• May

Scams to be Aware of When Creating Your LLC

You're excited to start your new business or side hustle so you create an LLC, but watch out for predators that try to take your money.

man signing contracts

Creating an LLC is straightforward and simple enough and many people tend to do it themselves through a third party such as LegalZoom. You pay about $300-400 for the registration, EIN, operating agreement and the rest of the works to be fully registered. The problem? Other companies see that you have just registered and are now hungry to earn a few bucks off of you.

I have created several LLCs - one where I went through a lawyer and one where I went through LegalZoom. When I went through the lawyer, it cost more money (obviously, I had to also pay the lawyer), but I received no fake notices or letters of people trying to get money from me. When I went through LegalZoom, it was a completely different experience. I'm not saying don't use LegalZoom, but watch out for these common letters of companies trying to scam you:

1. Labor Poster Compliance

These scams are so predatory because they are based somewhat in fact, but are using the fear of non-compliance to get a few dollars for themselves. Take this federal labor law poster scam as an example. First off, these forms look SUPER legit. You might think, "Damn, I need to make sure I'm compliant, I'll pay the $80 fee. It's not that much." But in reality, they're overcharging you for a bunch of printed paper. It was actually called out by Pennsylvania's Department of State and they posted updates on these scams on their website. I couldn't find something like this for NJ.

First off, if you are the sole business owner and in an LLC with no employees, this doesn't apply to you. You can throw this out. If you have hired an employee, even just 1 employee, then yes, this is technically relevant. The kicker is in the back of this paper, in the blue box that states: "This service has not be approved or endorsed by any agency of the government. Individual panels are available to be requested by any agent of the corporation from the government free of charge." Translation: the government provides the labor posters for free, but we're trying to make money off of you by charging you $80.

Labor Poster Compliance Poster Front

Labor Compliance Poster Back

2. Certificate of Good Standing

At first glance, this also looks extremely legit. BUT did you know that in New Jersey, any NJ business is not legally required to obtain a certificate of good standing? This person is trying to make a $115 by using fear. Now, there are instances you might need one. If you are purchasing business insurance, applying for a business loan, opening a business checking account or registering to do business in other states, you will need this certificate. However, if you go directly through the NJ Division of Revenue, the cost is only $50 - half of what these people are charging below.

You can also tell it's a scam by the fine print statement they make (2nd image below). They clearly state they are not affiliated with any government organization and are trying to solicit your business.

Certificate of Good Standing Request Front

Certificate of Good Standing Request Form Close Up

3. Certified Certificate of Formation

The last document I received was for a certified certificate of formation. This one confused me a lot considering that in my LegalZoom purchase to create an LLC, they already provided me with a certificate of formation. This is just a redundant request for the same exact form I already received. Again, in the fine print in the 2nd image below, you can see that it states you can get this service for cheaper elsewhere. But you won't notice it unless you read the entire document.

Be careful when you receive documents like this and ALWAYS read the entire document to find out if it is legitimate or not!

Certified Certificate of Formation Request Form Front
Certified Certificate of Formation Request Form Close Up

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