LegalZoom CEO John Suh provides some interesting insight on how LegalZoom can be utilized to help entrepreneurs and startups. Their perspective is important for us as future lawyers to understand, as they offer to help entrepreneurs start and run their companies for a flat fee of $300 per year.
Link: http://fortune.com/2016/01/21/startup-legal-mistakes/
Solid post Riley
Very interesting article Riley. After reading the article, I am curious how many of the ‘over one million small businesses’ that LegalZoom has helped start have run into legal trouble down the road. It may be convenient and affordable for a start-up to pay $300/year to get help jumping through some of the initial legal hoops that exist; however, not getting legal advice specifically tailored to the particular start-up and its industry may prove more costly down the road. LegalZoom did add lawyers in 2010 and said they have had over 200,000 one-on-one consultations with entrepreneurs, but that is a small fraction of the over one million companies they have helped start. Furthermore, providing one-on-one consultations does not necessarily ensure the most effective and accurate legal advice. As LegalZoom’s CEO, John Suh, said, “It doesn’t cost a lot to do it right, but if you make a mistake, it can be devastating.” I agree with Mr. Suh, and that is why I’m skeptical that going the LegalZoom route is the way “to do it right.”
Obviously LegalZoom is much cheaper than hiring a lawyer in starting a business. I agree with Phil that this may lead to problems down the road. There’s probably a reason why lawyers are so much more expensive – you often get what you pay for. In lots of cases, standard form contracts don’t adequately reflect the needs of the party. However, it would be interesting to know more statistics about LegalZoom. Maybe the risk of inadequate advice from LegalZoom is “worth it” compared to hiring an expensive lawyer in certain cases. If you can’t afford an expensive lawyer, LegalZoom may be the only option.
Mike, I totally agree with your points. It seems like LegalZoom would be beneficial in creating a will, for example, but it would never be an appropriate option to handle complex legal matters. Further, the success of this program depends on who is using it. If an educated person with some generic legal knowledge uses LegalZoom, they are far more likely to have favorable results compared to an uneducated person that is desperate for legal help. I have a hard time deciding whether I am for or against LegalZoom because I am not sure that the cons outweigh the pros. However, we should definitely be concerned for the safety of those that rely on LegalZoom and are not highly educated.
Nice article. Any time I hear the name “Legal Zoom” I get a little annoyed. I practice Trademark Prosecution and have had start-up clients choose Legal Zoom over the cost of my or my firm’s legal services. Its rather tragic when it happens, because we know as practitioners that this is not the best option for them, but in an effort to save money or an attempt to navigate a system they don’t really understand, they are undeserved. In this article Rampenthal states “legal profession has excluded the customer.” I question how accurate this is. I think LegalZoom has done a nice job of advertising itself as accessible to the “common man” and that small businesses don’t even consider the benefits of a lawyer. Eventually leaving it to an attorney to “sell themselves” and their necessity to a client base who likely wasn’t looking in their direction to begin with. Perhaps what Rampenthal means is that attorney’s should have a more competitive pricing? However, I find it hard to stomach lowering my prices to whatever it may cost a computer to e-file a form.
Ashlie:
Great points. Your comment brings to mind the fact that the legal profession provides a SERVICE, not a PRODUCT. What we offer is expertise, advice, and judgment. These are not things that can be generated using complex algorithms, or cranked out on a form.
That said, the legal profession has priced itself out of its own market. To be honest, I have seen his dynamic play out in multiple industries. Nothing and no one is immune. Note what I always ask the class to observe – the extent to which people rely on the legal system to prop up what is essentially a failing business model. That sometimes works, but only temporarily.
Our salaries determine our fees, which most people cannot afford. Our salaries also drive the billable hours requirements, which have hit ceilings that cannot be increased – or even sustained. Our salaries are even driving (what I view to be) negative changes to law school curricula – pushing for more professional skills at the expense of core content (because at the prices they pay, firms cannot afford to “apprentice” first-year associates).
And – for different but related reasons – the increased costs of a legal education also drive starting salaries higher.
LegalZoom’s success and popularity – notwithstanding its inadequacy as a substitute for traditional legal representation – is textbook disruption, and reflects widespread dissatisfaction with the legal profession.
Most businesses being disrupted do not change – they either will not, or they cannot. Thus, they end up having the rug ripped out from under them.