To (Legal)Zoom or Not to (Legal)Zoom: A Look Into the Online Legal Services Industry

Credit: Above the Law

The year is 2022 and the internet is, more than ever before, a prominent part of individuals’ everyday lives.  The internet is responsible for not only the creation of new industries but also the reshaping of existing trades and professions to meet the needs of a digital era.  For example, legal services, which have traditionally only been available via in-person meetings at a local law office, are now accessible from a home computer or cell phone.  Through online legal service providers such as LegalZoom, Rocket Lawyer, and LegalShield, people can now skip the formalities and take care of their legal needs the moment they are ready to do so.  But the question is, should they?

Who is behind LegalZoom?

LegalZoom was founded in 2001 by three lawyers: Brian Liu, Edward Hartman, and Brian Lee.  Although they were confident in their new business venture’s potential success, they were not well-known within the legal world and were looking to partner with someone who not only had the credibility but also the reputation “to help get LegalZoom off the ground.”Enter Robert Shapiro.

Graduating from Loyola Law School in 1968, Robert Shapiro rose to prominence in 1994 when he became part of O.J. Simpson’s legal defense team.  He was nearly synonymous with the O.J. case itself.  The considerable amount of press coverage Shapiro received throughout the trial made him the perfect candidate to increase LegalZoom’s visibility.  Shapiro took a spot on the board from the company’s launch on March 1, 2001, and is still a key member of the company.

What is Legal Zoom’s Market Share?

According to IBISWorld, from 2016 to 2021, the U.S. online legal services industry grew 6.3%, a rate faster than the overall economy.  In 2021, the industry had a market size of nearly $9 billion.  Of that $9 billion, LegalZoom represents $555 million, or roughly 6%, with competitors Rocket Lawyer and LegalShield representing $269 million, and $1.5 billion respectively.  In total, these three companies represent just over 25% of the total industry, which is a remarkable statistic considering the industry is currently comprised of more than 14,000 online legal service providers and continues to grow.  Compared to the nearly $350 billion in revenue generated by the total legal services industry within the U.S., online legal services specifically reflect about 2.5% of the total market.  While 2.5% may not appear to be a sizable portion, it is significant because it showcases that more people are looking to the online model to fulfill their legal needs.

Having helped over four million businesses and consumers, LegalZoom is a leading company within the field that provides legal services to its customers exclusively online.  As a platform that allows people to create legal documents without necessarily having to hire a lawyer, it has the potential to provide its services at a fraction of the cost of a traditional lawyer.

What types of services does LegalZoom provide?

Priding itself on being a company “for the many”, LegalZoom, like many other online legal service companies, provides services focused on business activities, wills and trusts, family law, real estate, and intellectual property.  Although the main appeal is based on the option to “do it yourself” by following the step-by-step legal forms provided, LegalZoom also now offers “year-round attorney help” to assist with someone’s legal needs.  While the former is made up of a one-time fee based on whatever forms are selected and utilized, capitalizing on live legal help from a licensed attorney is only available via a subscription model and requires a minimum of a six-month commitment.

While this list of services might seem limited in nature, these specific areas make up a significant part of the law and attract many people to the site.  For instance, of the nearly 470,000 businesses that currently make up the marketplace in the U.S., each of those could turn to LegalZoom to “register their business, run their business, or protect their brand.” These are the three categories that make up LegalZoom’s services that are available to businesses, with one of the most popular being the “register” category.

Businesses that are corporations and LLCs typically follow a similar formation pattern, as each require that documents be filed with the Secretary of State to secure their desired legal status.  For an LLC, that document is known as the Articles of Organization, whereas for Corporations that document is referred to as the Articles of Incorporation.  By filing these documents with the Secretary of State, it signifies the business’s formation.  Because of the similar formation requirements across states, starting a business in the U.S. is a process that does not require the hiring of an attorney.  Entrepreneurs launching a business, for instance, may opt to complete this filing on their own.  Options like LegalZoom are appealing because of the troves of information available that could be helpful with various legal issues and services like conducting a name search or electronic filing, all with low costs.

Is Using an Online Legal Service Provider Advisable?

Aside from the cost savings that a customer could receive by using a platform like LegalZoom and the associated conveniences, there are several risks associated with using “DIY” or Do-It-Yourself legal services.  For instance, LegalZoom does not guarantee legal sufficiency, nor does it promise that the documents it makes available to customers will be complete or up to date.  Given that the law changes constantly, a business filing such as Articles of Incorporation that was current and included all the necessary information in accordance with a statute one day, could become outdated the next week.  A consumer utilizing the service could be set for failure before they even begin.

Some of these concerns came to the fore in 2010 when LegalZoom became the subject of a class-action lawsuit.  The lawsuit alleged that the company was engaging in deceptive business practices and practicing law without a license.  The action was brought by the executor of a decedent’s estate who had used LegalZoom to create and execute a will and living trust with the belief that “the documents they created would be legally binding and that if they encountered any problems, the company’s customer service department would resolve them.”  However, the customer service representatives at LegalZoom are not lawyers and as such cannot provide legal advice.  When the financial institutions holding the decedent’s money refused to accept the LegalZoom documents as valid, the executor was forced to hire an attorney to settle the estate, which resulted in thousands of dollars in attorney fees.

As evidenced by this suit, online legal services can create a false sense of security because of the many nuances of the law.  Ironically, this is often the reason people seek legal counsel in the first place. In the end, LegalZoom reached a settlement with the plaintiff and the case was resolved.

In the end…

The allure of savings can be difficult to overlook when the online alternative is a fraction of the traditional approach.  This is further complicated by the fact that the traditional approach’s costs are often prohibitive.  “For nominal fees of a few hundred dollars or less, people can set up their entire will in less than one hour.  Spend even just one hour with a lawyer and you’ll easily creep past that.”

When deciding on whether one should contact a local lawyer or instead just powering up their laptop for the legal matter at hand, there are some key benefits and risks that should be considered.

Some key benefits include the associated cost savings of a do-it-yourself platform by cutting out the middleman, and the inherently simple, convenient nature that allows one to take care of their legal needs the moment they are ready to do so.  The key risk, on the other hand, centers on the fact that one may not always be working with an expert (an attorney) unless they sign up for the subscription model, which starts to cut into the beneficial cost savings and could impact the accuracy and reliability of the documents.

Always weigh your options to determine the best solution.

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About Jaclyn Garcia (1 Articles)
Jaclyn Garcia is a third-year law student at Campbell University and serves as Managing Editor for the Campbell Law Observer. Originally from Hamilton, New Jersey, she attended Rider University where she received a Bachelor’s degree in Finance and International Business, along with a Master’s degree in Business Administration. Coming to Campbell with nearly a decade of work experience under her belt, Jaclyn is involved with several student-run organizations such as Women in Law, the Intellectual Property Society, the International Law Association, and the Business Law Association, where she currently serves as Treasurer. She has an interest in all areas of business law, specifically those pertaining to contracts, data privacy, mergers and acquisitions, and start-ups.