Every small business owner has legal questions, even seemingly minor ones.
- “What are the legal ramifications if I include my wife in the LLC?”
- “Can I pay my personal expenses from my LLC checking account?”
- “I want to borrow money from my cousin for the business, what should I say in the agreement letter?”
- “My landlord wants to throw me out because he says I’m running a business from my apartment. Can he do that?”
You can always call your local attorney, but he has to make a living, too, so he bills every time he takes your call. From my experience as an entrepreneur, virtually all start-ups and most young small businesses are:
Raising capital is a question for another time, but one way to find reasonably priced legal advice is through pre-paid attorney services.
Are They Worth It?
Definitely … with some caveats. A timely phone call to the right person can save you from making a dumb legal mistake.
Understand that legal subscription services like LegalShield, Rocket Lawyer and LegalZoom are not law firms; they are matchmakers between you and attorneys they have on retainer to take your calls and review your documents. In some cases they’ll write demand letters, and one company will even defend you in civil court.
Most of them charge about $40 a month or around $300 a year, which can be cancelled any time. That fee goes up as the businesses get bigger, usually starting at 10 or fewer employees. Most have a free trial period where you can ask a limited number of legal questions and get free business forms.
How Do They Work?
Once you sign on, usually you get an unlimited number of half-hour phone consultations with a lawyer in your state. The catch is that each question has to be on a different legal matter. (They don’t want you calling with the same question over and over because you’re not getting the answer you want to hear). You email your question and they give you a choice of an appropriate attorney in your area. A lawyer on the phone for 40 bucks is the heart of the deal, and remember, you can quit if you get your initial questions answered in a month or two.
For those quickie questions, most companies allow emails twice a month, but limit the size of your written question to 600 characters — about four tweets in modern online measurements.
They’ll review your business documents, usually up to 10 pages. Some have a limit of two reviews per month. This can be a good deal, for example, when it comes to lawsuits. Either you’re suing somebody or somebody is suing you and you want to know if there are grounds for a case. This, to me, is extremely valuable. I have never been in a business without them.
Most of these services do not limit you to business-related questions. You can ask about wills, trusts, and taxes, even about personal bankruptcy, divorce, or a DUI.
Particularly useful is that most companies offer a stepped-up service for starting-up a small business, including overseeing the creation of an LLC, a corporation, a sole proprietorship, or a DBA, securing an EIN, a trademark, a copyright, state filing regulations, and so on.
What’s in it for the Lawyers?
I spoke to three lawyers about the benefits to them. There is, of course, a steady source of additional income from the subscription services. They take your questions only after you make an appointment that fits their schedule. In other words, they’re talking to you during their down time.
Nobody said this, but all of them are merely responding to your questions, probably off the top of their heads, and their answers are likely to be pretty general in terms of interpreting the law.
Amanda Fornwalt, an attorney in Huntington Beach, said she liked “the variety of the questions” but stressed that under her LegalZoom arrangement, “We’re not representing you, we’re not a substitute for an attorney on retainer, we’re something in between.” It’s also a way to get new clients. When issues come up beyond the scope of brief consultations, you may choose to hire them outside of the subscription service — at a discount.
Who Are the Players?
LegalZoom is best known for its vast variety of forms and templates which cost around $15 each. But when subscribing to the monthly legal service, they are all free and unlimited.
Rocket Lawyer offered a free first year Registered Agent service with the subscription. (Before getting a license, all businesses have to register an agent with a physical address — no P.O. boxes — to receive and forward official notices). You can register yourself but it’s public and you’ll be deluged with junk mail.
Of all the companies I checked out, one in particular surprised me. LegalShield, a 45-year old company out of Ada, OK, offers all the services mentioned above plus one more: LegalShield will actually defend you in civil court (including 15 hours of prep time, and 60 hours of a lawyer in the courtroom). For a business with 10 or fewer employees, that service costs $89 per month. There’s a catch, though: the defense is only for cases initiated after you’ve signed up.
All the services I looked at had discount deals if you have to hire a lawyer for bigger issues. Using someone on their list gets you a discount ranging from 25% (LegalZoom) to 40% (Rocket Lawyer) off the regular hourly fee.
This is a buyer’s market, so contact more than one to start. You’ll know better than anyone what kinds of questions you have in mind and be confident they can answer them before you subscribe.
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