Starting a Business is Easy, But Starting a Company is Too Damn Hard

By Farhad Manjoo , written on March 5, 2012

From The News Desk

Well, I’m a corporation. And it feels great! For many years, I’ve been a mere sole proprietor, a fledgling one-man band in the eyes of the IRS. But due to some financial changes in my life—a book deal, a New Year’s resolution to become more organized with my money, a realization that I could slightly lower my tax bill by changing my status—I recently decided to create an S-corporation out of which to pursue my various Internet scribblings. I suspected that becoming Farhad Manjoo, Inc., would be something of a hassle, but that going through the incorporation process would nevertheless be an interesting exercise, a way to see what it’s like to start a small business.

It turns out I was right about that second part. I have gotten a good picture of the regulatory and logistical travails involved in starting a company. But I was totally wrong about the first thing: Even in our age of easy Web tools, formally establishing a corporation wasn’t just a minor hassle. It has been a major headache, a weekend-consuming blizzard of signing up for different Web sites, filling out lots of forms, and even—horror of horrors!—faxing. The entire process was slow and extremely confusing. I spent way more time researching everything I needed to do than I expected to. And I’m still not sure if I did it correctly.

With things like Kickstarter, Etsy, eBay, PayPal, Square and on and on, it’s become easier than ever to start a business. But should you need to start a legal company, you’re in for a huge shock. There’s a huge opportunity here for someone to make this a one-step, one-site, we-do-everything-for-you-for-not-much-money process. Please, entrepreneurs of the world: Build this!

I know what you’re thinking. What about LegalZoom? Aren’t automated legal sites like that supposed to make it easy to create a corporation? Yes, they are. And to a certain extent, they do. Once I decided that I wanted an S-Corp, it took me about an hour on LegalZoom and a few hundred dollars to get the process started.

But I had two problems with the service. First, LegalZoom is an unrepentant upseller. At just about every step through the process, the site tried to get me to spend more on this or that tremendously helpful feature. I’m used to upselling online; I use travel sites all the time.

But when you’re dealing with an area of commerce about which you’re completely ignorant, upselling is more than just annoying—it’s actively hateful of your customer. Should I really spend a few hundred extra for Gold Service? Was that worth it? How about for having LegalZoom send my Statement of Information to the secretary of state. Was that worth $35 extra? And did I need someone to record my minutes, or serve as my official agent, or bring me a bagel with my coffee each morning, and on and on?

Huh? I don’t know! Why don’t you just, like, do the important stuff? Could you just handle that, please, LegalZoom?

The other problem was that LegalZoom didn’t do the whole thing for me. It took a few months for me to get fully incorporated (not LegalZoom’s fault—blame the bloated California government). I would have gladly paid a single entity hundreds more to basically do it all, but when I got my incorporation documents back, they came with a to-do list of everything else I needed to attend to: Set up a corporate bank account, and then find out how to manage accounting for the firm. Figure out how to handle my corporate governance minutes. Figure out how to do payroll. And so many more fun things!

Again, in theory, all this seemed easily doable online, an hour of work, at most. But there were so many different entities I had to contact, with none of them cooperating with one another, that each step took far more researching and processing than I cared for. For a corporate account I thought I’d just need to open something with my bank, Wells Fargo. Except that turned into a two-day clusterfuck that involved my faxing all the documents that LegalZoom had sent me over to the bank. Why couldn’t a single entity have handled banking and incorporation?

When you’re an S-Corp you’ve got to meticulously track your finances for tax purposes. I signed up for Outright to do that for me. This wonderful site is basically like Mint for businesses: It monitors your bank accounts to track your income and expenses, figuring out your estimated taxes and producing a Schedule C for tax time. Outright is cheaper and easier to learn than QuickBooks, and I fell in love with it completely, except for one thing: It doesn’t do payroll.

Since I’m an employee of my company, I’d need to pay myself. And because I’d need several complicated payroll adjustments—I want pre-tax deductions of health insurance and my self-employment retirement plan—I needed a payroll service to handle things for me. There are lots and lots of these online, and Intuit Payroll is generally recognized to be the best. So I signed up, with a price of $39 a month, and spent a half hour going through the set-up wizard before I learned of a major shortcoming. Intuit Online Payroll couldn’t handle deductions for my SEP IRA. (“I do apologize,” a representative told me in an online chat.) I’m still in the market for a payroll service. If you know of a good, cheap one, please let me know.

I’m sorry for boring you with all these details. But trust me, I haven’t even told you about the worst part of it—the hours of research, online and in books, that I had to do to figure out which tax status was right for me in the first place, and then how to set my S-Corp salary, and then how to … OK, I’ll stop.

Altogether I spent at least $900, in total, for the incorporation, not counting my time. In retrospect it would probably have been cheaper and easier for me to ditch the Web and do the whole thing the old-fashioned way: Hire a lawyer.

But that felt wrong to me. It’s 2012. Everyone, everywhere, says it’s the perfect climate for creating a business, that digital tools have made small businesses the next big thing. They’re right. Now all you need is someone to help us start the companies so that we can get those businesses going.

Who will do it?