This is a guest blog post by attorney Alec Segarich. Alec practices employment law and also handles general business matters. The post is very timely since we recently recorded a podcast about why you shouldn’t cut your own hair or use LegalZoom. Stay tuned for the podcast.

You have seen the ads: your small business can be incorporated with just a few clicks, at incredibly low costs. But does this service really work? As lawyers who have helped many small businesses, we say “no way.”

Here are ten key reasons we believe LegalZoom and similar online business formation sites will never match the value a real attorney-client relationship provides.

1. LegalZoom is slow. The company’s normal turnaround is 20-35 business days, unless you spend hundreds of additional dollars for a “rush” 7-10 business day service. Many of our colleagues turn around applications in 3-5 business days (or sooner, if need be).
2. You’re stuck with their prices. When you work with a lawyer, you can negotiate a flat fee or hourly rate depending on your needs. With online services, that is not an option.
3. The advertised prices are not what they seem. $149 for a corporation? That may be true in the abstract, but if you want quick service, advice on other registration matters, or anything else, you will easily spend hundreds of dollars more. The company charges $79 extra to get you a Federal Employer I.D. Number, something you can do online with the I.R.S. for free in less than five minutes.
4. No advice on which entity is best for you. Deciding which business entity is best for you is critical, with serious tax, liability, and other legal implications. Every business has different needs, and only by speaking with a lawyer about your goals and plans can you make an informed choice about the right business type.
5. You miss out on the latest options. Business entity law is changing. Many states now offer hybrid entities like benefit corporations and flexible use corporations that are helpful to companies pursing both profits and charitable goals. Lawyers versed in their state’s laws can keep you up to date on these developments.
6. The basic packages are incomplete. Most online formation deals cover basic filings with the Secretary of State, like corporations’ articles of incorporation. But, almost every city and county government requires additional business licenses and fictitious business name registration, not to mention unemployment insurance or industry-specific laws. You can pay LegalZoom hundreds of additional dollars to take research these filings, but a live lawyer will know and advise you as part of a normal formation.
7. Generic operating agreements and bylaws. Organizational documents like corporate bylaws are the foundation of your business. Wedging your business’s needs into cookie-cutter documents will cost you later on, especially in dissolution or bankruptcy, when you are bound to terms that don’t actually give you the rights and responsibilities you want.
8. Generic legal documents. Online formation sites offer access (for a fee, of course) to generic legal letters and agreements. Like their bylaws, these documents are merely models. A real lawyer can tailor contracts and documents to your business’s needs, so you have protection that makes sense for you.
9. No advice on existing or planned policies. Many laws and regulations affect small businesses. In the employment area alone, wage and hour, discrimination, harassment, retaliation, unemployment, and workers’ compensation laws regulate how you interact with your employees, and these laws change often. LegalZoom is not equipped to review your practices to ensure you are in compliance from day one.
10. No on-going relationship. Your business is up and running and all of a sudden, a legal issue comes up. While online companies offer access to lawyers to answer your questions (for more money), you essentially get a customer service hotline. This is nothing like the value of a lawyer who already knows you and your business, can get right to the heart of the problem, and is a partner in getting you to a legal solution.

We hope you consider these downfalls before going with an online service to form your business. You want your business to be the best it can be, and there is no reason to cut corners on the legal foundations of the company itself. Good luck!

Alec Segarich represents businesses and individuals at his firm, Sager Segarich LLP in San Francisco. You can check out his blog, Partners in Overtime, here.