Lawyers vs. LegalZoom

I’ve heard several entrepreneurs question whether LegalZoom can provide a better value for business formation than an attorney. While there is no doubt that LegalZoom can be far less expensive than an attorney, at the risk of sounding biased, I argue that lawyers provide a better value.

Attorney Alex Segarich recently wrote a blog post detailing ten reasons why lawyers were better than LegalZoom:

1) Whereas LegalZoom’s standard processing time is three to five weeks (for extra money, of course, you can expedite filing), many attorneys can draw up certificates of formation, operating agreements, and other necessary documentation within a matter of days.
2) Lawyers can provide flexible payment schemes (hourly rates, flat fees, payment plans). Online business formation services cannot.
3)The advertised fee only provides the bare minimum of service. For other services in the incorporation process that lawyers normally provide, online business formation services can charge hundreds of dollars in extra fees (for example, LegalZoom charges $79 to apply for an EIN from the IRS, which you can accomplish yourself for free in a matter of minutes). The end result is that the price you end up paying an online service may rival an attorney’s fees.
4) Online services aren’t equipped to speak with you about your business’ needs and goals to determine the proper form of organization for you. An attorney will sit down to listen to you to advise you on what the best form of business is for you.
5) Online services usually don’t provide you with other state and local forms you may need, including business licenses, DBA forms, unemployment insurance registration, etc.
6) The model bylaws and operating agreements provided by online services are just that, models. An attorney can draft up bylaws and operating agreements that provide the owners with the rights and responsibilities they want and need.
7) Online services also provide additional legal documents, such as buy-sell agreements, shareholder agreements, customer agreements, employment letters, etc., for additional fees. But like bylaws and operating agreements, online services cannot tailor legal documents to meet your specific needs.
8) Online services cannot give advice on your business’ policies in the areas of intellectual property, employment, and liability. It also cannot keep you up to date on changes in the law to keep your business in compliance.
9) Online services often do not keep up with new developments in business law, such as benefit corporations or new crowdfunding regulations. Attorneys can alert you to less well-known options that can help you better achieve your vision and goals.
10) When a legal issue comes up with your new business — and it invariably will — online services are limited in the assistance they can provide. While some have lawyers you can ask questions of (for an extra fee), it does not really compare to the knowledge of your business an attorney who assisted in its formation can bring to bear.

In the end, using LegalZoom or another online business formation service can cost as much as hiring an actual attorney to prepare all the documentation for you. The value proposition of an attorney is having someone you can explain your business goals and needs with and who can tailor bylaws, operating agreements, and other legal documents to those goals and needs. Furthermore, having an attorney assist you with your business formation gives you a professional you can turn to when other legal issues arise who knows the legal side of your business as well as (if not better than!) you do, and can provide the detailed and knowledgeable assistance to match.