Potente, Business Lawyer and Company Formation

There is no doubt that the rapid advancement in technology over the last thirty years has been for the better. We have access to all the world’s information with the click of a button, and can do things our ancestors would have deemed nothing short of impossible. However, as new technologies emerge, we need to consider if those technologies are helping or hurting us.

Over the last fifteen years, the popularity of the Do-It-Yourself (“DIY”) sector has grown exponentially. We have all heard of companies providing DIY platforms in the professional service industry, whether it be legal, web design, taxes, medical, or a myriad of other service providers. When used effectively, these types of service providers can be a great help. However, when used exclusively, and as a means of eliminating the trained professional, there can be dire consequences.

There are a number of DIY filing and template providers that have entered the legal and tax space over the last ten years. While these providers may be beneficial and sufficient in limited circumstances, for the most part, they tend to cause more harm than good. The obvious problem is that these providers are unable to issue-spot or provide professional advice – they simply spit out form templates. While attorneys often use forms as a starting point in drafting documents, the attorney’s expertise enables them to craft the document in a way that maximizes the client’s liability protection while satisfying their unique objectives. When it comes to contracts, details matter. Simply put, a form template with no customization simply cannot provide adequate protection.

With barriers to entry that are lower than ever, it is extremely easy to go into business these days. As such, many novice business owners are looking for ways to cut costs and avoid paying for professional services. For example, the legal entity is set up with an automated filing system, underlying legal documents are provided in a cookie cutter template form, standard template contracts are obtained, a CPA is not consulted to discuss tax ramifications of the entity structure and filings, taxes are filed using an online software, etc. In this scenario, the DIY platform provides a false sense of security – the deliverable comes in a pretty package, the initial filings are filed, and the consumer feels good about the few thousand dollars that were saved. However, unbeknownst to them, the foundation is likely improperly structured, required state and IRS filings are missed, the wrong type of entity may have been formed, the form contracts do not adequately protect them, and the limited liability protection afforded by a separate entity is jeopardized. Unfortunately, it typically isn’t until a few years later that the DIY damage is discovered, after it may be too late to fix.

We have carved out a niche in performing “corporate audits”, whereby we fix the problems created by the DIY service providers. When it comes to the mess that the DIY service providers create, we have seen it all. In almost all cases, it costs the client far more for us to fix the deficiencies than to have done it right from the beginning. The next time you or someone you know considers utilizing technology to do something yourself, especially in an area where you have little experience, think of the potential ramifications. The cost to build a solid foundation from the beginning will be worth it in the long run!

Dan C. Edwards, Esq.

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