Business | Franchise | Employment | Litigation

When to Use Pre-Paid Legal Services… and When to Hire a Lawyer

What is a pre-paid legal service?

The term can mean several different things. A pre-paid legal service can be a consortium of lawyers who’ve banded together to offer discount legal services. It can be a plan that offers simple legal forms drawn up for a modest fee, or it can provide access to a database of legal forms. Is a legal service worth it?

That depends.

The reality is that many—maybe most—pre-paid legal plans offer a fairly limited range of services, and it’s your job to read the fine print and determine what exactly you will actually be getting out of the arrangement. Will the pre-paid plan give you everything you need, or will you face additional fees to complete your matter?

Here’s an example of how these arrangements can go wrong. Several years ago, Pre-Paid Legal (now LegalShield) was ordered to pay $9.9 million in punitive damages for defrauding a customer. According to The Street, “The company stands accused of misrepresenting both the value of its product, which offers limited coverage for a monthly fee, and the opportunity to sell its policies through the multilevel marketing technique made famous by Amway. Pre-Paid critics claim that the company targets the working poor, including minorities, in particular.” In other words, make sure you know what you’re signing up for.

Many business owners are familiar with sites such as Legal Zoom, which offer legal forms and limited assistance with a variety of legal functions – from incorporating a business to filing for divorce to adopting a child. These services can be very tempting for business owners who are looking to cut costs and reduce overhead. The problem is that very often, simply filling out a form is insufficient when it comes to proactively protecting your business.

If you only need to create a very simple single-member LLC for a company that will be doing less than $50,000.00 a year in gross sales, using a service like Legal Zoom may be fine (although you can also do it directly on in Florida). But if you have business partners, or if your services can open you up to liability, or any number of complications… it’s worth the extra cost upfront to hire a business attorney to properly install your legal infrastructure and protect your business.

As I’ve said before here and here, it is FAR cheaper to make an upfront investment of time and money in order to create a legal strategy for your business – rather than neglect these matters and find yourself stuck in a significant lawsuit, partnership dispute, or other legal challenge later down the road. “A stitch in time saves nine”, as they say… and the adage is certainly true when it comes to business law.

If you’ve got legal questions about your business, including whether or not you need to hire an attorney to begin with, I’d be glad to talk through it with you. Give me a call at (305) 431-5678 today!

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