Intro to Entity Formation | LegalZoom CTO Eddie Hartman

That's awesome. Thank you. To paraphrase Arnold Schwarzenegger, of all the receptions that I've ever received, that was the most recent. The— yeah, so I have done a lot of things. I've done a lot of weird things. LegalZoom is what they're going to write on my tombstone, you know? LegalZoom is one of 6 or 7 different companies that I either started myself, started with friends, helped get off the ground. Of which 3 or 4 were terrible failures that crashed and burned, and I had to do that fun thing where you turn off all the lights and lock the door and hand the keys back to the person who owns the property. But I've also had a few successes. In addition to LegalZoom, Trune was acquired. Ironclad is going well. They went through Y Combinator. So I've had a few hits. and a fair number of horrifying experiences. And I've seen it from both sides. I am the founder of LegalZoom. How many people here know LegalZoom? Show of hands. OK, so some people don't know LegalZoom. So I'll explain a little bit about what LegalZoom is, what LegalZoom does. I will tell you, if you're in California, as we are today, about half of all the LLCs— between a third and half of all the LLCs are started at LegalZoom. When you talk about brand awareness, about If you had 100 people lined up, 87 of them would know LegalZoom without you having to explain anything. So we've got pretty good brand awareness. We've got pretty good penetration. It's great. I should also point out I'm actually a partner now at Simon-Kucher, which is an amazing firm. None of you know Simon-Kucher, I guarantee, because no one— you know Simon-Kucher. I read— when I was in church, I read Herman Simon's book. He's a genius. Yes, he's a true magical ninja genius, Herman Simon. So today what I'm going to do is I'm going to take you through a little bit of law, a little bit of how you can negotiate with lawyers, which is really important. And then I'll tell you a little bit about how that ties into thinking about your own monetization, because monetization is just super duper important. So my understanding is that I'm coming in at the end of legal week. Is that right? You guys have been talking about law for a while. So you just heard immigration. You probably heard quite a bit about incorporation, intellectual property, all this stuff, yes? No. No, really? OK. All right, good. Well, I've got slides on that. So I just need to know how much time to spend, what to go over quickly. We only have 45 minutes together. So I'll try to be concise and focus on what you want to learn. Maybe a little explanation, though. LegalZoom— I think people have terribly wrong ideas. Some people think that LegalZoom is a place to find a lawyer. Some people feel that LegalZoom is a collection of forms. Some people feel that LegalZoom is a completely automated product. And the answer is it's really none of those. LegalZoom is a place where if you have a legal need, you can get the legal need filled. But it's— we hope to combine humans and automation in a respectful and responsible way. We employ technology. Not to make things cheaper, although it does make things cheaper, not to make things more efficient, although it does make things more efficient, but to achieve a high level of standardization and quality that you can measure. Because if you go to a law firm right now, you know, the math will tell you there's going to be a best lawyer at that law firm, and then there's going to be a worst lawyer at that law firm, and who knows where you're going to wind up. If, on the other hand, you use technology to always standardize around that very top quartile or top decile, you can achieve a consistent quality that builds and builds and builds over time. So that's what we've done. People often say, hey, Eddie, why in the heck would you think that a LegalZoom will is comparable to a will done by a lawyer? I mean, the lawyer's been to law school and done all this stuff. I should point out, first of all, okay, well, the lawyers that create our legal templates and such at LegalZoom have gone to law school, have gone to the very best law schools. In fact, our Our chief legal architect, or one of the chief legal architects that used to report to me, Vanessa Butnik, was a Yale Law grad, top of her class, super competent individual. But this is what I would say more than that. No matter who that lawyer is at that law firm, they have not been asked the same question 1,000 times. Whereas at LegalZoom, just based on the volume, you know, we do the same volume of the biggest trademark law firm in the country We do that in the first week. By January 7th, we've done the equivalent of their entire annual volume. And what that means is we've seen it all. And not only have we seen it all, but we've incorporated it into our framework. But it's not just software. There are also people then that get involved and make sure that the work product is great. So that's LegalSim. I think most importantly, I'm from the best state in the country, which is New Jersey, as some of you may know. It's on the East Coast. It's not walking distance, but that's where I'm from. Very proud. I'm a dad. I really love my kids. And yes, I do. I teach at, or I have taught at Stanford Law School, Yale Law School, Yale School of Management, that kind of thing. Very proud of that as well. That's, I think, enough about me. Oh, and please, definitely hit me on Twitter. Follow me and DM me or whatever. Good to get to know all of you. So what we're going to be talking about quickly is just a little bit about entity formation. People love to say incorporation. Incorporation is actually the wrong term. When you incorporate, you're making a corporation. Somebody said C corporation. Who said that they started a C corporation? C corporation, right? And you'd had— no, it wasn't you. Somebody else said that they had problems with their C corporation. I see. Got it. So if you're incorporating, you're creating a C corporation or an S corporation. You're creating a corporate entity with 2 different types of ways of being taxed. One that's called flow-through, the other is called double taxation. You might say, well, why would I ever opt for double taxation? There are reasons I can explain. But you don't need to incorporate to get the benefits of entity formation. You can set up a company. An LLC is an example of a company. So 2 words, company, corporation, different words, but the interesting thing is that both of them give you a lot of protection.