Is Legalzoom a Good Investment

So, yes, we have invested in our biggest competitor and we intend to continue buying LegalZoom shares. We have every reason to believe that our investment will increase in value along the way. Management`s guidance for the remainder of the year implies a 16% year-over-year increase in Q4 revenue. This also represents a 22.5% increase in revenue for FY21 compared to FY20. Revenue growth is undoubtedly there, but GAAP earnings have been hit hard since 2019. This is due to significant investments by management to get LZ Tax off the ground and rebrand the company. These expenses primarily represent LegalZoom`s “Fast Break for Small Business” partnership with the NBA and the integration of CPAs/tax experts for LZ Tax. Keep in mind that much of these expenses recorded today will not contribute to increasing revenues between now and FY22 and FY23. Starting a limited liability company (LLC) through LegalZoom is a great choice for new small businesses, as the process is simple and affordable — plans start at $79. In addition, you can add other services you need, including a registered agent, tax advice, and access to a legal form and document library. What for? We believe LegalZoom is designed to be excellent in the long run, so it seems like a solid investment strategy. And since their initial public offering (IPO), LegalZoom has been required to share their numbers with shareholders, so we can now see regular snapshots of their inner workings.

Based on available industry data, we believe LegalZoom has approximately 350,000 active clients and registered agent owners. These are clients whose accounts have been paid and who remain in good standing with the State. Northwest, CSC and CT each have between 1 and 3 million active (and paying) registered agent customers. LegalZoom first attempted a listing in 2012, reaching a valuation of $500 million, but unfavorable market swings (at least in part due to Facebook`s decline in value after the IPO) simply hampered the way. Instead, private equity firm Permira launched with an initial investment of $200 million, and LegalZoom used that funding, along with an additional $500 million in 2018 (for a valuation of $2 billion), to build its brand and grow its customer base. Unlike most promising stock market debuts introduced last year, LZ stock supports a profitable business. LegalZoom`s S-1 filing with the SEC resulted in net income of $7.44 million in 2019, followed by $9.9 million in 2020. It should also be noted that goodwill accounts for less than 5% of total assets, suggesting that most of the company`s assets are tangible or material items. Technically, LegalZoom is not a lawyer and cannot practice law, so it is not a good substitute for an actual lawyer. Instead, think of it as a self-service portal for legal documents and FAQs. The company can put you in touch with a lawyer and you get consultations, but they will likely lead you to pay hourly rates with a lawyer for actual services.

LegalZoom has established its brand as a well-known name in corporate startups. In fact, they dominate the public`s imagination so much that most people don`t even bother to search for terms like “how to form an LLC in California” when doing their Google searches. Just search for “legalzoom”, “legal zoom” or “legalzoom llc”. It`s like there`s no difference between starting a business somewhere in the US and a specific business (LegalZoom) that can help someone do it. LegalZoom was founded 20 years ago and attempted to go public in 2012 before withdrawing its offering. Now that it`s publicly traded, is the company worth an investment? Let`s dive into the company to find out. Daniel is currently a manager at Avaring Capital Advisors, LLC, a registered investment advisor who oversees a hedge fund, and leads Crude Value Insights, a value-based newsletter that analyzes cash flow and assesses the value of companies in the oil and gas sector. Its main objective is to find companies that are trading at a significant discount to their intrinsic value, using a combination of Benjamin Graham`s investment philosophy and a contrarian approach to the market and the securities it contains.