Founded in 2001, California-based LegalZoom bills itself as an online legal technology company seeking to reshape the legal industry by offering convenient, affordable, high quality legal solutions. According to the LegalZoom website, over the past 15 years LegalZoom has provided services to close to four million families and small businesses making it one of the leading companies of its kind on the web.
For those looking to start a new business, like a Limited Liability Company (LLC), LegalZoom’s reasonable pricing options and simple sign-up and filing processes make using the service seem like a no-brainer. However, there are some important factors that aspiring business owners should take into account before choosing LegalZoom to help launch their business.
How does LegalZoom work?
According to the LegalZoom website, filing the paperwork to start a LLC is as simple as:
1) Answer a few easy questions in as little as 15 minutes, 2) Wait for LegalZoom staff to assemble all necessary documents and file them directly, and 3) Receive a complete LLC package by mail.
Though all customers follow these three basic steps, the final product each customer receives depends on the type of package purchased. The most popular package is called the Economy package. It costs $149+fees and includes: filing of LLC state documents, drafting of a personalized operating agreement, verifying the chosen business name is available, providing a financial account authorization letter, and receiving LLC within approximately 30 business days.
The upgraded Standard ($289+fees) and Express Gold ($359+fees) packages provide everything in the Economy package, plus additions such as a customized company seal and binder, customized membership certificates, and a Federal tax identification number (EIN). The Express Gold package provides the quickest turnaround time in as little as seven business days.
As great as LegalZoom’s offerings are, the truth is that for most people, filing for business formation on your own isn’t very difficult. If the company you are trying to create is so complicated that you couldn’t complete the paperwork yourself, LegalZoom’s template documents are likely too cookie-cutter to do the job well, anyway.
Instead, when it comes to the online legal document templates and services provided by LegalZoom, there is a sweet spot based on a person’s timeline, budget, and paperwork comfort level that will determine if LegalZoom is the right choice.
What kinds of questions do you have?
Though LegalZoom has an extensive area of its website dedicated to “Common Questions,” the answers provided are from the general public and are neither drafted, supported, nor vetted by LegalZoom.
This might be okay for those who just want to know more about the costs of LegalZoom, or if there are specific additional services that LegalZoom offers to businesses. However, for aspiring entrepreneurs with tougher questions like, “Is an LLC the best business structure option for my needs?” or “How do I minimize my risks as an employer?” LegalZoom suggests seeking a licensed and independent attorney.
How much are you willing to pay?
LegalZoom’s fees for forming your LLC can get quite (especially with the upsells).
As an alternative, we recommend checking out Northwest Registered Agent ($39 + state fee).
They are more affordable, have better customer support, and don’t try to nickel and dime you with upsells.
Speaking of fees, one of the top complaints surrounding services like LegalZoom is the use of upselling. Beyond the features included in the Economy, Standard, or Express Gold packages, LegalZoom gives users multiple opportunities to sign up for additional services. One such service is a $79 fee for obtaining a Federal tax ID, which can actually be obtained for free online via the IRS EIN Assistant. Others include fees for a registered agent for $159, a compliance calendar for $69, or consultation services for $37.50 per month. This might be a small bother for some but a deal-breaker for others.
Tip: for a free Operating Agreement and EIN check out the guides on LLCUniversity.com. It covers all 50 states.
How quickly do you need your LLC?
Processing times for paperwork at state offices can vary from a day to a few months. Most states offer a “rush filing” option that usually requires walk-in, hand delivery. This is no problem for those who live close to their State Secretary’s office. For those in a hurry to get their LLC up and running but not living close to the State Secretary’s office, LegalZoom has a courier located nearby that is able to submit the rush filing and have the forms processed more quickly.
Are you worried about the fine print?
The LegalZoom™ Services also include a review of your answers for completeness, spelling, and for 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, opinions or recommendations about your legal rights, remedies, defenses, options, selection of forms, or strategies, or apply the law to the facts of your particular situation. LegalZoom™ is not a law firm and may not perform services performed by an attorney.
In other words, when a person files their paperwork through LegalZoom the individual filing, and only that individual, is legally responsible for the entire contents of the paperwork. LegalZoom cannot provide any legally-binding information specific to a person’s situation, and cannot guarantee that customers have completed paperwork correctly or in a manner that would be defensible in court.
The bottom line
Using LegalZoom will probably save aspiring business owners lots of time and could potentially save them money. As a company, LegalZoom has a stellar 15 year history of success with clients. The website is extremely user friendly, and customer service reviews are generally very positive. However, LegalZoom is not an adequate substitute for legal representation and cannot offer the same protections provided by an authorized business attorney.