About LegalZoom and Traditional Attorneys
LegalZoom was founded in 2001 and has offered legal assistance over the Internet ever since. It sells limited liability company formation, corporation formation, trademark registration, DBA registration and will-drafting services, along with website hosting. As opposed to a traditional lawyer, you pay a fee and fill out an online questionnaire or form. Instead of a conversation with an individual attorney, the interaction is usually limited to an email or chat session. A decision is then made by LegalZoom staffers about what type of documents you need, and you are charged for those services. You receive the basic legal documents, but little guidance on how to apply legal principles to your individual situation . There is no ongoing support or personalized attention beyond the legal document preparation.
When it comes to trademark registration services, LegalZoom typically costs $50-$100 less than the average lawyer. However, an attorney may become familiar with the ins and outs of your business during the process of filing for a trademark, and that information could be useful later for other legal issues that come up. The money you saved using a LegalZoom service to register your trademark could be recouped addressing those issues. Simply put, you get what you pay for, and LegalZoom is not a substitute for the knowledge and insight of a skilled lawyer.
Price Comparison Between LegalZoom and a Lawyer
LegalZoom operates on a pay-per-service pricing model. For example, the cost of the three most commonly used services at LegalZoom are: $149 for a basic Will, $349 to form an LLC and $59 to trademark a brand name. The total for those three services? $557. When you look at the cost of hiring an attorney, you obviously need to look at your geographic location. As we discussed earlier, LegalZoom’s services are mostly geared towards fairly uncomplicated legal matters and we must also consider that most lawyers have both fixed and hourly rates for their work. Let’s assume that one of the lawyers in our hypothetical example is located in New York City and one is in Montgomery, Alabama. For these services, this basic side-by-side would be accurate:
Attorney #1, New York City
Attorney #2, Montgomery, Alabama
At first glance, especially for those outside the legal industry, it may seem that hiring an attorney in New York City is significantly less expensive than working with an online service like LegalZoom (and an attorney in Alabama much less expensive than a lawyer in NYC). The reality is a $309 difference in fees for the same services is very much in the ballpark for legal service work. If these services were redone with a larger, complicated estate, say upwards of $10,000, the cost of the legal services would easily rise in comparison even the middle ground locations of Chicago or Dallas. Keep in mind, this example is also highly simplified, factoring only bookkeeper-like tasks that don’t take into account the level/quality of service, the time it takes to get these things done, the chance of making costly mistakes and then there are the problems that sometimes come up such as IRS audits or business lawsuits.
Scope and Limitations of Services
LegalZoom provides a structured set of basic legal services, with products and options to cater for the needs of consumers with specific legal needs for commonly required documents to be prepared and filed.
For example, an LLC formation service on LegalZoom is provided with the following options:
• Standard Option: This option requires that the user fill-in and submit responses to a predetermined set of questions. With this Standard option, there are limited fields for the applicant to provide specific information and legal history for the attorney that will be exclusively representing the LLC. This limits the ability of the LLC membership and managers to provide information regarding any necessary legal background information for the attorney that is needed for the legal representation of the "person" and the "entity", including specific information about the parties and the specific business issue(s) that are either unique to the particular situation or represent a material legal issue that may become contentious with the parties at some future date.
• Comprehensive Option: The Comprehensive option allows the requester to provide non-specific information or caption a document for initial review by the legal representation. Some aspects of this procedure would allow for the sharing of specific information with the attorney regarding the background and intentions of the parties to the agreement and is preferable to the Standard option.
While these services have value and can serve the needs of simple matters, not all situations are simple and many of them can be more complex than any legal service can prepare for in a limited timeframe. Standard and Comprehensive options circumvent the need for the attorney-client discussions necessary to address potentially contentious items and issues that are critical to a properly drafted and reviewed document.
When to Use LegalZoom Instead of a Lawyer
For some, it is clear that hiring a lawyer is the only route forward, but for others it may also be just as clear, after a little thought, that hiring a lawyer is unnecessary and that the legal documents needed can be readily found online or through do-it-yourself methods.
In such instances, the DIYer should first think of whether there are online legal forms they can fill out, with the most well-known service being LegalZoom. For example, Probate application forms can be completed in California on LegalZoom which would save both the hassle and the expense of meeting with a lawyer. Similarly, a Will can be done online and notarized by a non-lawyer not connected to the website doing the Wills.
While most people know that they need a lawyer to help them with something complicated, the truth is that most people do not know when they are able to proceed without a lawyer and when they have to contact or hire a lawyer for assistance. As a rough guide, anything below $1,000 in value in legal assistance is a good candidate for DIY work while legal work that is over $5,000 clearly is a candidate for a lawyer to become involved.
Examples of "legal DIY" works abound. For nearly all simple contracts and agreements, there are pre-printed forms or places to generate and print one online. A friend can witness the signing of a contract or agreement and even notarization can be accomplished without hiring a lawyer who has a notary public stamp.
For a limited time period, the SEC has made available online forms for registration and reporting on their website, and if you qualify for the simplified 506(c) and 506(d) exemptions under the recent JOBS Act, those forms will guide you through filing.
A very common example of legal DIY work is to prepare a quitclaim deed to help transfer property from one person to another. By using a real estate deed preparation services, you can buy a quitclaim deed online and then record it in the appropriate county recorders office.
Similarly, a person can fill out and file a Chapter 7 bankruptcy petition without a lawyer if he/she meets the qualifications for a simplified bankruptcy process. Even the IRS has a number of forms online and you can even use a Form 2848 to sign without a lawyer.
Bear in mind that deadlines to file do matter, however, and procrastination can put you out of time to file certain paperwork. Since all courts have strict deadlines for filing, and many require the use of a lawyer, filing an action without a lawyer may not be possible. If your case seems simple and litigation is not anticipated, you should consider using a website like LegalZoom to prepare the form for you for a flat fee.
Before you act pro se (representing yourself), get as much information from the court handling the proceedings. Most law libraries are open to the public for research and they often have self-help sections with forms and instructions.
Work to identify all of the relevant facts, and gather supporting documents to support your case or claim. Be open-minded to the fact that while a lawyer may not be necessary, at some point you may still need a lawyer if facts begin to emerge or counterclaims arise that you need a lawyer to help you deal with.
In sum, LegalZoom may be your first choice of action if you need legal documents, especially simple ones. There’s no reason to pay a lawyer thousands of dollars for what only requires spending maybe a couple of hours online filling out forms.
While speaking to a lawyer won’t hurt you, you need to remember that lawyers have a duty to obtain as much information as possible and charge you based on the amount of time they spend drafting legal documents, which sometimes leads to billing practices that some clients might object to. Lawyers have a perception, whether right or wrong, of being expensive to consumers. So saving money is always useful.
When You Will Absolutely Need a Lawyer’s Expertise
While many legal matters can be addressed through websites like Legal Zoom, there are situations where the advice of an experienced attorney is needed. Determining whether you need a lawyer to represent you in a specific situation depends on a wide variety of factors.
For example, in business transactions between large corporations, it is common practice to have attorneys involved on both ends of the deal. In such situations, a legal contract is drafted that stipulates the terms of the agreement and protects both parties from later lawsuits. Without a legal contract, one party may choose to break the deal without any legal recourse for the other.
Laws can also vary significantly from state to state, and some legal matters are extremely high summation. Without the advice of an experienced attorney, your lawsuit may end badly and even be dismissed. If you are offering a special product or service to a specific market, you may need a patent or a trademark to protect your investment. Such registration requires detailing the particular item you wish to protect, and it is a complex legal process. For these reasons, many entrepreneurs choose to work with attorneys, as they have intimate experience with the nuances of patent, trademark, and publicity laws.
In certain non-profit legal matters, you may need the advice of an experienced legal professional. Certain rules and procedures apply to non-profit organizations. Such organizations are assigned tax-exempt status by the federal government, and decisions must be made regarding what type of non-profit organization is best for you, what assets should be exposed to liability, and what risks might be created.
Use, Experience and Ease of Use
User experience is an area where LegalZoom has an obvious advantage. Whether you’re looking to create a will, set up an LLC or trademark a catchphrase, using LegalZoom is very simple. While there is some information gathering and a couple of clicks to be had on the site, all the forms can be completed in a matter of minutes. LegalZoom delivers the fast service it claims.
The choices are clear. LegalZoom offers three price points for its services. You can choose the cheapest option for "basic" needs for as little as $79 plus government filing fees, or you can pay up to $750 for some services, which can include legal advice on your specific situation for up to 30 minutes.
A Lawyer, in contrast, is not for the budget-conscious, and can be complicated and time-consuming. You’ll have to sit down for a consultation, consider your priorities, then weigh fees for specific tasks versus keeping the lawyer on a retainer basis. You’ll also have to be ready to put in more time if you need additional counsel .
LegalZoom customer reviews are generally positive, despite most complaining that the documentation provided isn’t personalized. Some are dissatisfied at how much money is spent for such bog-standard output. Negative reviews are more common for the document-filing services LegalZoom provides. If the documents you’ve requested are delayed or flawed, there’s not much that can be done.
The reviews of lawyers have been quite mixed. Some lauded their lawyer for friendly service, low fees, and exceptionally fast document preparation. Others are far less happy about their experiences. For example, one revealed a lawyer with whom he had difficulty communicating, which led to misunderstanding of client expectations, and a resulting botched job. Others are unhappy at the high costs, and others have dealt with lawyers who were apparently too busy to effectively serve their clients.
Whichever path you choose, don’t look only at price, but also at other factors, including responsiveness of services and the reputations of those providing them.
Risk Factors and Anticipation
A common question asked by consumers is if they should complete their estate plan using forms and instructions provided on the Internet, the most famous of which is LegalZoom.com. As a California licensed attorney, I thought it helpful to elucidate some of the issues involved in using LegalZoom.com versus an attorney to assist you with your estate planning. These are, generally speaking, the legal risks and considerations that arise when using LegalZoom, along with what protections the attorney-client relationship provides that LegalZoom does not.
Legal Limitations: As we have discussed, LegalZoom.com does not provide legal advice. Therefore, there is no attorney-client relationship established with LegalZoom.com when you use their services. This means that they do not formally represent you and legal protections afforded to you through the attorney-client relationship do not apply.
No Errors and Omissions Insurance: LegalZoom.com is not required to carry errors and omissions insurance (E&O) or malpractice insurance. Malpractice insurance protects you, similar to E&O coverage for accountants, from the actions of licensed professionals as a result of legal errors. For example, if your attorney gave you incorrect advice on how to complete your estate plan, and you or your beneficiaries lost money as a result, you would be able to make a claim under the attorney’s E&O insurance policy. By contrast, LegalZoom.com does not have to carry or be accountable to anyone for its advice, whether it is correct or incorrect. As a result, if the forms you purchased through LegalZoom.com do not reflect your wishes, or do not properly carry out your wishes, the website is not held responsible in the same way.
Lack of Legal Advice: LegalZoom.com does not provide legal advice. Therefore, you are left to guess whether your completed forms are sufficient or incorrect. An attorney will help you get it right, by asking questions that provide context and background information about your situation. For example, you may want a trust, but LegalZoom.com will not tell you why a trust might be appropriate, or not appropriate, for your situation. A lawyer will give you all the options that are available to you, explain the pros and cons of each option, and provide guidance on each option that may be favorable to you.
Testimonials and Reviews
The following testimonials offer a glimpse into the real-life experiences of individuals and businesses who have used both LegalZoom products and services, and traditional lawyers. These case studies highlight the strengths and weaknesses of each option, providing a balanced view of how these services performed for real people.
Angela D., Owner of ABC Boutique
For years, Angela relied on LegalZoom’s LLC formation service to set up her clothing boutique. She found it quick and affordable. "I thought I was saving time and money, but now I see that I was doing more harm than good. I wish I had taken a few minutes to consult an actual lawyer before starting my business," she admits.
Angela’s biggest concern was the absence of personalized legal advice. "Though LegalZoom was great for filing paperwork quickly, I didn’t receive any guidance on how to run my business legally."
After a lawsuit from a vendor over a missed payment deadline (which Angela thought was cleared), she approached a lawyer for the first time. "He explained the legal aspects of my business, including contracts, invoices, and payments, helping me avoid this problem again," he explained.
Angela wishes she’d started consulting a lawyer sooner. "LegalZoom may be fine for some things, but formation services were not one of them."
Carl P., Small Business Owner
Carl, the proud owner of a small coffee shop, utilized both LegalZoom’s patent filing service to secure a trademark for his signature latte blend and a local attorney to draft his coffeehouse’s contracts with suppliers.
"We filed the documentation for the trademark without a hitch. It was relatively simple," Carl recalls. "But when it came to contracts, I ultimately ended up paying more after trademarking, as the lawyer I hired was much pricier than I anticipated. I wish I’d spent more time researching his background."
Despite the contract snags, Carl is content with the valuation he received. "LegalZoom provided a decent quote through its online tool. Based on my experience, I’d say its services are exactly what they advertise. You pay for what you get."
Carl will consult both services in the future. "I’m just more cautious now about picking a lawyer," he explains.
Laura T., Contingency Client
Laura, who used to be a LegalZoom client, recalls her experience. "Looking back, I suppose part of why I chose LegalZoom was its name, which made it sound like it was the ‘legal Google’ of sorts. But that’s all it was, simply a name."
Laura recalls getting stuck in the online filing process review. "I kept getting prompted to re-upload documents that I had already uploaded. It happened several times, and it got really frustrating," she says. She usually kept the browser window open so that she could attempt the upload again, but one time, "the temporary failed upload was no longer available to redraft the process, so my entire filing failed. When things didn’t work out through LegalZoom, I hired an attorney."
Laura’s attorney was able to complete the filing process she launched through LegalZoom. However, in her search for legal advice, she realized that she should have consulted a lawyer first. "Legal advice might have saved me from that particular filing error. After hiring the lawyer, I later realized that he could have helped me file my other trademarks, like my logo, as a single filing. He would’ve saved me money and effort. The lawyer could have done it faster too."
Laura is glad that LegalZoom provided the filing service. "When I Googled my issue, I knew nothing about trademarks. I just needed to quickly file one, to be safe. LegalZoom helped me do that at record speed," she explains.
Conclusion – Choosing the Right Legal Means
A cumulative review of the relevant points highlighted in this article is as follows:
• The accessibility and ease of use of both LegalZoom and a Lawyer provide peace of mind.
• The competitive pricing and flexibility in time commitment offered by LegalZoom are often persuasive to the prospective Client.
• The experience and specialized legal knowledge offered by the Lawyer often outweighs the idea that you can get the same result for less money with LegalZoom.
• If you do not understand the law well, it could mean the difference between life and death if you make the decision not to consult a Lawyer .
• Making the right choice depends upon an honest assessment of your own circumstances and needs and using that to make the most informed decision about how to have your legal issue resolved.
The decision whether to go with LegalZoom or a Lawyer is often not a clear cut one. A good Lawyer will be able to offer valuable insights and services that are not available using LegalZoom although the latter has the benefits of flexibility and lower costs. It is a decision that is too complex to break down into a simple answer but hopefully the insights offered in this article will help you make the right decision for you.