In recent news, a woman defrauded the public by posing as an attorney and handling trusts & estates cases – over the course of ten years! This rather terrifying story is a reminder of why it’s important to have licensed attorneys serving you and your company.
Every state in the United States (plus the District of Columbia and Puerto Rico) issue licenses to individuals who have completed the required legal education and passed a state bar exam. This licensing requirement is intended to protect the public and to ensure that knowledgeable people are providing legal services.
But here’s the thing: while attorneys have to attend law school, take a bar exam, and maintain their license with continuing education classes, online template databases like LegalZoom do not have to be licensed. Moreover, they are not your “lawyer” in the usual sense of a lawyer-client relationship – see our blog on LegalZoom.
Why is this important? Let’s say, for example, that you have started a corporation and your bank requests a copy of your “Bylaws.” You jump online and type in Bylaws, and get bombarded with ads for legal template services like LegalZoom and big expensive law firms that would be thrilled to represent you. Because it’s the cheapest option (and hey, you’re just starting out so you’re on a budget!), you sign up with LegalZoom or one of their brethren and order the “Bylaws” template.
You read through your new company bylaws, and none of it makes any sense. Or worse, it all looks “legal” so you sign at the end and hand it over to your banker without really knowing what is inside.
This all-too-common scenario illustrates why it’s worth the money to hire an attorney familiar with your specific situation when you have a legal need. Bylaws are the rules by which your company operates. Similar to an Operating Agreement for a Limited Liability Company (LLC), Bylaws lay out the specific rights and authorities that each Shareholder has (or doesn’t have), how often the corporation’s owners have to meet, who tracks corporate minutes, how tax matters are handled, what happens if a shareholder dies or sells their shares, and just about every other rule or contingency plan that is important to the company’s success.
To make matters more complicated, legal documents like Bylaws are filled with terms that have a very specific legal meaning. For example, the phrase “reasonable business judgment” has been interpreted by decades of business case law. If it appears in a business contract, the phrase will be considered within its legal context – regardless of what the author intended for it to mean – what the courts think reasonable business judgment means.
And a company must follow their own Bylaws or Operating Agreement – if they fail to comply with these rules, people bringing lawsuits against the company can claim that it’s merely a sham corporation and should therefore not benefit from limited liability, allowing the plaintiffs to go after all of the business owner’s personal assets.
Moreover, all contracts, agreements, and other legal documents are written with a particular state’s laws in mind. An operating agreement created for a Pennsylvania company will be different from one created for a Georgia company. When you download contracts online or hire an unlicensed person to draft your legal documents, you risk non-compliance with your own state’s laws, which could void out certain key provisions in your agreements, or have negative consequences when it’s time to enforce the documents.
Your lawyer needs to be licensed. If you live in Georgia, you can search your lawyer’s name on the state’s bar website.
Online or automated legal services (blank forms and templates) give you a false sense of security. While you may save a bit of money on the front end, you’ll spend a lot more trying to untangle the knots created by using a sub-par legal form. You’re not a “Fill in the Blank Company” – why use a “Fill in the Blank Form”?