LegalZoom.com, Inc. (LZ)

Criticisms on file

No material criticisms on file for this pillar.

Disclosed initiatives

No disclosed initiatives on file for this pillar.

Criticisms on file

• Independent Contractor Classification Risk: The company structures relationships with independent attorneys and accountants as independent contractors rather than employees. Risk disclosed that tax or regulatory authorities may challenge this classification, potentially exposing the company to employment withholding liabilities, penalties, and past taxes.

  Source: LZ_10k.txt, Risk Factors: 'If the independent professionals who participate in our or our partners' networks, or otherwise work with LegalZoom as a consultant or contractor, are characterized as employees...'

Disclosed initiatives

• Remote-First Work Policy

  Company operates predominantly remote workforce; disclosed as a challenge to culture embedding and employee engagement.

  Cited as difficulty in orientation, training, development, and engagement; no positive ESG impact claimed.
• Workforce Reductions

  Reduction-in-workforce actions conducted in 2024–2025; restructuring costs of $854k (2025) and $6.1M (2024) disclosed.

  Negative; actions cited as creating attrition, delays in product development, and reduced employee morale.

Criticisms on file

• Unauthorized Practice of Law (UPL) and Compliance Practice (CPL) Risk: Company faces ongoing allegations and regulatory exposure related to UPL. The Arizona ABS structure is described as 'generally untested in U.S. courts' and may not insulate the company from UPL or CPL claims. Risk of professional liability exceeding insurance coverage is disclosed.

  Source: LZ_10k.txt, Risk Factors: 'Our Arizona subsidiary, which is licensed as an ABS, may not insulate us from claims of the unauthorized practice of law and is subject to restrictions under Arizona Code of Judicial Administration'
• AI Regulatory Risk and Compliance Uncertainty: Company incorporates AI into offerings but faces rapidly evolving regulatory framework (Colorado AI Act, California AI laws). Risk of accuracy issues, discriminatory outcomes, biases in AI outputs, and potential regulatory investigations and lawsuits disclosed. Also risk that AI outputs may constitute UPL.

  Source: LZ_10k.txt, Risk Factors: 'We are incorporating AI into some of our offerings, which may present both compliance risks and reputational risks'
• Data Privacy and Security Regulatory Risk: Company subject to GDPR, CCPA, state privacy laws, and evolving privacy regulations. Risk of investigations, enforcement actions, fines, and operational changes to comply with privacy and data localization laws disclosed. Cross-border data-transfer mechanisms (e.g., under GDPR) may be invalidated, increasing compliance cost and complexity.

  Source: LZ_10k.txt, Risk Factors: 'Compliance with U.S. and foreign privacy and data security requirements could result in additional costs and liabilities...'
• Arizona ABS Shareholder Restrictions: Under Arizona Code of Judicial Administration Section 7-209, any holder of ≥10% of common stock may be required to file an ABS Authorized Person application with the Arizona Supreme Court. The court may attach conditions, require divestment, or suspend/revoke the subsidiary's license if restrictions are violated.

  Source: LZ_10k.txt, Risk Factors: 'Under Section 7-209 of the Arizona Code of Judicial Administration, or ACJA, there are restrictions on holding an interest of 10% or more in the issued share capital of a licensed ABS...'

Disclosed initiatives

• Arizona Alternative Business Structure (ABS) Licensing

  LZ Legal Services, LLC licensed as an ABS in Arizona (September 2021), allowing non-lawyers to co-own law firms and employ/contract licensed attorneys to provide limited-scope legal services.

  Enables attorney-assisted offerings but creates regulatory and governance constraints; Arizona Supreme Court retains authority over ≥10% shareholders and can suspend/revoke license if ABS authorization rules are violated.