How AI Legal Services Are Making Legal Help Affordable for Small Businesses

Neil Hare
Thu, 01 Feb 2024 16:18:00 +0000
Ai-for-small-businesses, Ai-legal-tools, Artificial-intelligence, Artificial-intelligence-ai, Bankruptcy, Business-finance, Generative-ai, Legal, Legal-counsel, Legal-help, Online-legal-services, Startup, Technology, Ai

We saw during Covid that businesses that had legal counsel were first in line to receive Paycheck Protection Program (PPP) funds and have them forgiven in the wake of many gray areas, potential audits, and fraud liability. Now, new online tools are democratizing legal services, making it possible for businesses of all sizes, from the startup to the solopreneur to the small-town retailer, to get the legal help they need.

When do you need legal advice? There are many times when you should seek legal counsel, but certainly when you are starting a business. If you are forming an LLC with partners, for example, what will the LLC agreement spell out in terms of ownership interests, voting rights, liability concerns, and what happens in bankruptcy or the dissolution of the business? Similarly, what type of corporate entity should you have for tax consequences and liability among other concerns, an S Corp, C Corp or LLC? Do you have intellectual property that needs protection? There is a long list.

How AI is enhancing online legal services for small businesses

Online legal services have existed since the first dot-com era in the late 1990s, largely providing small business owners with educational materials and forms to handle their basic legal needs and databases for finding lawyers. Now, just like in many other industries, online legal providers are turning to AI to enhance and simplify their offerings and make them more accessible. AI allows users, no matter where they are, to download forms, read pertinent information, and connect with a lawyer.

Rocket Lawyer, one of the leading providers of online legal services, recently announced a new tool called Rocket Copilot to help business owners establish a business name, incorporate it, and protect it. Rocket Copilot asks a series of questions about the business and then generates names that business owners can choose from until they find one that fits.

“The first thing we ask prior to the incorporation process, is what are you going to call your business, and many folks don’t know how to name one,” explains Rocket Lawyer CEO Charley Moore. In the future, Moore says, the new AI tool will be an assistant for most of the services Rocket Lawyer provides.

To be clear, the AI tool is not providing legal advice, something Moore reiterates. Rocket Copilot still falls into the education category, prompting business owners who are in the process of finding an appropriate name and moving them through the incorporation process. While this tool is helpful and well-designed, I would not recommend going through any legal process without consulting a lawyer. Rocket Lawyer and other legal tech companies provide matchmaking services to find the right attorney near you.

Regulatory oversight of AI legal tools

AI is moving at warp speed compared to internet access, e-commerce, and mobile, and is the proverbial genie that will simply not go back into the bottle. That is why regulators globally are taking a long look at where and when it should be employed. The growing industry around online legal services is also getting more scrutiny from a regulatory standpoint.

Historically, lawyers were not permitted to have a joint business with non-lawyers. Lawyers need to be bar certified, are usually required to take continuing legal education (CLE) courses, and are subject to ethical standards and malpractice liability, all with much higher standards than those for basic entrepreneurs. Certain states, notably Arizona and Utah, are starting to look at accepting alternative business structures (ABS) that permit lawyers and non-lawyers to provide certain services. In 2020, the Utah Supreme Court created a “regulatory sandbox” to oversee and regulate ABS companies issuing innovation to provide affordable legal services.

One such company is Salt Lake City-based SimpleCitizen, which provides online immigration legal services for individuals looking for permanent residency and citizenship in the United States. SimpleCitizen's interface allows filers to upload the information and documents necessary to complete their applications, and has lawyers review final applications before shipping them to the clients for final submission to U.S. Citizenship and Immigration Services.

Simple Citizen’s president and counsel, Chase Hertel states, “In the family-based immigration space, specifically, so much time is spent summarizing intending immigrants' backgrounds and drafting simple explanations based on various inputs. In our view, leveraging generative AI alongside lawyers can automate this type of work and free them up to focus on complex legal analyses, ultimately providing lower cost legal services to the client.”

The future of online and AI legal services

One thing is for certain and that is that the use of AI in the legal profession is here to stay. Lawyers themselves are using AI tools to draft documents, while in theory using the right legal precedents and regulations. This will make tools like Rocket Lawyer, SimpleCitizen, LegalZoom, and UpCounsel more useful and affordable in the future. Making legal services more available and at lower cost for all Americans is certainly a good thing if done right. But meeting face-to-face with your lawyer or via online video, and doing a thorough check on their background is still advisable.

When it comes to starting and running a business, skimping when a lawyer is needed creates unnecessary risk. A poorly drafted contract, lease, or employment agreement could lead to costly litigation down the road. As the old saying goes, “An ounce of prevention is worth a pound of cure.”