Frequently Asked Questions Concerning Entity Formation and Choice of Entity Issues
1. Why shouldn’t I just use Legal Zoom? Just as Turbo Tax can help you prepare your taxes and even provide limited advice, Legal Zoom can help you choose and create a business entity. However, Turbo Tax is not appropriate for everyone, and the more complex your taxes are, the less and less useful Turbo Tax is -- "pop up" answers to frequently asked tax questions only goes so far in some instances. The same is true for Legal Zoom. In my experience, Legal Zoom and similar providers work best where (1) you know exactly what business structure you want (and why you want it), and (2) that business structure is very, very simple (e.g., a single member LLC or a “mom and pop” business that wants to incorporate).
But even where the business structure is simple, with Legal Zoom, you get a website, not your own attorney. (Legal Zoom does provide limited attorney assistance, but at $14.99 - 29.99 a month, I would be inclined to say that you get what you pay for.) In my experience, businesses that incorporate with Legal Zoom and similar providers are more likely to “incorporate and forget” which leads to problems down the road. Even if the entity documents are properly prepared, problems often arise from the client’s failure to contemplate various legal issues which arise in the course of their business. Legal Zoom only works if (1) you already know your legal issue, and (2) Legal Zoom has a document which addresses that issue. The role of an attorney is not just to draft documents, but to anticipate legal issues. The attorney’s ability to anticipate these legal issues stems both from their education and training, but also their ability to understand your business structure and objectives. Legal Zoom simply cannot provide that understanding.
But even where the business structure is simple, with Legal Zoom, you get a website, not your own attorney. (Legal Zoom does provide limited attorney assistance, but at $14.99 - 29.99 a month, I would be inclined to say that you get what you pay for.) In my experience, businesses that incorporate with Legal Zoom and similar providers are more likely to “incorporate and forget” which leads to problems down the road. Even if the entity documents are properly prepared, problems often arise from the client’s failure to contemplate various legal issues which arise in the course of their business. Legal Zoom only works if (1) you already know your legal issue, and (2) Legal Zoom has a document which addresses that issue. The role of an attorney is not just to draft documents, but to anticipate legal issues. The attorney’s ability to anticipate these legal issues stems both from their education and training, but also their ability to understand your business structure and objectives. Legal Zoom simply cannot provide that understanding.