As an entrepreneur and a lawyer, I am actually somewhat of a fan of Legal Zoom. No, I don’t use their services and I would not recommend that you file a trademark registration, patent or franchise review through them. However, incorporating a business through them can make sense. Why do I bring this up? Well, over this past week, I received a call from a small business owner who utilized their services. He was a small business owner who utilized Legal Zoom to incorporate.
This business owner called because he received a cease and desist notice that claimed he was infringing on the trade name of a local competitor. He called our staff and commented that “…I set up my LLC through Legal Zoom and they checked the name and said it was okay, so doesn’t that mean I am protected…?” Well, the simple answer to this gentlemen was no and that setting up a corporation or LLC does not also confer legal rights to the name. To protect a trade name you need to conduct a trademark search and file a trademark application with the USPTO. So, if you are reading this blog post please understand that just because a state allowed you to incorporate a name doesn’t mean that you have secured trademark rights in this name.
Did Legal Zoom do something wrong? Not at all. However, while I get why some find value in utilizing services like Legal Zoom for routine tasks like incorporating a business (in fact, I believe they do a good job of it) I believe that they are overlooking a critical relationship that is required for business success. That is, small business owners need to align themselves with business lawyers who represent entrepreneurs and who can guide them. Had this business owner gone to a business lawyer (at least a business lawyer who finds value in entrepreneurship and assists start-up businesses) the lawyer would have insisted on conducting a trademark search and would have recommended a trademark application.
So, yes, while it was less expensive to go through Legal Zoom for incorporation, it turns out that this individual is facing much higher legal fees now to defend against this potential infringement claim and he will also most likely be taking down his entire website.
Again, Legal Zoom is an innovative company and I admire that. I also believe that they did a good job and nothing wrong, but if you are an entrepreneur and you are serious about your business, you need to align yourself with a lawyer who understands your goals and can give you the advantages of his or her experience representing entrepreneurs over the years. A good business lawyer is critical to the development of a great business.
By the way, if you want to know how to find a good lawyer for your small business, check out this great article by Pete Grasso “Choosing the Right Lawyer is Crucial to Success.”