LegalZoom.com Flourishes, with Bumps on the Way

According to the U.S. Bureau of Economic Analysis, legal services in the country were a $266 billion market in 2010. There is a big demand for legal services by small and medium businesses. A study conducted by L.E.K. Consulting LLC revealed that in 2011, $97 billion was spent by the small businesses and consumers on legal services.

LegalZoom’s Financials
California-based LegalZoom.com was founded in 1999 by technology and legal experts, Brian Liu, Brian Lee, Eddie Hartman, and Robert Shapiro. They formed the company to provide individual consumers and small businesses a more inexpensive option of dealing with legal document requirements.

LegalZoom offers a broad portfolio of legal documents that lets individual customers customize those documents to their needs. Their interactive legal documents are acceptable across all 50 states, the District of Columbia and even at the federal level. Their interactive legal document include services such as helping in the formation of limited liability companies, incorporation, and trademark applications. For customers, documents are available for services like the creation of wills, living trusts, and powers of attorney. Apart from fee-based documents, LegalZoom also offers subscription-based legal services and registered agent services.

Small businesses and consumers can connect with legal experts through LegalZoom through their subscription-based plan. LegalZoom offers small business and consumer subscription legal plans in 40 states and the District of Columbia. Their legal plans include free attorney consultations on new legal matters, review of interactive legal documents, and discounts on LegalZoom services besides specific services required by their customers. In addition, they provide subscription-based registered agent services for businesses, thus helping them with services of process and official government communications.

Since inception, LegalZoom has helped more than two million customers. Last year, they processed 490,000 document orders and had 228,000 paying subscribers. Their financials are also improving steadily. LegalZoom saw revenues grow from $103 million in 2009 to $121 million in 2010 to $156 million last year. The year 2011 was also the company’s first ever profitable year, in which they recorded a net income of $12.1 million, compared with a loss of $4 million suffered in 2010.

To date, LegalZoom has received more than $100 million in funding from co-founders and investors, including Polaris Ventures, Kleiner Perkins Caufield & Byers, and Institutional Venture Partners. Earlier this month, they filed their S-1 to raise $120 million in funding from an IPO which is proposed to list on the NYSE later this year.

LegalZoom’s Social Networking
Besides successfully adopting Internet services, LegalZoom has also managed to embrace the social network to their benefit. In 2010, LegalZoom began offering free legal advice to their users through a Facebook page “Free Joe Friday.” The service let Facebook users post a question for Joe Escalante, a California attorney, on the Facebook page. The attorney then responds to the questions in a free hour-long session. Looking at the popularity of the program, LegalZoom expanded the service beyond Friday to an hour-long session on Tuesday as well.

Analysts believe that LegalZoom has strong growth ahead. LegalZoom has processed incorporation related services and documents for 20% of limited liability companies formed over the last ten years in California. The high acceptability rate does suggest that they have potential to be the small-business legal-service provider of choice for basic processes. Little wonder then that LegalZoom has been subject to several lawsuits. A recent one was a class action suit filed against them in the state of Missouri stating that the company had misrepresented their legal services in the state. LegalZoom settled the claim out of court by making certain undisclosed modifications to their business in the state. As the company continues to prosper, it will have to watch out for more such cases heading their way.