In the age of the “Do-It-Yourself” (DIY) mentality, entrepreneurs who are resourceful and eager to cut costs may attempt to perform legal work themselves by using the Internet as a resource for sample agreements, forms, and answers to their legal questions. While the Internet is an amazing tool and the great equalizer, it is no substitute for advice from trained legal counsel. Just as identifying your medical symptoms on sites like WebMD is no substitute for visiting a doctor, using the Internet alone as the source of legal advice can cause more cost and headaches in the long run. The following examples illustrate some of the downsides to using the Internet instead of a lawyer.
1. DIY Sites Lack Customization:
Many entrepreneurs believe that filling out a form on a site like LegalZoom is all they need to do to start a business. However, taking this approach will deprive the entrepreneur of crucial tax and legal advice that could cost hundreds of thousands of dollars later.
For example, is the owner concerned about personal liability? How many shareholders will there be? Will it be a closely-held family business, or will there be many investors involved? How will the profits be distributed? What steps need to occur before the entity can go public or be sold? What makes the most sense: an LLC, LLP, general partnership, professional corporation, non-profit, or other entity?
2. Attorneys Use Their Experience to Anticipate and Plan For Potential Problems
Do you want an agreement to settle partnership disputes through arbitration in order to prevent protracted and costly litigation? What will happen in the event of a dispute among partners or shareholders? How will they buy each other out? What happens if one partner dies and his portion of the business is left to his spouse, and now you are in business together?
If these considerations are not ironed out at the outset of a business, they can come back to haunt the owners later when things go awry and relationships are strained with partners, vendors, or clients. For example, partnership dissolutions are so emotionally charged that they are akin to a divorce. Think of the proper business documents and contracts like a pre-nuptual agreement–you would rather plan for the unthinkable now, while you’re excited about the future, than later when communication breaks down and anger sets in.
Think of hiring an attorney like purchasing business insurance: if you handle everything correctly at the beginning, you can minimize the risk of liability later.
2. The Potential to Overlook Details that Can be Fatal to a Lawsuit
Another problem with the DIY approach to legal work is that a person who is not trained in the law does not know what he or she doesn’t know. It takes three years of intense training and many years of practice to learn all the nuances of the law. For example, each type of action has its own statute of limitations or deadline to file the claim or application. Without consulting an attorney, the user may miss this deadline and be forever barred from bringing the claim or application. Also, the law is different in each of the 50 states. An attorney will know the laws of the particular states and whether it makes to incorporate in another state, while websites may not provide that kind of advice. An attorney will need to collaborate with local counsel when a matter takes place outside his or her state. A tax professional can discuss the pros and cons of forming a business entity in one state or another, and can also provide advice on potential tax advantages and liabilities.
In addition, it is common for DIY’ers to prepare a form the wrong way or miss a minute detail, resulting in its rejection from government agencies, for example. Bureaucratic agencies can be unforgiving, and one misspelling or mistake on a form could lead to its rejection and weeks of lost time while it is resubmitted and reviewed again.
For the DIY generation, it may make sense to want to do everything ourselves, even form our own corporations, write our own wills, and file our own trademarks. However, in the case of LegalZoom or other DIY legal websites, you essentially “get what you pay for”—which is merely a form that you can edit yourself, and which is often already available online for free. What you don’t get is the advice of a seasoned attorney who can tell you not only what to do, but what not to do. That alone can save you hundreds of thousands of dollars, many headaches, and avert litigation and the strain on personal and professional relationships. Most of all, it can provide peace of mind.
If you have DIY legal experiences to share, please post in the comment section below.
The Grady Firm attorneys specialize in business advising for small business and Startup owners. To schedule a complimentary consultation, call (323) 450-9010, or fill out a Contact Request Form.