goes for LegalZoom and Direct Incorporation. Each service has their own range of packages and price points; they’re pretty comparable in value. Let’s take a look at them.
- Economy: LegalZoom’s entry-level price points rings in at $99. For that fee, you’ll get a name availability check, letter of financial authorization, and filing of your Articles of Organization.
- Standard: Standard makes a large money jump to a $329 price tag. With Standard, you receive all of the Economy features, plus 20 official membership certificates to use in your LLC. You’ll also get a corporate kit, which is an official, embossed binder and seal that’s been customized for your business.
- Express Gold: LegalZoom charges $349 for their highest package, but it doesn’t have much more to offer over the Standard option. The extra $20 really only buys you an expedited filing.
- Standard: Direct Incorporation starts out its offerings at a price point of $147. It’s definitely pricey compared to LegalZoom’s opening package, but it does include some interesting options. For this price, you’ll get a business name check, filing for your formation documents, and an EIN. They also throw in a three-week trial to their Executive Club and six months of registered agent service.
- Premier: The next package jumps to $297. You’ll get everything in the standard package, plus a corporate kit for your business. That gives you an embossed binder and a custom seal. You’ll also get sample documents like membership certificates and an operating agreement.
- Elite: Elite makes a $32 price jump for a total cost of $329. But that extra $32 gets you a lot: access to their website builder, five free business email accounts, and a stock logo for your business (which you can use under the terms of a shared license).
- Venture: Venture brings a pretty hefty price tag—$873—but it’s jam-packed with features. Instead of a website builder and stock logo, you get a professionally designed website and logo (plus exclusive rights to those graphics). You also get 12 months of their Executive Club and trademark protection service. If you want to establish a powerful brand image from the get-go, then Venture may be the package for you.
- Venture Plus: There is one last package offering of Venture Plus, but it’s probably well beyond what most people need. It includes everything above and adds a subsidiary entity filing, a DBA, and a second trademark or copyright filing.
Direct Incorporation’s upper-tier packages may leave you with sticker-shock, but they do include a lot of features for that price. LegalZoom has some pricey packages of their own, too. In fact, neither service has a truly competitive price point. We have to call this category a tie.
How easy it is to use the service
Any business service is supposed to make your life easier, right? That’s why we always consider how easy it is to use a service when we evaluate them. After all, why would you bother paying someone to file your paperwork if it’s harder to hire them than it is to do it yourself?
We tested both services, and Direct Incorporation is much simpler to use. LegalZoom’s order process seems a bit backwards to us. Here’s the run-down of the two:
- Choosing a package: Unfortunately, with LegalZoom, picking the package you want is a touch difficult; you pick your package after you’ve input some of your information and chosen a few add-ons.
- Up-sells: If there were a competition for which company offers the most up-sells and third-party offers during their order process, LegalZoom would win hands-down. It’s very easy to spend extra money after getting distracted with all the add-ons they offer.
- Order time: Once you get past the up-sells, it doesn’t take too long to finish your order. For example, it took us about fifteen minutes to get to the package selection stage. Then the rest of the process took a bit longer.
- Choosing a package: Direct Incorporation directs you to choose a package after entering some information about yourself and the type of business you wish to form. If you’re not sure which package you want, you can hit their “Compare Packages” link to learn how their offerings stack up.
- Up-sells: With Direct Incorporation, there aren’t really any up-sells or third-party offers to navigate through. What comes in your package is what you get.
- Order time: There are really only four steps to complete in your Direct Incorporation order. Most customers spend about ten minutes ordering their package, but if you have a bigger package, the process may take a bit longer.
In our opinion, a user-friendly service does two things: it employs a clean, straightforward order form, and it largely avoids up-sells and third-party offers.
LegalZoom falls short of both those criteria. Their order form is backwards; the packages come last, and you pick your add-ons before you even know what you’re adding them on to. LegalZoom has several up-sells and add-ons, too.
But Direct Incorporation has the opposite: a straightforward order form and no up-sells. That’s enough for us to give them the win.
Buying a product is one thing. But getting support for that product is just as important. After all, if a company doesn’t stand behind its product, why should you? But when a company helps you throughout the entire process—choosing a product, purchasing it, and keeping that product up-to-date—you’ll be happier with your purchase.
The same goes for business formation services. If they help you pick the package that’s right for you, assist you with the paperwork, answer your questions, and make it clear that they want to help you more than make money off you, you’ll keep using them. You might even recommend them to your friends.
Direct Incorporation and LegalZoom have similar customer support models, and both get the job done. Here’s a summary of our thoughts on the customer service of both services:
- Types of support: LegalZoom offers support via phone and email.
- Availability: LegalZoom has very prompt service and great hours. On weekdays, you can reach them from 5 a.m. to 7 p.m. (PT) and 7 a.m. to 4 p.m. on weekends.
- Quality of support: When we tested LegalZoom’s customer support, we found their representatives to be quite helpful, especially via phone. (Email replies were more generic). The only thing we found annoying was that their customer service representatives also tried to make a sale during the process.
- Types of support: Direct Incorporation also offers support via phone and email.
- Availability: Direct Incorporation’s hours for customer support are pretty wide: 9 a.m. to 6 p.m. ET.
- Quality of support: Direct Incorporation has a general support line through both phone and email, and they provide quick, helpful service. But here’s what we like best: they list contact information for each member of their team on their website. So if you need specialized assistance, you can get in touch with the best support staff easily.
This category is another close call. Each company has an advantage over the other: LegalZoom has wider availability, and Direct Incorporation makes it easy to contact just the person you need. We have to call this category a tie, but you can pick which advantage is more important to you.
Company track record
Technically, there’s nothing wrong with using a new company to form your business. But working with an established, trusted brand gives you confidence. You can trust a company that has already served thousands of happy customers.
The difference between these two companies boils down to how many customers they’ve served. Here’s how the two stack up:
- Years in business: Founded in 2001, LegalZoom has been in business for close to twenty years.
- Businesses formed: LegalZoom has helped form over a million businesses (and they’ve served nearly 4 million customers in other legal avenues).
- Customer reviews: LegalZoom’s online reputation is mixed; you’ll find a wide variety of one-star and five-star reviews alike.
- Years in business: Direct Incorporation first opened its doors in 2003, so they’re a little bit younger than LegalZoom.
- Businesses formed: Direct Incorporation has helped create more than 80,000 businesses. They’ve also hosted more than 5,000 websites.
- Customer reviews: There aren’t many online reviews for Direct Incorporation. There are more positive reviews than negative ones, though.
LegalZoom takes the narrow win in this category. For one thing, neither service has a lot of online reviews. Direct Incorporation has a few more reviews, but it’s not enough to call this category in their favor. LegalZoom does have a lot more customers than Direct Incorporation, though. That volume gives them the victory.
If you ever change your mind about a product you’ve purchased, you want to be able to return it, right? Unfortunately, with any LLC formation service, a full refund is impossible. That’s because part of the money goes to the state as their incorporation fee, and states do not refund those fees.
But occasionally, a customer changes their mind about a package they purchased. Perhaps they no longer want to subscribe to the registered agent service, or the company completes the process incorrectly. Each company has their own policy for refunds, and LegalZoom and Direct Incorporation are no exception. We’ll summarize those policies here.
You can cancel your service with LegalZoom at any time (although some customers have noted that cancelling can be a bit tricky). Refunds are also allowed, if they fall under LegalZoom’s Satisfaction Guarantee and you make the request within 60 days. You can also exchange for a comparable service, too.
You can request a refund from Direct Incorporation at any time, so they’re a bit more flexible than LegalZoom. However, the drawback is their $40 convenience fee; it accompanies any refund request you make.
Assistance with ongoing compliance
Starting your business takes a lot of time and effort, but so does maintaining it! Each state is a little different; some require annual reports, some require you to renew your license each year, and more. Keeping track of these requirements can be confusing.
That’s why a lot of services help you with ongoing compliance. But just how much help you’ll get depends on what service you choose.
For $69 per year, you can subscribe to LegalZoom’s Compliance Calendar program. This service helps you stay up-to-date with your due dates by alerting you so you can get them filed on time. You can also subscribe to additional services that will complete this report for you, if you’d like. They also offer registered agent service for $159-299 per year.
Every package offered by Direct Incorporation also has six months of free registered agent service. You can contact them for a quote of how much this service will cost when the trial expires. They also offer annual report services for $75.
So, which service do we recommend to form an LLC?
In our opinion, LegalZoom and Direct Incorporation occupy a level playing field. They’re tied. Each service wins at least one category. And they come up tied in the most important category: pricing and value.
Of course, some entrepreneurs will benefit more from Direct Incorporation, and LegalZoom will be better for others.
We think that Direct Incorporation is a better option for businesses who want to establish a visual brand and online presence from the get-go. But LegalZoom is better for entrepreneurs who need a straightforward business formations or other legal needs.
Alternatively, you can check out your other options through our comparison guide of the 3 most affordable and top LLC services.