With the increased popularity of available online services, legal document preparation has also gone the way of the World Wide Web. Users simply fill out a questionnaire, and the online service spits out legal documents. These online legal services promote themselves as “fast,” “easy,” “convenient,” and “affordable.” However, these supposed benefits can be deceiving.
First, online services generally aren’t capable of customizing documents to the user’s needs and goals. They simply regurgitate what the user inputs. The familiar mantra “garbage in, garbage out” comes to mind. For example, if a user tells the online service to set up a corporation, the service will do just that, even though the user’s true needs might be better served by creating an LLC instead.
Second, most transactions are not as simple as they appear. For instance, properly drafting a contract, setting up a business entity, or preparing a family trust frequently involves multiple considerations, such as complex tax ramifications, securities laws, intellectual property rights, licensing, insurance, employment issues, buy-sell contingencies, and the like. It’s tempting to believe that there’s a one-size-fits-all, cookie-cutter document for every transaction, but that’s simply not the case.
Third, online services often charge hidden fees for extras that would normally be included in a complete package deal. For example, it’s often not readily apparent that the online customer will have to pay extra for name reservations, filing fees, S-corp elections, corporate books, bylaws, business licenses, and other corporate add-ons.
Next, online services don’t follow up to make sure that blanks get filled in, that documents get signed and properly filed, and that necessary formalities are observed. So when a dispute arises later, it’s not uncommon for parties to discover that there’s no dispute resolution or buy-out clause, that the document is unenforceable, or that the corporate liability shield can be pierced by creditors. Too often, these problems cannot be fixed or result in extremely expensive litigation.
Finally, online services cannot and do not provide legal, accounting, or other professional advice, which is the primary reason why expensive problems result in the first place.