In Part 1, we started exploring do-it-yourself (DIY) legal products compared to hiring an attorney. DIY legal products can be appealing because they can be far less expensive than hiring an attorney, but it may not meet your needs.
In a comparison of a will provided by LegalZoom and a will from an attorney, I think most people would agree that a more educated and legally proficient person may be able to obtain a better end-result with DIY product than a less educated and less-proficient person. In exploring this theory, a Minnesota attorney named Gregory Luce decided to compare LegalZoom with a will drafted by an attorney. The article about his experience can be found here.
There are two things that caught my attention with the article, the first is that Gregory Luce was not trying to get more estate planning business, he was not an estate planning attorney, he is the Practice Development Director for the Minnesota State Bar. The endeavor was for educational purposes, to do a real comparison. In contrast, I practice in transactional work (non-litigation) where DIY companies claim to provide high quality comparable products. I have seen first-hand the differences in the products and I do not like seeing people make mistakes without fully understanding the consequences of a DIY transaction. The second thing that caught my attention was some of the items pointed out, such as “80 percent of the people who fill in blank forms to create legal documents do so incorrectly” and it did not address specific protections for his child from his previous marriage, possibly disinheriting his eldest son.
Similar to Mr. Luce’s experience, I decided to explore how LegalZoom worked. Although I didn’t purchase anything from LegalZoom, I entered information to open my own law firm (for Professional Services), including the states we planned to be doing business on the LegalZoom website.
- LLC? C Corp.? S Corp.? Confused about your options? Answer a few simple questions and find out which one may be right for you. — I selected “Help Me Decide”
- Then I was asked “Where do you plan to run your business?” — I selected From an office or location separate from my home (and did not select: From my home or home office)
- In what state is your business officially located? — I selected Wyoming
- Will your business be outside of Wyoming? — I selected Yes
- Which of the following describes the nature of your business? — I selected “My employees or I will physically conduct work outside of Wyoming (and did not select: My business will ship goods to customers outside Wyoming)
- Which states outside of Wyoming will your business operate? — I selected California, Colorado, Montana, North Dakota, Nebraska, Missouri, Washington DC, Maryland, and Virginia
- What is your primary business activity? — I selected Professional Services
- Will your business have other owners besides yourself? — I selected Yes
- How do you intend to finance this business? — I selected my own money
- Which of the following best describes your goal for the business? — I selected Grow the business but keep it with original owners or within our families (and did not select Grow the business so it can be publicly traded nor Sell the business)
I chose the answers that I would have chosen in establishing my own firm, with my expectation of where the firm is going to operate in the future, from the options they provided. The result: 81% of customers in Wyoming chose to form a Limited Liability Company (LLC). If I change the options to form the entity in California, LegalZoom said 67% of their clients form an LLC and 33% form a Corporation. These results could make most people think that the Limited Liability Company is the best option. The problem with this result is that not all states recognize a Professional Limited Liability Company and if my firm were to operate in a state that does not recognize a Professional Limited Liability Company would be a Professional Corporation. Please also keep in mind, these questions and answers from LegalZoom do not look at other considerations, such as tax, corporate governance, etc. LegalZoom puts a round peg into a square hole, many times it may fit, but it does not cover the intricacies of life, nor the law.
I think every lawyer (and law student) quickly learns that they are always being asked for (free) legal advice. Nearly every week I get asked for either “free” advice or “pro bono” advice. In law school, I often replied with “I am not a lawyer, I am a law student. I may know enough to think I know the answer, and be completely wrong.” Now I can’t use that excuse, but I also know to keep to the areas of law that I am familiar and comfortable with, and where I am licensed to practice.
In conclusion, although things can go well with a DIY document, mistakes can be far costlier than even not doing anything and even if it does work, it may not cover the intricacies of what you really want to happen, or what you would have wanted if you knew the option was available. If you opt to purchase a DIY document, you may want to have it reviewed by a licensed attorney. Best case, you find out that the document meets all of your needs. Worst case, you find that your document does not meet your needs, and then you can obtain a properly drafted document by an attorney.