SHOULD YOU USE AN ONLINE LEGAL FORM COMPANY FOR YOUR BUSINESS ?
The proliferation of Internet usage and access has increased the use of online legal form companies by business owners . Many owners look to various websites and form services for entity formation documents , employment agreements , asset purchase agreements , contracts with third parties , and other general corporate governing documents . Companies like LegalZoom and Rocket Lawyer contrast their services with those of a law firm by advertising “ common ” legal documents at a fraction of the price and “ without expensive hourly fees .” These companies offer services regarding forming , naming , and running a business , with all of these resources just a mere click away . They even provide you with forms for you to prepare your own will or a deed to transfer real property .
Unfortunately , corporate law is absolutely not a form practice . Online form companies are not the same as a law firm , and more importantly , they cannot give you legal advice customized to the individual needs of you or your business . LegalZoom ’ s disclaimer , for example , states : “ LegalZoom is not permitted to engage in the practice of law . LegalZoom is prohibited from providing any kind of advice , explanation , opinion , or recommendation to a consumer about possible legal rights , remedies , defenses , options , selection of forms or strategies .” The disclaimer even says that LegalZoom ’ s information is “ not guaranteed to be correct , complete or up-to-date .”
A common nightmare resulting from poorly prepared corporate documents arises in the context of “ business divorces .” There are certain questions that cannot be addressed by a standard online form . What are the owners ’ day-to-day roles ? What constitutes a “ fundamental ” change in an LLC or partnership ?
By : Andy Krone , Attorney at Law Waldron & Schneider
What happens when the one owner decides to retire ? What do the owners do when they are deadlocked on an important decision ? How do they break a tie ? What if someone is buying into a business that was established 15 years ago ? What do owners do when one owner wants to sell his interest to a third party ? What recourse does one owner have if he discovers that the other owner has started a separate entity that is stealing business opportunities from the company ? These types of questions are among the hundreds of issues that simply cannot be solved by downloading a form online and filling in the blanks .
Every day savvy business owners make mistakes when setting up and operating businesses using forms downloaded from the internet . Two women went into business together to open and operate a retail arts and crafts company . While the first owner had contributed the majority of the initial capital , she also made the mistake of incurring a large amount of personal debt to support the partnership throughout its shortlived existence . The owners had established the new entity using a partnership agreement from LegalZoom . Unfortunately for the capitalizing owner , she was only entitled to 50 % of the company assets based on the terms of the partnership agreement . Therefore , upon dissolution , she was only able to apply 50 % of the assets toward paying down her personal debts .
Each and every provision in a corporate document can and should be unique to an owner ’ s business . Every business owner needs to put the same time and care into preparing corporate documents as they would into any other aspect of their business .
MOMENTUM / February 2017 13