Legalzoom.com Review

Many people ask me whether websites like LegalzoomTM are appropriate for simple legal matters, like forming an LLC or preparing a last will and testament?  These websites offering a “bargain” alternative to lawyers, but are they really a bargain?

First, my opinion as a lawyer may be suspect because LegalzoomTM and their ilk take away millions of dollars in business away from attorneys.  But, my job in this review is not to bash LegalzoomTM, but rather to persuade you as to why a lawyer, in most cases, is the better bargain and the obvious choice.

LegalzoomTM is Not a Law Firm

First, LegalzoomTM and most other websites have a giant disclaimer that says, in essence, “We’re not a law firm and we can’t give you legal advice.  We fill in documents at your direction”.  There’s many problems with this approach.

If LegalzoomTM is not a law firm, then how do they get away with filling in documents for people?  The short answer is that most states consider filling in forms for people as a “scrivener” service and not the practice of law.  However, some people disagree, and LegalzoomTM has run into trouble with the law more than once.  

Second, if they can’t give you legal advice, then how to you know if the form they are filling out is appropriate for your legal matter?  

Third, how do you know you gave them the correct information to put in the form?  

Finally, most importantly, how do you know if the legal forms they are using are any good?  Personally, I have reviewed some of their forms, and while they are generally adequate, in my opinion they are not as good as what many attorneys prepare for their clients based on the client’s particular needs.

Prices Aren’t So Cheap

The attraction (and misconception, in my opinion) of websites like LegalzoomTM is that by using them you are saving money.  Let’s look at some specific examples:

Last Will & Testament.  For $69, LegalzoomTM says it can help you prepare a will.  $69 is not bad, since I generally charge about $400.  But are we comparing apples to apples?  Not really, because my will includes a second joint will for the spouse, a medical power of attorney, a financial power of attorney, and a medical directive.  Add all that up on LegalzoomTM I see a price of about $240, and that’s for regular service.  If you don’t want to wait weeks and weeks, and want the documents also emailed to you (which I do for free), it costs you quite a bit more.   So, apples to apples, it’s not much cheaper to use a company like  LegalzoomTM .

LegalzoomTM is not a law firm, so they cannot tell you the tax implications of the estate plan, nor recommend how to hold title to assets. And, if you have to transfer assets around, such as a deed, bank accounts, retirement plans, etc, LegalzoomTM will not do that for free (if they do it all all?). 

Limited Liability Company

First of all, most people who forms LLCs are not aware of the tax implications of the different types of entities, and mistakenly choose an LLC over an S corporation.  Again, you won’t get this kind of advice from non-lawyers, such as LegalzoomTM.  Second, where to file your LLC is a choice that they can’t advise you on, either.  With all the other non-lawyer outfits advertising Nevada entities, many people assume that Nevada is the most appropriate jurisdiction, not knowing that their own state might be better.  Many Californians, for example, try to avoid the $800/year annual franchise tax by filing in Nevada, which has no income tax.  They are shocked later to find out that they still have to pay the California franchise tax because the Nevada entity did business in California.  Again, a non-lawyer is prohibited from advising you on where to file your company.

At first blush, it appears that you can form an LLC online with  LegalzoomTM for just $99.  What a bargain, I charge $497 for an LLC in Colorado.  Once you dig a little deeper, you realize that the $99 price does not include a lot of things you need, such as:

  • State filing fee
  • Federal Tax ID# 
  • Company Record Book
  • Operating Agreement
  • Various Resolutions

Their “Express Gold” package includes all of this for a total of $409, which is quite a difference from $99.  But, the higher end package signs you up for a monthly billing plan for an attorney review service, which you may not want or need.  And, their “Priority Rush” is 7-10 days, while our standard service is 72 hours.   Apples to apples, not much of a savings.  Plus, we offer other valuable services at no charge, such as:

  • Getting a Dunn & Bradstreet ID#, so you can apply for corporate credit
  • Acting as your registered agent for free, which is $159/year at  LegalzoomTM
  • Anonymity filing, which means we remove your name from the public filing, so your customers won’t know where you live

So, next time you decide to file an LLC or Corporation, read the fine print and see what’s a better bargain, a law firm or a company with a website that up-sells you for everything and works slower than your local law firm.

Malpractice

Technically, Legalzoom.com is not a law firm, so they can’t be held accountable to a state authority that licenses legal services.  While Legalzoom does offer a $50,000 guaranty, I wonder if that’s even enough for some mistakes, and what kind of exclusions are in that guaranty?  Most lawyers, myself included, carry $1,000,000 in professional liability insurance.  And, the state has a pool of money (which comes from interest on the lawyers’ escrow accounts to fund) that reimburses clients that were ripped off by a licensed attorney.  While many lawyers would drool at the idea of suing LegalzoomTM for making a mistake, have a look at the terms and conditions that  LegalzoomTM makes you agree to before using their website.  OJ’s lawyer, Bob Shapiro, couldn’t have drafted it any better!

While online Legal services have their place for simple forms, like a Limited Power of Attorney for Real Estate or a Bill of Sale for an Automobile, the more important documents such as business agreements, estate planning documents, and company formations should be left to your local attorney to draft.  As the old saying goes, “Don’t be pennywise and poundfoolish” – or, in practical terms, “You get what you pay for”.