Legal Zoom vs. The Business Lawyer:

Today I’m helping a good friend amend the Articles of Incorporation for his company. 

My friend originally formed his corporation through LegalZoom.  You know LegalZoom?  It’s the canned forms service founded by one of O.J. Simpson’s defense attorneys.  The commercials claim that you can accomplish all these great things – form a corporation, prepare a will, apply for a patent – all without paying tons of money to an attorney.

Here’s the problem I have with LegalZoom.  First, its selling point plays off a stereotype:  that we business lawyers are fee-grubbing scriveners looking to nickel and dime the most out of a set of forms which we use over and over again.  Second, LegalZoom’s forms are either incomplete or result in unnecessary expenses for the business owner.

As to the fees issue, myself and most of the good business lawyers I know ALWAYS work with our clients on the fees.  As an example, my Firm’s INCubation Center program provides a range of services to startup businesses at flat fees and reduced hourly fees for the initial years of the business.  The idea is we are investing some of our otherwise billable time to help cultivate new businesses.  I call this “relationship-focused business law” as opposed to “transaction-focused business law”.  We also spend a lot of time – which we do not bill for – helping our clients find other necessary advisors for their businesses (CPAs, insurance agents, business plans, and the like).  I also spend a lot of otherwise billable time planning timely educational programs for my clients.    In other words, the idea that business lawyers are focused only on fees rather than building trust-based client relationships is simply incorrect.

As to my second point – the quality of LegalZoom’s product – in my opinion, using canned forms leads to unintended consequences.  Take my friend as an example.  He is being billed $160.00 per year for a professional registered agent (note:  I’ve had other clients who formed through LegalZoom and they experienced the same thing).  I told him, as I’ve told others, that there is no reason for him to have a professional registered agent.  My amendment will terminate the use of the agent and end his continuing obligation to pay an agent in another state.

I’ve seen and heard of other issues with the quality of the services provided through LegalZoom, such as no buy-sell agreement for a multi-owner business.  My partner (who heads up our estate planning practice)  just told me about a problem he saw with one of LegalZoom’s “$99 Wills” that would have resulted in a very expensive probate later on.  These issues lead to later expenses for the LegalZoom user which outweigh any purported cost savings at the outset. 

The bottom line is that a good business lawyer can be much more than a scrivener of documents, especially in the startup business context.   Most of us – myself included – genuinely want to do everything possible to help our clients succeed, from drafting the appropriate documents, making introductions to other key advisors, and opening up our Rolodexes to promote their businesses.  This role as a “trusted advisor”, over the course of the relationship, outweighs any alleged “cost savings” which is advertised by the canned forms providers.

By the way, my friend whose articles I’m fixing?  I’m not charging him for doing so.