Should You Use Ready-Made Legal Documents for Your Small Business?

rsz_computerwithphone by Tim Parker on December 6, 2012
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Why pay through the nose for something that you can get for little or no cost? With attorney’s fees averaging more than $200 an hour [PDF] in some states, many small-business owners are looking to the internet for legal information.

Plenty of free and affordable options exist: Sites like Probono.net offer legal forms (for selected states) drafted by nonprofit legal-aid programs. These forms can be downloaded free of charge. Other free services assist litigants by providing a step-by-step interview process (much like TurboTax) for the preparation of legal forms.

Meanwhile, companies like LegalZoom offer ready-made legal documents — and an increasing number of law firms provide online document preparation — for nominal fees that are well below the cost of hiring a traditional attorney.

3 Potential Pitfalls

So, is there any danger in using these ready-made legal documents? There can be. Experts point to three potential pitfalls:

1. Too many choices — Doing a quick search online for “free legal forms” returns multiple pages of results. This makes it difficult to separate quality forms from those that are substandard. We live in a world in which lawyers scrutinize legal documents word for word and any loophole can spell disaster for the company on the losing side.

2. Lack of expertise — Lawyers have long criticized LegalZoom for the lack of efficacy of its forms. The question is not whether the forms are accurate, but instead, how would a small-business owner without formal legal training know an airtight document from one that is insufficient?

3. No legal advice — How often have you been presented a form to complete but did not fully understand what you were reading or signing? A legal document may be complete and accurate, but when you are making decisions for your small business, completing it incorrectly could have disastrous and expensive results.

A Happy Medium

The most cost-effective option may be to combine online and offline resources. Download the form you need from a website you trust (nonprofits and government sites are best). Complete the form and take it to an attorney who charges by the hour. Ask the attorney to review the document. This saves you from paying someone to create or complete the parts of the form that you understand but adds the protection of having a qualified lawyer review it for any errors.

It doesn’t have to cost a fortune. Prepaid legal services charge around $20 per month to have an attorney at your disposal to review documents and help with other legal issues.

The internet has given small-business owners more low-cost tools to manage their business affairs. But a tool is only as good as its operator. You’re an expert in your own business — not business law. Savvy entrepreneurs know when to hire an expert and when to do work themselves. For most business-related legal matters, the advice of an attorney is money well spent.

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