On Self-Help Legal

I often get asked about a certain self-help legal site, where they offer legal forms that they fill out on your behalf once you've answered a few questions about the party or parties involved. And at the prices they offer, it sounds like a fantastic deal! I mean, you don't need some big fancy document, and they even guarantee your satisfaction! Well, here's what you won't read unless you scroll to the bottom of their homepage, and they click on the "Full Disclaimer" link:

Disclaimer

LegalZoom is not a law firm, and the employees of LegalZoom are not acting as your attorney. LegalZoom's legal document service is not a substitute for the advice of an attorney.

LegalZoom.com, Inc. ("LegalZoom") is a registered and bonded legal document assistant, #0104, Los Angeles County (exp. 12/09). LegalZoom cannot provide legal advice and can only provide self-help services at your specific direction.

LegalZoom is not permitted to engage in the practice of law. LegalZoom is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.

This site is not intended to create an attorney-client relationship, and by using LegalZoom, no attorney-client relationship will be created with LegalZoom. Instead, you are representing yourself in any legal matter you undertake through LegalZoom's legal document service.

LegalZoom provides an online legal portal to give visitors a general understanding of the law, as well as to provide an automated software solution to individuals who choose to prepare their own legal documents. To that extent, the site publishes general information on legal issues commonly encountered.

LegalZoom's document service also includes a review of your answers for completeness, spelling and grammar, as well as internal consistency of names, addresses and the like. At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. LegalZoom and its services are not a substitute for the advice of an attorney.

Although LegalZoom takes every reasonable effort to ensure that the information on our website and documents are up-to-date and legally sufficient, the legal information on this site is not legal advice and is not guaranteed to be correct, complete or up-to-date. Because the law changes rapidly, is different from jurisdiction to jurisdiction, and is also subject to varying interpretations by different courts and certain government and administrative bodies, LegalZoom cannot guarantee that all the information on the site is completely current. The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance.

Therefore, if you need legal advice for your specific problem, or if your specific problem is too complex to be addressed by our tools, you should consult a licensed attorney in your area. Visitors to our site may obtain information regarding free or low cost representation through your state bar association or local legal aid office.

This site and some of the articles on this site contain links to other resources and businesses on the Internet. Those links are provided as citations and aids to help you identify and locate other Internet resources that may be of interest, and are not intended to state or imply that LegalZoom sponsors, is affiliated or associated with, guarantees, or is legally authorized to use any trade name, registered trademark, logo, legal or official seal, or copyrighted symbol that may be reflected in the links.

LegalZoom is not responsible for any loss, injury, claim, liability, or damage related to your use of this site or any site linked to this site, whether from errors or omissions in the content of our site or any other linked sites, from the site being down or from any other use of the site. In short, your use of the site is at your own risk.

Wow. Well, if you made it through that whole thing - congratulations, and I'll bet you're even more scared than you were before. And you should be, the site was founded, and is run, by very successful attorneys. They didn't get where they are by not knowing how to cover themselves. On the off chance you didn't make it through the whole thing, here are some of the "Greatest Hits":

LegalZoom is prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.

So, guess who's responsible if you pick the wrong form? And who are you supposed to ask if you don't even know where to start? Well the answer to both of those questions is not the folks at LegalZoom.

At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation.

So, among the "questions" they ask you to fill out your forms, they don't ask you about the facts of your situation? Even the person who does your hair asks that before they offer to help.

...the legal information on this site is not legal advice and is not guaranteed to be correct, complete or up-to-date. Because the law changes rapidly, is different from jurisdiction to jurisdiction, and is also subject to varying interpretations by different courts and certain government and administrative bodies, LegalZoom cannot guarantee that all the information on the site is completely current.

So, seeing as how the forms they're offering don't have to be "correct, complete, or up-to-date" (all things that can invalidate your document) the "Satisfaction Guarantee" they're offering guarantees what exactly?

Okay, besides the Draconian disclaimer, what's the problem?

They offer cookie-cutter solutions to often complicated legal problems. The formation of a company can be extremely complicated, and usually involves multiple owners, and a host of other threshold matters which should be addressed in the foundation documents.

Say, for example, that you want to form a company with three owners. Two of them will be contributing expertise and goodwill (client lists), and one will be contributing starting capital. Although the profits will be shared in equal parts, the starting capital is expected to be paid back in full before profits are distributed, and the "capital" owner will be managing the company. All three owners will be taking different salaries (based on personal need), which will be "trued up" at the time of any distributions. And as a final part of this hypothetical, let's say you order an "Express Gold" all inclusive LLC kit from LegalZoom ($359.00 + state fees).

The "custom" operating agreement they purport to provide is only "customized" with the names and addresses of the parties. All decisions of the proposed LLC default to being made by a "majority" of the members, including the election of the "Manager" of the company. There are no provisions regarding capital accounting, or what, if any, obligations will need to be satisfied prior to the distribution of monies. All the initial capital accounts are defaulted to $0. Well, that's a lot of legal talk - so what does it mean???

For the hypothetical LLC in question, it means that the non-capital members have the absolute authority to remove the capital member from her position as Manager and replace her with one of them. It means that the money paid in by the capital member will not be accounted for, nor will it be repaid preferentially to equal distributions from the company (e.g., if the capital member put in $50,000 in start-up capital, and the company makes $120,000 profit to be distributed at the end of the year - each member will get $40,000, leaving the capital member with a $10,000 loss for the year). What's more, if the company books a loss for the year, that loss is allocated to the members in equal part for tax purposes (e.g. if the capital member contributes $120,000 and it's all lost, that member will only be able to account for $40,000 of that loss for income tax purposes - potentially paying regular income tax on an additional $80,000!).

That LLC Operating Agreement doesn't sound so "custom" anymore, does it?

What's more, you paid about $300 too much. Attorney's Corporation Service is a legal service provider with a much smaller marketing budget and much less well-known founder. It is also the service used by thousands of California attorneys to get their corporate filings accomplished in an expeditious manner. (http://www.attorneyscorpservice.com). Their highest priced LLC kit? $105.00 and in-person filing for $45.00. LegalZoom's "expedited" service is ACS's "standard" service (7-10) days, and costs $100 more. For $25 with ACS, you can be filed in 3-4 days.

The most egregious bit of misinformation on LegalZoom's site is their assertion that an LLC formation will cost you approximately $1740.00 to have an attorney do it. Which they base on an average rate of $266.00 per hour, and a 6.5 hour bill to form an LLC. This is plain fear-mongering. If a lawyer tells you they need to bill 6.5 hours to form a basic LLC, find a different lawyer. In truth, every lawyer has access to standard LLC forms, and doesn't need to spend any time drafting them. What's more, they can actually take your factual situation into consideration to make sure you don't fall victim to some of the situations mentioned above.

What you can be certain of with LegalZoom is that you won't get any advice, protection or guarantees. You won't get a good price, you won't get honest service and you won't get the thing you really wanted in the first place: a little help.