By Neil Hare
New online tools are democratizing legal services for small businesses.
During the COVID-19 pandemic, we saw businesses that hired legal counsel be the first to receive Paycheck Protection Program (PPP) funds only to have the funds forgiven after many gray areas, potential audits, and fraud liability. Now, new online tools are democratizing legal services, allowing businesses of all sizes, from startups to sole proprietors to small-town retailers, to get the legal help they need.
When do I need legal advice? There are many times when you should get legal advice, but especially when starting a business. For example, if you and your partner are forming an LLC, will the LLC agreement specifically address ownership, voting rights, liability concerns, and what happens in the event of bankruptcy or dissolution of the business? Similarly, what type of legal entity should you have – an S corporation, a C corporation, or an LLC – taking into account concerns such as taxes and liability? Do you have intellectual property that needs protection? The list is long.
How AI will power online legal services for small businesses
Online legal services have been around since the first dot-com era in the late 1990s, primarily providing small business owners with educational materials, forms, and databases to find lawyers for their basic legal needs. Now, like many other industries, online legal service providers are turning to AI to enhance, streamline, and make their services more accessible. AI allows users to download forms, read related information, and get in touch with lawyers wherever they are.
Rocket Lawyer, one of the leading providers of online legal services, recently announced a new tool called Rocket Copilot that helps business owners establish, incorporate, and protect their business name. Rocket Copilot asks a series of questions about the business and generates names for business owners to choose from until they find the right one.
“The first thing we ask before you start the incorporation process is what to name your company, and a lot of people don't know how to name it,” explains Rocket Lawyer CEO Charlie Moore. In the future, Moore says, new AI tools will assist with most of the services Rocket Lawyer provides.
To be clear, this AI tool does not provide legal advice, Moore reiterated. Rocket Copilot still falls into the education category, finding the right name and providing advice to business owners going through the incorporation process. While the tool is useful and well-designed, it is not recommended to go through the legal process without consulting a lawyer. Rocket Lawyer and other legal tech companies offer matching services to find the right lawyer near you.
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Regulatory oversight of AI legal tools
AI is like a genie, evolving at a phenomenal rate compared to internet access, e-commerce, and mobile, and will never go back. This has led regulators around the world to carefully consider when and where AI should be used. The growing online legal services industry is also coming under increased regulatory scrutiny.
Historically, lawyers have not been allowed to enter into joint ventures with non-lawyers. Lawyers must be licensed, are typically required to take continuing legal education (CLE) courses, and are subject to much higher ethical and negligence standards than average entrepreneurs. Some states, such as Arizona and Utah, have begun to consider accepting alternative business structures (ABS), which allow lawyers and non-lawyers to provide certain services. In 2020, the Utah Supreme Court established a “regulatory sandbox” to oversee and regulate ABS companies that innovate to provide affordable legal services.
One such company is Salt Lake City-based SimpleCitizen, which provides online immigration legal services to individuals seeking permanent residence or citizenship in the U.S. SimpleCitizen's interface allows applicants to upload the information and documents needed to complete an application, and an attorney reviews the final application before sending it to the client for final submission to the U.S. Citizenship and Immigration Services.
Chase Hertel, president and general counsel at Simple Citizen, said, “Especially in the family-based immigration space, a lot of time is spent compiling biographies of potential immigrants and creating short descriptions based on various pieces of information. In our view, leveraging generative AI alongside attorneys can help automate this type of work, allowing them to focus on complex legal analysis, ultimately resulting in lower-cost legal services for clients.”
The future of online and AI-powered legal services
What's certain is that the legal profession's use of AI is here to stay. Lawyers themselves are also using AI tools to prepare documents, in theory using proper legal precedents and regulations. This will make tools like Rocket Lawyer, SimpleCitizen, LegalZoom, and UpCounsel more convenient and affordable in the future. Making legal services more accessible and less expensive for all Americans is certainly a good thing, if done right. But it's still wise to meet with a lawyer in person or via online video and thoroughly vet their background.
Skimping on legal counsel when you need it most when starting and running a business introduces unnecessary risks. Contracts, leases, and employment agreements that are not properly drafted can lead to costly litigation down the line. As the old saying goes, “An ounce of prevention is worth a pound of cure.”
About the Author
Neil Hare is a lawyer. GVC StrategyShe specializes in small business policy, advocacy and communications campaigns. Follow her on Twitter. Nehare and LinkedInFor more articles and bios by Neil, All Business.
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