I had a meeting with a client recently — one of a thousand others just like it — where the client had attempted to use an online legal “firm” to incorporate their business. This particular client was starting a new business which, by its nature, needed to be open and operational by the time summer hit in order to capitalize on its primary market. In an effort to save attorney fees, the client resorted to one of the well-known online legal services to prepare and file his Articles of Organization (the new business was to be a Limited Liability Company). Although he completed the process and paid his fees in the middle of April, his Articles were not received and filed by the appropriate governmental agencies until the end of May — nearly six weeks later. During this time, the new business owner could not open a bank account, file for building permits, obtain an Employer Identification Number (EIN), or do any of a multitude of other things that need to be done when opening a new business. Upon inquiring with the county probate office, the clerk informed him that they run into these kinds of problems all the time with online legal services. When I first met this gentleman, he was telling me, over lunch, of his ordeal, and asked me if I could help. Unfortunately, since he had already paid his money and set the process in motion, there was little I could do. I did tell him, however, that if he had come to me in the first place, I could have had his new company filed and official within 24 hours, with very little increase in cost.
This is not an isolated incident. I can’t tell you how many times I’ve been asked by a new client to fix a mess that they caused by using an online legal company, or trying to do something themselves — frequently by finding a “form” on the internet and trying to adapt it to what they need, only to find out down the line that the contracts they created did not protect them from events and liabilities they did not anticipate. These kinds of discoveries can be expensive!
Please, please, please don’t use online resources for your legal documents. In fact, don’t try to do any significant legal work on your own. Online documents are barely sufficient at best, and almost always inadequate in any meaningful way. Legal documents are not “one size fits all,” and so many of the legal tasks and processes that look simple are actually quite complicated under the surface. Things like incorporating a business (which is, actually, quite simple, but there are so many ways to make small errors which can have significant consequences — the stories I could tell!) to registering a trademark (which looks deceptively simple, but is actually exponentially more difficult than just about anything else I do in my practice).
Online legal services cannot, by their very nature, provide you with the kind of legal service and direction you need if you are serious about starting a business. For instance, look at how the Missouri Supreme Court described the LegalZoom process in Janson v. LegalZoom.com, Inc., 727 F.Supp.2d 782 (W.D.Mo. 2010):
“Customers can choose from a variety of products or services, and input data into a questionnaire. The LegalZoom platform generates a document using the product and data provided by the customer.”
Similarly, a North Carolina court compared LegalZoom’s online software to a scribe who merely inputs information given to it by the client, without providing advice or consultation:
“LegalZoom’s software acts at the specific instruction of the customer and records the customer’s original information verbatim, exactly as it is provided by the customer. The software does not exercise any judgment or discretion, but operates automatically in the same fashion as a ‘mail merge’ program.”
LegalZoom.com, Inc. v. N.C. State Bar, No. 11–cvs–15111, 2014 WL 1213242, at *12 ( N.C. Super. Ct. Mar. 24, 2014) (noting that the “scrivener’s exception” to the unauthorized practice of law allows “unlicensed individuals [to] record information that another provides without engaging in [the unlicensed practice of law] as long as they do not also provide advice or express legal judgments”)
Note that both courts recognized that LegalZoom does not, and cannot, provide advice, discretion or judgment. It’s software simply inserts the information you give it into its pre-produced forms. Is this how you want to start your business? Or plan for your estate and provide for your family after your death?
The phrase “you get what you pay for” is probably 99% true in the legal field. If you incorporate using online legal firms such as LegalZoom or Responsive Law, or the Alabama Secretary of State forms, without the benefit of legal counsel, you may save money, and you may make your company legal, but you don’t get advice or direction. If your company goes anywhere at all you may eventually have to consult an attorney to take care of issues you didn’t address at the start, and usually that means cleaning up messes. That can be more expensive than if you had consulted an attorney initially.
Every business — and every household — needs to have a real, live, local lawyer. This should be someone you trust implicitly to be excellent in their field and have your best interests in mind. He or she should be LOCAL — not long distance, and for heaven’s sake definitely not on the internet — so you can go to their office, sit down across from them, look them in the eye, and have a face-to-face discussion about your affairs and what they are doing to serve you. Please, if you don’t allow Gosnell, P.C. to help you, get your legal help from some other real live attorney.
I wouldn’t get on the internet to figure out how to take out my own appendix. Likewise, legal work is not DIY.