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The sad truth about Legalzoom

Feb. 8, 2018

Our own investigation of Legalzoom's misleading pricing & shady practices

We decided to test Legalzoom's ordering system to see what they've been up to lately. The results are not pretty.

We went to their LLC ordering page at https://llc.legalzoom.com, and the first thing they ask is for your desired LLC name. So we entered "Gamma Ray LLC", which is an LLC we formed a while back. That LLC is 100% in good standing in NY.  

Next, Legalzoom's order form asks for the state in which we want to form our LLC, so we selected "New York" from their drop-down list. 

Guess what? We got the following screen:

On the bottom, in tiny text, it says "This is based on an initial search".

BULLSHIT. Had they actually done a search on the NYS Corporations Database, the name would have shown as "unavailable". 

To make sure, we entered several other LLC names that we knew already existed, and wouldn't you know, they all showed up as available on Legalzoom's website! 

This is terribly misleading, and only serves to further delay Legalzoom's already ridiculously long process, since they have to now (a) contact the customer, (b) ask for another name choice, and (c) go back and forth with the customer regarding each choice's availability. 

Had they simply performed an actual search right away (like we do), it would eliminate these additional delays. It would also lead to less confusion and disappointment for the customer. But misleading customers seems to be part of Legalzoom's standard practices. 

Anyway, we continued on with the ordering process to see what other surprises we could find. It didn't take long. 

We got to their additional services page and selected an Operating Agreement and EIN, both of which are necessary and already included in our own NY LLC formation package. 

Next, they tried to rope us into "tax services" for $29 per month. WTF are those? We declined. 

Then they tried to sell us some kind of "legal protection" for $29 per month. We declined that nonsense as well. 

Next was a "compliance package" for $320 per year! Nope, we're not suckers, so we skipped that too. 

So now we made it to the summary page. Look what we found!

Legalzoom doesn't even know what the LLC formation document is called in New York! It's called "Articles of Organization". How can you trust your business formation to a company that is spread so thin that they don't know the names of the documents they prepare? BTW, let's see if they fix it -- this way we'll know that they follow this page.

Okay, now it's time to pick a Legalzoom package.

Hmmm, how shall we proceed? We don't want to pay a lot, but we also need our LLC sooner than 30 days (which is a ridiculous wait -- this is 2018!). However, to get the "Super Duper Speedy Fast" service of 7-10 days (LOL), we would need to select the "Express Gold" package, which is way more expensive because it includes a bunch of ridiculous and unnecessary services like "LegalZoom VIP Processing" (wtf is that?).

Since we don't want to wait 30 days, we selected the Express Gold package so we can receive our LLC in the super speedy time of 7-10 days. BTW, we at CheapNewYorkLLC.com deliver all LLCs within one day at no extra cost. 

So we're done. Let's see the damages:

Wait, what? $159? It can't be. $159 due now? What does that mean? What's our total? How much is due later?

We clicked on "continue to checkout" to find out, but guess what? First they requested our credit card details! Wait, hold up! What is our total cost? What does "$159 due now" mean? We're not going give them our credit card without knowing what we're locking ourselves into. So we clicked back to the previous screen and looked at it again, but we still can't figure it out.

What's our total cost? Very confusing. So we put on our thinking caps and added $159 plus the $349 for the "Gold Express" package. That adds up to $508, which sounds about right for Legalzoom. 

The problem is, $508 is a bad deal. New York LLCs require legal publishing, which is usually the most expensive part of the LLC formation process in NY. But Legalzoom doesn't mention that, nor do they provide that service. 

For most LLCs, legal publishing costs about $800 to $1200. So our Legalzoom LLC setup, assuming the $508 number is correct, will cost about $1500 in total. 

That deal is nowhere near as good as ours at CheapNewYorkLLC.com. We perform the entire LLC setup, obtain your EIN, prepare your operating agreement, and deliver it all in ONE BUSINESS DAY OR LESS. And we take care of the entire LLC legal publishing process, with all costs & fees included, all for the grand total of $795. 

So what does anyone gain by using Legalzoom? You get confused, get mislead, pay more, and wait longer with Legalzoom. Sounds to us like Legalzoom does suck, as most people say.

8 reasons why using LegalZoom is a big mistake for NY LLCs

Over the years, we've received many customer inquiries with a common theme: Can we fix LegalZoom's stupid mistakes?

Unfortunately, for most people who've gotten the "LegalScrew" as we call it, there is no fix. Even worse, a certain often-repeated LZ mistake costs unwary startups more than $1,000 in unnecessary and easily-avoided expenses.  

Based on our experience with LegalScrewed clients, the following are the ways in which LZ fails New York businesses:  

1. Advice not included 

LegalZoom's front lines are manned by clerks, not lawyers. They are legally prohibited from answering basic legal questions such as "What are the advantages of an LLC versus an S-Corporation?", or "Should I form my LLC in Delaware or New York"? You're on your own with LZ.

2. California dreaming 

LegalZoom is based in California. They know nothing about New York law, and just as importantly, New York geography. You might ask why geography is important, and the answer is that it is crucial when forming a New York LLC. Selecting the wrong location for your business will end up costing a startup more than $1,000 in unnecessary fees. Unfortunately for those California Clerks, they don't know which section of NYC is located in which county, and once the mistake is made, it is irreversible.

3. Don't ask, don't tell, waste over $1,000 

LegalZoom will set up your LLC, but they won't tell you about the required legal publishing or how you should approach it for maximum savings. So many people set up their LLC through LegalZoom for about $400 and then find out later that they have to spend another $2,000 on legal publishing. (BTW, we do the entire process for $795, so which is cheaper, the local guys [us] or the nationwide "discount" form filling machine [LegalZoom]?)

4. It's all about the money 

According to their financial documents, LegalZoom spends $47 million a year in advertising. They withdrew a planned IPO. They are a marketing machine. But quality of their work? That's apparently not as important.

5. LegalZoom's terrible track record 

A simple Google search on "LegalZoom ripoff" reveals too many complaints to list here. One particularly revealing item was written by a former employee who exposed many of LegalZoom's shady business practices.

6. No accountability 

Have a problem with LegalZoom's service? Pissed off that you got hit with an extra $1,500 expense due to their mistake? Too bad. LegalZoom answers to no one. Your only recourse is to complain to BBB, or register a complaint online (which will likely get promptly buried by LZ's online marketing team). BTW, LegalZoom has a 1 star BBB rating, not to mention 97 LegalZoom entries on RipoffReport, dozens of complaints about LegalZoom on MeasuredUp, and numerous Legalzoom complaints and horrible ratings on PissedConsumer. You can also view LegalZoom horror stories on Scambook, and an unbelievable ZERO RATING on ComplaintsBoard.

7. They've got you on the hook 

According to LegalZoom's IPO documents, they are transitioning their business to a monthly subscription model. In other words, once you buy from them, they rope most people into a monthly plan which almost no one needs. And good luck cancelling an unwanted LegaZoom service.

8. Sell, sell, sell 

When you order through Legalzoom, they do their best to lock you into silly services like annual self-renewing memberships. Why would you pay for something that you don't want or need? 

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