The Problem With "Legal Zoom" Forms

Most small businesses are run by do-it-yourself types. Entrepreneurs.   People with self-made, “I’ll figure it out”  attitudes.

All of that’s commendable, and that’s partly why I love working with these folks.

But when it comes to anyone using DIY legal forms – whether from LegalZoom or from an office supply store’s shelf – at least three problems inevitably crop up.  Here’s a summary of what to remember:

Problem #1 with DIY Legal Forms: They May Mis-state the Law.

The law constantly changes.  Legislatures make new laws and amend old laws, agencies make new regulations and amend old ones, and courts interpret old laws, claims, and defenses in new ways daily.

How can a form – prepared at some unknown date in the past – keep up with those changes?

No matter how smart the person who drafted the form was – and do you really know that, when the form’s from a company? – there’s no possible way to be sure that the form follows current law.

Take non compete agreements for instance, the law varies in every state regarding their enforceability and requirements.

But while that statute has essentially remained unchanged, the Texas Supreme Court has interpreted the statute in different ways at least three different times — since 2006.

Hiring an experienced attorney can help assuage that concern by knowing they’re licensed, competent, and up-to-date.

Problem #2 with DIY Legal Forms: They May Mis-State the Facts.

Each client’s facts are unique.  While there’s some overlap within similar businesses and industries, no two situations are precisely the same.   This means that each client’s goals and hurdles will be slightly different, and the agreements the client enters should be slightly different.

How can a form – prepared by someone unfamiliar with your specific business – possibly reflect those differences?

Even assuming that the form says it’s appropriate to your industry or business – and do you really know that? – there’s no possible way to be sure that the form achieves what you’re hoping.

Take a form for a non-disclosure agreement, for example, that you hope will protect your trade secrets.

Obviously, if the form “under-protects” you – by omitting types of trade secrets you may use, then the agreement is probably worthless as to those trade secrets.

On the other hand, if the form you’re using “over-protects” you – naming all kinds of information that you really don’t use as trade secrets, then at a minimum you face a skeptical judge (or an unfriendly jury) when you seek to enforce the “real” trade secret protections.

Or it could be worse.  Overly “protective” forms can even invite the other party to file a lawsuit – as one dentist who used a “protective” form she bought online learned the hard way.

Problem #3 with DIY Legal Forms: They Cannot Answer Your Questions

But let’s set all of those issues aside.  Let’s assume that the form follows precisely the law applicable to your situation and that it recites precisely what the facts are that apply to the agreement.

Is there still any reason to have an attorney on hand?

Yes.  The competent counsel can work with you to understand – in a way that no form can – how the form works with all the moving parts of your business.  For instance:

·      Do the agreements tie into or relate to one another?  How?  Is that what you really want?

·      Are there other agreements between the parties that these agreements amend or supersede?  How?  Is that what you really want?

·      How will these agreements work as the business expands, pivots, or is sold?  Is that what you really want?

·      What are the costs and savings of each approach?  Have you chosen the one that makes most sense for you?

·      How comfortable are you with the risks you’ve assumed?  What are your options for negotiating through (or out of) some of those risks?

No form anywhere can answer these questions, or be there to work through those issues with you.

That’s why every DIY legal form worth its salt now comes with a large and clear disclaimer that the company is NOT providing legal advice and is NOT responsible for the use of the form.

These companies well know that their forms do not (and cannot) replace competent legal counsel.

That’s an interesting and appropriate term – counsel.  It suggests an interaction, a responsiveness to your particular needs, and an ability to learn from you as much as to teach you.

Summary

Does all this mean that we should banish DIY legal forms, and out-law LegalZoom?

Not at all.  These forms can often  be used as a starting point to achieve your goals.

But a starting point is not the ending point.  And before you rely too heavily on such a form, particularly for sensitive and highly-valuable assets (like intellectual property protection), seek competent legal counsel who can work through the issues with you.