What changed in this filing

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Item 1. Business

2023-03-01 compared with 2022-03-24 · 105 added, 299 removed, 157 unchanged (72% of the section changed)

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Our unique position at business inception allows us to become a trusted business advisor, supporting the evolving needs of a new business across its lifecycle.

Along with formation, LegalZoom offerings include ongoing compliance and tax advice and filings, trademark filings, and estate plans.

Additionally, we have unique insights into our customers and leverage our product as a channel to introduce small businesses to leading brands in our partner ecosystem, solving even more of their business needs.

Along with formation, LegalZoom offerings include ongoing compliance and tax advice and filings, virtual mailbox solutions, trademark filings, and estate plans.

We operate across all 50 states and over 3,000 counties in the U.S., and have more than 20 years of experience navigating complex regulation and simplifying the legal and compliance process for our customers.

legal and regulatory landscape is broad and varied, complex, opaque, and constantly evolving, in particular with respect to the following:

• Multiple third-party interactions.

The simple act of forming an LLC or incorporating a corporation may require specific federal, state, county and city interactions, each with their own idiosyncrasies.

• Compliance requirements are complex.

At formation, basic compliance requirements are not anticipated or understood.

More advanced requirements are dictated by industry, geography, and employer type.

• Regulations change constantly.

The myriad of regulatory bodies and potential compliance requirements are daunting on their own, and this dynamic is amplified by the fact that they are constantly changing and evolving.

According to a 2017 National Small Business Association, or NSBA, Small Business Regulations Survey, 44% of small firms in the U.S.

reported spending 40 hours or more each year dealing with new and existing federal regulations, and 30% spend 40 hours or more each year navigating state and local regulations.

Many small businesses operate without forming a legal entity, unintentionally introducing financial risk to the owners’ personal assets.

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business formations increase, driven by various macroeconomic factors such as the rise of the gig economy and remote work, accentuating the need for a trusted, cost-effective, digital-first and simple legal and compliance solution.

We commenced operations in 2000 so more people could access legal help.

Initially, we focused on business formation, intellectual property, and estate planning.

Over the years, we have expanded our offerings to cover a broader set of legal, compliance, tax and business services for small businesses.

In addition, 39,000 trademark applications were made through us in the U.S.

At December 31, 2021, we had over 1.3 million subscription units outstanding and were one of the largest registered agent providers for small businesses in the U.S.

Our platform combines the power of technology and people to demystify and simplify complicated processes, creating user-friendly experiences for our customers.

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The combination of technology and people is at the heart of our unique customer experience.

For our customers looking for general help, our customer care and sales organization of over 500 people are available for real-time guidance on how to use our services.

For customers preferring credentialed assistance, we embed the option for them to retain attorneys and certified public accountants, or CPAs, from the beginning of the customer journey at affordable and transparent pricing.

For our customers looking for general help, our customer care and sales organization is available for real-time guidance on how to use our services.

For customers preferring credentialed assistance, we embed the option for them to retain attorneys and certified public accountants, or CPAs, from the beginning of the customer journey.

In addition, our unique and trusted position at business formation gives us unparalleled knowledge of our customers’ needs prior to the business being operational or discoverable by other service providers.

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Alongside and after this initial transaction, our customers generally purchase annual subscription services to solve additional legal, compliance and tax needs, deepening our relationship with our customers.

The power of our platform yields highly efficient unit economics:

over the past several years for customers in the U.S., we have generated a lifetime customer value in excess of customer acquisition costs generally within the first 90 days of establishing a customer relationship.

With recurring revenue through subscription services and repurchases from existing customers, we continue to benefit from an increasing customer lifetime value.

Industry Trends

Millions of people start small businesses every year, an accelerating trend driven by digital enablement and the gig economy.

Small business owners often do not know that they may face personal liability and tax consequences depending on their business formation decision and many try to figure out legal requirements on their own, and often face regulatory problems for noncompliance.

Millions of people start small businesses every year, a trend driven by digital enablement and the gig economy.

Small business owners often do not know that they may face personal liability and tax consequences depending on their business formation decision and many try to figure out legal requirements on their own, often facing regulatory problems for noncompliance.

It can be frustrating, time consuming and expensive to navigate multiple layers of legal and compliance requirements.

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The gap between a small business owner’s legal and compliance needs and available offline solutions is widening.

The COVID-19 pandemic spurred new business formation and also highlighted the impact of policy and enforcement differences across local, regional and state levels.

At the same time, the challenges associated with traditional offline “do it yourself” or “find an expert” options are becoming relatively worse as service level expectations increase as a result of small business enablement in other industries.

The challenges associated with traditional offline “do it yourself” or “find an expert” options are becoming relatively worse as service level expectations increase as a result of small business

enablement in other industries.

Technological advances are transforming consumer expectations for professional services.

Our Competitive Strengths

Leading legal platform.

We provide a leading online legal platform that helps small businesses form, protect their ideas, stay compliant and run their businesses.

We helped form 447,000 businesses in 2021 and helped create 158,000 estate plan documents in 2021.

In addition, 39,000 trademark applications were made through LegalZoom in the U.S.

At December 31, 2021, we had over 1.3 million subscription units outstanding and were one of the largest registered agent providers for small businesses in the U.S.

Since inception, we have served as registered agent for more than 1.9 million current and former customers.

We have invested significantly to create a highly recognizable legal brand, online and offline, with unaided brand awareness of 39% and with aided brand awareness of 78% as of December 2021, more than three times our nearest online competitor.

Since inception, we have helped form over 3.2 million businesses, helped create over 3.7 million estate plan documents and served over 6.0 million customers.

Proven ability to operate in a highly regulated market.

We have spent more than 20 years building a systematic understanding of many aspects of the U.S.

legal system, across 50 states and over 3,000 counties.

There is a wide variety of individual statutes and requirements across the U.S., making it difficult for small businesses and consumers to fulfill their legal obligations.

We have filed millions of documents on behalf of our customers with various county and state agencies in the U.S.

Our compliance platform allows our customers to stay focused on running their businesses, while we help them manage the ever-changing regulations and filing deadlines.

Our compliance database tracks rules and deadlines across multiple jurisdictions and our platform provides notifications of rule changes and deadlines to our customers.

Since we are a large filer of business formation and other documents with these agencies, our fulfillment teams have direct relationships with many of them and interact with many of these agencies every business day.

We have also invested substantial time and capital to achieve 50-state coverage for our subscription offerings for attorney advice, registered agent, tax and other compliance related subscriptions.

Attorney integration.

Most people prefer the comfort of knowing an attorney is available to help them with their legal needs, even if on an as-needed basis.

However, most other online providers are either positioned purely as self-help with no access to attorney advice, or for those who do provide access, it is often a service connecting customers to attorneys with limited integration of the network to ensure consistent service quality.

Offering attorney advice nationally through a legal plan, as we do, requires significant initial and ongoing investment, including:

sourcing law firms and attorneys licensed in each state;

ensuring such plans are acceptable to state regulatory agencies with varying rules;

and keeping up with the administration of the plan.

Unique position within small business lifecycle.

Given our unique position at business inception, we are typically the first business advisor a small business interacts with.

By delivering quality business formation solutions, we are able to establish trust with small businesses, who then frequently trust us with other critical needs as well.

We have leveraged this trust to extend our legal and compliance product portfolio over time, through both first-party solutions such as tax, given that, based on customer surveys through March 2021, we estimate that approximately 70% of small business owners that sought a tax accountant did not have one at the time of their entity formation, as well as our

partner ecosystem, where we recommend third-party partners to our customers.

As we grow our product portfolio, we are able to leverage proprietary data we receive at business formation to create more useful and relevant products and services for our customers.

Authority in educational legal and compliance content for small businesses .

Our content library serves as a funnel for new customers.

Our customers often interact with our educational content before making a purchase.

We have grown our content library to thousands of educational articles across our services and established ourselves as a trusted source of expertise before a potential customer even begins seeking access to legal and compliance care.

Our technology platform.

We have invested significantly since our inception in building proprietary technology that drives quality and efficiency on our platform.

We use software to abstract the many archaic and last mile processes that are involved in processing formations at the state level.

We deploy machine learning and natural language processing to power our registered agent offering, in order to scan and sort mail for our small business customers, allowing them to stay compliant and focus on running their businesses.

We consistently improve our technology platform, resulting in improved document generation, increased automation, and increased use of the cloud to enable digital collaboration.

In addition, we have developed a highly accurate database of millions of business entities we have helped form.

And over time, we have collected over 1.5 billion answers as part of the user-friendly questionnaires our customers complete as part of their experience with our products.

We are able to leverage this data, in accordance with relevant privacy laws and our data stewardship principles, to understand new products that may be relevant to our customers and optimize our operations.

We also use application programming interfaces, or APIs to seamlessly integrate our formation products within third-party applications, further extending our platform reach.

Attractive business model.

Our financial performance is a result of attracting new customers and delivering more value over time for customers as they stay on our platform.

Our unique position at business formation allows us to grow our relationships with our small business customers as their businesses evolve.

Business formation serves as an onboarding point to the LegalZoom platform, and as businesses grow, their legal, compliance and tax needs naturally increase and become more complex.

We have expanded our solutions to meet more of these needs, and have seen consistent lifetime value improvement over time.

Given our efficient customer acquisition dynamics, we are able to profitably acquire new customers as we pursue our massive market opportunity.

Given this customer acquisition efficiency, we have experienced economies of scale and favorable working capital dynamics.

Our Growth Strategy

We are in the early days of penetrating and growing the online market for small business legal and compliance services.

We expect to continue to grow our customer base, retain and expand our customer relationships, and increase our market opportunity with the following strategies.

Our Competition

We operate in a very competitive industry.

We face intense competition from offline law firms and attorneys, online legal document services, legal plans, secretaries of state, tax preparation companies and other service providers.

Law firms and solo attorneys, who provide in-person consultations and are able to provide direct legal advice that we generally cannot offer due to laws and regulations regarding the unauthorized practice of law, or UPL, compete with us offline and have and may develop competing online legal services.

However, we previously applied for and received a license to operate as an alternative business structure, or ABS, in Arizona, which allows corporate entities to become licensed providers of reserved legal activities in that jurisdiction.

As a result, our Arizona ABS is able to compete directly with more traditional offline law firms and solo attorneys.

We also compete in the registered agent services business with several companies that target small businesses.

In addition, certain U.S.

states, including Nevada, California and Louisiana, offer online portals where consumers may file their articles of organization for free, other than filing fees.

Our direct and indirect competitors, whether they are online legal document providers, legal plan providers, law firms, accounting firms, solo attorneys or large internet providers, may also be developing innovative and cost-effective services that target our existing and potential customers.

In recent years, we have seen certain online competitors target more price conscious customers by offering business formation transactions at little or no charge while cross-selling subscription compliance services.

We expect to face increasing competition from offline and online legal services providers in our market, and our failure to effectively compete with these providers could result in revenue reductions, reduced margins, and loss of market share, any of which could materially and adversely affect our business, results of operations, financial condition and future prospects.

We believe competitive factors for our services include ease of use, breadth of offerings, brand name recognition, reputation, price, quality and customer service and that we compare favorably on all these bases.

We are in the early stages of penetrating and growing the online market for small business legal and compliance services.

We expect to continue to grow our customer base and retain and expand our customer relationships following formation with the following strategies:

Grow our customer base.

We continue to grow the top of our funnel and improve our customer experience in order to grow our customer base.

To accelerate growth, we intend to:

• Increase LegalZoom brand awareness.

We intend to continue to invest in our brand to increase awareness of the protection that legal and compliance services offer small businesses, and the ease and affordability of our platform.

For example, in March 2021, we launched our latest brand campaign “Let’s Make it Official”, emphasizing the core products that we offer and the benefits of our platform.

We will also amplify our net promoter advantage through social channels that drive word of mouth.

We expect to shift our marketing investment towards brand and reduce our performance marketing spend as we pursue this strategy.

• Improve conversion.

We have millions of visitors to our website each month and a large opportunity to increase conversion of prospects into customers.

We have invested in improving ease of use and optimizing the checkout flow to drive better conversion upon the first interaction with potential customers.

In addition, we plan to leverage machine learning further to create personalized experiences for potential customers, making them more likely to see the value of our platform.

• Attract new customers through partner integration.

We partner with leading players that can help our small business customers and improve our ecosystem.

Through our APIs, our partners can offer our solutions within their experience, providing us with a highly efficient customer acquisition channel.

For example, our services can ensure that a user of these third-party integrations has an EIN in order to open a financial account or can help the user form an entity to enable independent contractors connected to the gig economy avoid misclassification as employees.

We will continue to seek partner integrations to increase awareness of our brand and to grow our customer base.

At December 31, 2021, we had over 175,000 paid subscriptions acquired through our partner integration channel.

To accelerate growth, we intend to continue to invest in our brand to increase awareness of the protection that legal and compliance services offer small businesses, and the ease and affordability of our platform.

We also intend to broaden our customer top of funnel through the introduction of lower-priced products and services targeting more price-sensitive customer segments.

Finally, we continue to partner with leading brands that can help our small business customers and improve our partner ecosystem.

As we attract more visitors to our website, we believe that we have a large opportunity to increase conversion of prospects into customers.

Retain and expand our customer relationships following formation.

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• Launch adjacent services.

Our strategy is to meaningfully expand our product line in the medium term to offer a solution for the majority of small business legal and compliance needs.

We have collected a vast amount of data in the past 20 plus years to both improve our own solutions as well as identify additional areas where we can launch new products for our customers throughout their lifetime.

For example, in 2020, we launched a tax advisory product, and in 2021 we introduced a new virtual mail solution through our acquisition of Earth Class Mail.

We plan on continuing to invest in a broader array of services to capture this opportunity.

Our strategy is to meaningfully expand our product line to offer a solution for the majority of small business legal and compliance needs.

• Partner to offer our customers broader ecosystem solutions.

We plan to offer additional access to third-party solutions to further support small business needs in areas such as banking, payments, payroll, accounting, and website hosting.

In 2021, two-thirds of our new customers had not yet started their businesses when they first engaged with us.

We believe that by working with our partners, we can increase our customer engagement and retention.

• Increase customer lifetime value.

We plan to continue to improve the lifetime value of our customers, particularly by increasing retention of our small business subscribers.

We plan to maintain engagement post-purchase with additional investments in existing solutions, add new solutions to serve additional needs, and improve lifecycle marketing to increase retention rates.

We also expect to leverage machine learning even further to create a more bespoke experience for our customers.

Through these initiatives, we plan to better monetize our existing customers by allowing them to realize continued value on our platform over time.

• Increase our market opportunity by introducing a new tier of higher-priced, higher-value products.

We have a large opportunity to serve customer demand by offering assistance with their legal and compliance needs.

• Broaden customer top of funnel.

We aim to reduce peoples’ uncertainty and doubt about forming a business on their own, as well as to expand our opportunity to serve people who would not consider a “do it yourself” solution.

We expect to continue to broaden the top of the funnel consideration for LegalZoom by highlighting our attorney integration.

We believe the “assisted” market is multiples larger than the “do it yourself” market that we have historically served, because expertise increases customer confidence.

• Increase adoption of assisted offerings.

We plan to provide more value to our customers from existing product lines by adding a tier of Attorney Assist solutions.

In June 2020, our “Attorney Assist” product for trademarks became widely available, and we have seen higher average order value, and more orders over time, as customers value the ability to work directly with attorneys.

Solutions that incorporate an attorney have higher completion rates.

We plan to continue to expand our credentialed professional-assisted offerings to complement our technology-enabled solutions.

We plan to continue to improve the lifetime value of our customers, particularly by increasing retention of our small business subscribers through maintaining engagement post-purchase, adding new solutions to serve additional needs, and improving lifecycle marketing to increase retention rates.

• Increase our market opportunity by introducing a new tier of higher-value assisted offerings.

We aim to reduce peoples’ uncertainty and doubt about forming a business on their own by offering “assisted” solutions alongside our “do it yourself” offerings for their legal and compliance needs.

We plan to provide more value to our customers from existing product lines by adding a tier of attorney assisted solutions and continuing to expand our professional-assisted offerings to complement our technology-enabled solutions.

Our Products and Services

We help customers form their businesses, protect their ideas, stay compliant and scale their operations.

Our products and services include business formations, creating estate planning documents, protecting intellectual property, completing certain forms and agreements, providing access to independent attorney advice, and connecting customers with experts for tax preparation and bookkeeping services.

The primary driver of new customers is small business formation transactions, and at that moment we aim to start a deeper relationship reflected in bundled subscription services and partner offerings.

The primary driver of new customers is small business formation transactions, and at that moment we aim to start a deeper relationship reflected in bundled subscription services and

partner offerings.

This combination creates a suite of legal and compliance solutions that are relevant for our customers’ ongoing needs.

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Transaction products

We completed 977,000, 892,000 and 691,000 transaction orders in 2021, 2020 and 2019, respectively.

Our transaction products are described in the following table:

Our transaction products are listed in the following table:

Transaction Products for Small Businesses Transaction Products for Consumers

Business Formation

Limited Liability Company (LLC) Formation

Limited Liability Company (LLC)

Incorporation of C and S Corporations

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Provisional Patent Application

Tax Services (1)

Business and Personal Tax Preparation

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Other Legal Matters

Uncontested Divorce

Real Estate Deed Transfer

Real Estate Leases

(1) When generating a customized legal document, customers are guided through every step by our proprietary questionnaire and document engine platform.

Related offerings are presented within the questionnaire, enabling customers to opt into complementary products and services.

If customers need assistance, our customer care and sales organization is available to help them through the process.

Additionally, if they need legal or accounting help, customers can opt into a subscription and get access to our tax experts and our network of independent attorneys.

Once the customer submits the questionnaire data, our people or technology review responses for completeness prior to delivery or submission to the appropriate federal, state or local jurisdiction.

Subscription services

More than 85% of the U.S.

subscription units as of December 31, 2021 and 2020 were annual plans billed in advance.

Our primary subscription services are described in the following table:

Our primary subscription services are listed in the following table:

Small Business Subscriptions Consumer Subscriptions

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Tax Advice and Preparation

Accounting, bookkeeping and payroll

Accounting and Payroll

Virtual Mail and Check Deposit Services Attorney Advice through our Legal Plans

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Our registered agent services receive, process, and forward served legal documents digitally or physically to the customer.

The majority of our customers who formed their LLCs and corporations through us in 2021 and 2020 used us as their registered agent as of each period end, and over 60% of our subscription units as of December 31, 2021 were for registered agent services.

Compliance subscriptions .

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We introduced our LegalZoom-fulfilled tax subscription, or LZ Tax, in October 2020.

This subscription includes tax advice on essential tax matters at both state and federal levels with the option to add tax preparation, as well as advice on new tax and bookkeeping-related matters from a tax expert, either a certified public accountant or an enrolled agent.

This subscription includes tax advice on essential tax matters at both state and federal levels with the option to add tax preparation, as well as advice from a tax expert, either a CPA or an enrolled agent.

In addition, our customers receive

a consultation included in their formation that includes guidance on their tax strategy, including how to maximize their deductions and income.

Our tax services help small businesses get set up right from the beginning to minimize their tax bill.

In August 2021, we commenced selling our tax preparation services within our tax subscriptions.

Legal forms and other subscriptions.

We offer other subscriptions, including unlimited access to our library of legal forms, electronic storage of applicable LegalZoom documents, and document revisions.

Through our acquisition of Revvsales Inc.

in October 2022, we plan to enhance our forms library and legal template offerings and integrate e-signature capabilities into our platform.

Additionally, we offer subscriptions that enable customers to monitor trademark applications, create meeting minutes for their board of directors’ meetings and monitor compliance calendar deadlines.

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We have unique insights into our customers and leverage our product as a channel to introduce small businesses to our partner ecosystem, solving even more of their needs.

Our partnering arrangements include reseller models, revenue share, and flat fees earned by introducing small businesses to leading providers of small business services such as banking, bookkeeping, credit cards, business licenses, website design, and payment processing.

We are evaluating expanding our strategic partnerships to include payroll, human capital management, marketing, and digital presence as well as other best-in-class industry specific solutions.

We are increasingly focused on evolving our partner economic structures to recurring revenue models that reflect the value of our unique position in the customer’s business lifecycle.

Our partnering arrangements include reseller models, revenue share, and flat fees earned by introducing small businesses to leading providers of small business services such as banking, credit cards, business licenses, website design, and payment processing.

In addition to serving small businesses and consumers, we offer a developer platform, including APIs that enable external developers to co-brand or white-label business formation and compliance services with a highly integrated solution.

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Our solutions provide large enterprises the ability to manage their multi-entity legal and compliance needs and small business platforms to offer business formation and compliance services to their own customers, either within their own customer experience or by referring the customer to us.

The services are delivered using our proprietary technology and may include registered agent, regulatory filing, business licenses or compliance services as well.

For example, we may help a large enterprise incorporate each of its independent truck drivers via a cobranded referral program, a small business platform providing formation services on a white-label basis as an integrated part of its own customer offering, or an accounting firm incorporate its clients and assist with their compliance needs.

Partner revenue consists primarily of fees earned from third-party providers from leads generated to such providers through our online legal platform.

Partner revenue is generally composed of one-time or recurring referral fees, which are generated by introducing our customers to third-party providers.

New product development

Our product development strategy is focused on reducing friction and increasing conversion across our existing core products and services and expanding our portfolio of new products and services, gaining market share, and strategically deepening customer relationships, including in ways that will make legal and compliance expertise available to our customers and increase our recurring revenue through subscription offerings.

Our product development team gathers customer feedback from our front-line customer service agents and leverages user experience research to inform our product roadmap.

We are highly focused on using this feedback to meaningfully expand our service offerings to help our customers, from starting their businesses to successfully running them.

In our more than 20 years of operating history, we have amassed and maintained a database of forms and other legal documents used at the federal, state, and county level throughout the U.S.

for business formations, intellectual property registrations, and estate planning purposes.

We distilled the forms completion process into an easy-to-understand questionnaire that asks our customers the appropriate questions to complete the documents.

The result is our proprietary logic-based architecture that translates the customers responses onto one of over 1,100 documents across 150 different product types.

Our core systems use automation to map the customer’s data onto the appropriate document, prepare the document in the proper format, and, in most cases, submit it to the state or county.

Our product development strategy is focused on reducing friction and increasing conversion across our existing core products and services, expanding our portfolio of new products and services, gaining market share, and strategically deepening customer relationships, including in ways that will make legal and compliance expertise available to our customers and increase our recurring revenue through subscription offerings.

Historically, our customers have tended to place a higher number of orders and entered into new or renewed subscriptions in the first quarter of the year, which is when we believe the demand for forming businesses is the highest.

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Also, we have historically seen demand for our services decline around the beginning of the third quarter as a result of summer vacations and in the last two months of the fourth quarter as a result of the winter holidays.

These historical trends were recently affected by the COVID-19 pandemic beginning in the second quarter of 2020 as individuals and small businesses turned to online services given the relative inaccessibility of offline alternatives as well as due to the availability of government stimulus checks.

These tailwinds subsided in the back half of 2021 due to the easing of government stimulus supporting individuals and small businesses impacted by the pandemic.

Seasonality in our business may cause period-to-period fluctuations in certain of our operating results and financial metrics and thus limit our ability to predict our future results.

While the seasonality of our business was impacted by the COVID-19 pandemic throughout 2020 and into 2021, we have since seen a return to more typical historical trends.

Our Technology

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Document automation

Our technology platform includes complex automation systems that transfer customer responses into our more than 1,650 state or county-specific templates to generate customized legal documents.

Our technology platform includes complex automation systems that transfer customer responses into many state or county-specific templates to generate customized legal documents.

Our automation unifies the various methods used by states and counties to form businesses into a single easy-to-understand customer experience.

We have introduced straight through processing, or STP, for a subset of our estate planning and business formation documents, which has enabled us to deliver the documents to the customer in near real-time.

We plan to incorporate STP into additional transactional offerings.

We use straight through processing for several products, which has enabled us to deliver the documents to the customer in near real-time.

Compliance platform

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Robust CRM platform

Our account executives, customer care and sales organization, fulfillment specialists, and tax advisors leverage a multi-channel customer relationship management, or CRM, platform, powered by integrating a variety of tier one contact center technologies.

Our account executives, customer care and sales organization, fulfillment specialists, and tax advisors leverage a multi-channel customer relationship management platform, powered by integrating a variety of tier one contact center technologies.

The platform is integrated within our production and fulfillment systems and enables us to support customers through communications via multiple channels including our websites, email, text, phone, online chat, and our mobile applications.

For example, we automatically notify business formation customers over multiple channels regarding their order status as their legal documents progress through our workflow and when we receive confirmation of the documents being filed with or approved by government agencies.

Scalable and secure infrastructure

Our platform resides on a combination of on-premises infrastructure located in California and Texas and best-in-class public cloud-based platforms.

Our platform resides on a combination of on-premises infrastructure and best-in-class public cloud-based platforms.

Our platform is highly scalable to accommodate an increasing volume of customer orders.

We have designed our websites to be highly intuitive and secure using proprietary software and commercially supported tools.

Maintaining the integrity and security of our websites is a key priority.

We utilize national security standards and appropriate tools for secure transmission of personal information between our customers and our websites and maintain a dedicated security team that drives compliance with data security standards.

We intend to transition our platform to the public cloud with all essential products operating on public cloud platforms that have built-in security, and data and privacy controls.

Our website allows users to access the same content on our platform from their laptops, tablets, or smart phones.

We also maintain apps on iOS and Android that make it easy for customers to access their documents, schedule consultations, and get status updates on their orders.

Intellectual Property

We believe that our proprietary technology is an important and valuable part of our business.

We protect this proprietary technology by relying on a variety of intellectual property mechanisms including copyright and trademark laws, restrictions on disclosure and other methods.

We frequently file applications for trademarks and service marks in order to protect our intellectual property.

We have various trademark registrations in the U.S.

and in foreign jurisdictions, as well as pending trademark applications in the U.S.

We have no issued patents.

We also license intellectual property from third-parties, such as software used to support our technology and operations.

In addition, we seek to protect our intellectual property rights by requiring our employees and independent contractors to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.

Our Attorney Advice Network

We offer attorney advice across all 50 states in the U.S.

to our subscribers through a network of independent law firms that manage relationships with approximately 1,300 attorneys.

Our network consists of a core group of over 135 attorneys who handle the majority of consultations across the most common legal issues.

The remaining attorneys handle more specialized needs, including worker compensation, landlord and tenant issues and bankruptcy.

In 2021 and 2020, our network completed over 70,000 and 80,000 consultations, respectively, bringing our total completed consultations, since the launch of our attorney assistance division in 2011, to over 660,000.

We experienced a higher number of attorney consultations in 2020 as the COVID-19 pandemic led individuals and small businesses to turn to online services given the relative inaccessibility of offline alternatives.

Participating law firms must focus on customer care and satisfy stringent customer satisfaction standards to remain on the network.

Customers are given the opportunity to review an attorney after each consultation.

Based on these reviews, attorneys in our network achieved an average net promoter score, or NPS, of 78 in 2021.

to our subscribers through a network of independent law firms that manage relationships with independent attorneys.

Our brand and marketing efforts allow the participating attorneys to focus more on the practice of law and less on business development.

The initial free consultation serves as a platform for business development, where the participating attorney can offer to provide billable legal services to our customers at discounted rates.

The initial consultation serves as a platform for business development, where the participating attorney can offer to provide billable legal services to our customers at discounted rates.

In addition, participating law firms can leverage our brand awareness as well as the customer feedback and testimonials to market their own practice.

Each firm receives a flat administrative fee from us for each legal plan participant in its area to cover the administrative costs associated with participating in our network.

Our Tax and Advisory Services

We believe our goal of becoming the trusted advisor to the small business ecosystem hinges on our ability to offer high-quality legal and compliance services at business formation and beyond.

We are often the first service provider a new business interacts with, a unique position from which we can form a long-term customer relationship.

Our research suggests that our customers welcome assistance from us for their bookkeeping and tax needs, and that many of those needs are highly relevant and top-of-mind in the moment of business entity formation.

We provide our customers with tax advice, tax preparation, and related tax services (like bookkeeping and payroll) in affordable subscriptions through LZ Tax, which we launched in October 2020.

In addition, our customers receive a consultation included in their formation that includes guidance on their tax strategy, including how to maximize their deductions and income.

Our in-house tax advisors achieved an NPS score of 84.1 for 2021.

Customer Care

At December 31, 2021, we had over 300 customer care representatives providing assistance, support and account management to small businesses and individuals.

Exceptional customer experience is central to our culture and we take pride in our customer care team based in Austin, Texas, which handled over 1.2 million customer contacts in 2021.

Our customer care representatives provide assistance, support and account management to small businesses and individuals.

Exceptional customer experience is central to our culture and we take pride in our customer care team.

Our customers have access to live help from customer care representatives by phone, online chat, text, email, or via our mobile applications.

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We actively monitor our service levels, fulfillment speed and quality to maintain a high level of customer care.

Customer care team members have metrics-driven incentives that further align their goals and compensation with our

focus on the customer while maintaining regulatory compliance.

We believe the effectiveness of our approach is reflected in our strong NPS of 69.2 in 2021, which is based on over 81,000 responses from customers.

Customer care team members have metrics-driven incentives that further align their goals and compensation with our focus on the customer while maintaining regulatory compliance.

Sales and Marketing

LegalZoom is a highly recognizable online legal services brand for small businesses and individuals in the U.S.

We have invested significantly to create a highly recognizable legal brand, online and offline.

We intend to continue to invest in our brand awareness, emphasizing the core products that we offer and the benefits of our platform.

We attract a meaningful percentage of unpaid website traffic, underscoring our brand strength and unique content offering.

Our content marketing includes educational initiatives such as our Article Center on our website, where we create content to better inform our customers on how they can plan for and protect themselves, their families, and their businesses.

We invest significantly to create a highly recognizable legal brand, online and offline and we attract a meaningful percentage of unpaid website traffic, underscoring our brand strength and unique content offering.

marketing includes educational initiatives such as our Article Center on our website, where we create content to better inform our customers on how they can plan for and protect themselves, their families, and their businesses.

We use a strategic mix of online and offline marketing in combination with inbound sales.

We are highly disciplined and metric-driven in driving customer acquisition cost efficiencies.

Our largest customer acquisition media spend is in search engine marketing to capture demand generated by our other paid and organic channels.

We also advertise across television, radio, podcasts, digital video, and social media.

Our affiliate partnerships have historically been another very successful channel for customers to discover LegalZoom and learn more about our products.

We maintain a sales team of over 200 professionals in the Austin, Texas area.

This team takes inbound calls from customers and prospects, using a conversational approach to introduce our services, explain features and recommend various partners.

When our sales team becomes involved, the average order size frequently increases due to their effectiveness in selling ancillary offerings.

Our sales teams also proactively targets qualified prospects, such as those who began a questionnaire in our customer experience journey but have yet to purchase.

Our Competition

We operate in a very competitive industry.

We face intense competition from law firms and solo attorneys, online legal document services, legal plans, secretaries of state, tax preparation companies and other service providers.

The online legal solutions market is evolving rapidly and is becoming increasingly competitive.

Other companies that focus on the online legal document services market or business formations, such as BizFilings, LegalShield, MyCorporation, and RocketLawyer, and law firms that may elect to pursue the online legal document services market, can and do directly compete with us.

Law firms and solo attorneys, who provide in-person consultations and are able to provide direct legal advice that we cannot offer due to laws and regulations regarding the unauthorized practice of law, or UPL, compete with us offline and have and may develop competing online legal services.

We compete in the registered agent services business with several companies that target small businesses, including Wolters Kluwer, and these competitors have extensive experience in this market.

In addition, certain U.S.

states, including Nevada and Louisiana, offer online portals where consumers may file their articles of organization.

We also compete in tax advisory service business with several companies, including H&R Block and Jackson Hewitt.

We also advertise from time to time across television, radio, podcasts, digital video, and social media.

In taking customer calls, our sales team uses a conversational approach to introduce our services, explain features and recommend various partners.

When our sales team becomes involved, the average order size frequently increases due to our team’s effectiveness in selling ancillary offerings.

Our sales teams also proactively target qualified prospects, such as those who began a questionnaire in our customer experience journey but have yet to purchase.

Human Capital Management

At December 31, 2022, we, together with all our subsidiaries, had 1,383 employees worldwide.

At December 31, 2021, we also engaged approximately 400 contractors and consultants in the U.S., and maintained a network of independent law firms that manage relationships with approximately 1,300 attorneys.

At December 31, 2022, we also engaged approximately 400 contractors and consultants in the U.S.

None of our employees are represented by a labor union.

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Our guiding principles are anchored on the goals of being able to attract, incentivize, and retain talented employees who can develop, implement, and drive long-term value creation strategies.

We’ve designed our compensation program so that every U.S.

We’ve designed our compensation approach so that every U.S.

based employee has a component of their compensation that is performance or incentive driven.

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By that, we not only mean caring for and protecting the millions of customers we have served since inception, but investing in, empowering and fostering trust and wellness among our employees.

For example, when many of our employees were impacted by the recent unprecedented storms and power outages in Texas in February 2021, we moved quickly to set up a relief fund for all of our impacted employees and donated to an organization directly serving the broader impacted community.

In addition, we provided additional paid days off for employees who were unable to work due to power outages or internet connection issues.

We made an abrupt change in March 2020, in the face of the global COVID-19 pandemic, to move all of our non-essential workers to a remote, work-from-home environment.

The primary drive for all decision-making in the face of the pandemic has been focused on employee wellness.

We’ve remained agile to accommodate the ever-changing needs of our employees as well as the changing nature of the pandemic.

Our non-essential workforce continues to be almost entirely remote today.

We’ve made numerous investments in our employees to accommodate this new remote environment, including providing an allowance for home office needs, giving employees an added rest day each year, providing paid transportation via ridesharing apps for essential workers who would normally take public transportation, and providing ten emergency paid sick days for employees to use if they have been impacted by COVID-19 in any way.

In November 2021, we announced a workplace model shift to Remote-First, positioning us as a best-in-class workplace that provides flexibility through remote work, attracting, and retaining top talent to build an inclusive, productive, and collaborative culture that supports our business goals.

In November 2021, we announced our first-ever wellness break as a new benefit to our US-based employees, providing them with a week of continuous paid-time off to focus on holistic wellness and what matters to them most.

This was followed by an announcement and open enrollment of our new competitive 2022 benefits offerings for our U.S.

workforce for 2022, including additional time off, increased LegalZoom premium contributions, including options for 100% employer-paid dental, medical, and vision, increased coverage, new fertility benefits, and expanded mental and physical wellness benefits.

In order to better understand the needs of our employees, we launched a new employee feedback platform that allows us to survey our employees on a regular basis.

We were able to establish baseline employee net promoter, or NPS, and employee satisfaction scores, along with other feedback that measures satisfaction in a variety of areas.

We are now able to take very specific action based on the voice of the employee to better serve our organization.

We have remained agile to accommodate the ever-changing needs of our employees since the pandemic.

In 2021, we announced the adoption of our remote first model, which required coordinated efforts across the organization to operationalize.

Over the last year, our strategy has been focused on engaging employees virtually to support working from home by launching virtual productivity and collaboration tools, and driving engagement through virtual events.

In addition, while they remain primarily remote, we engaged with corporate employees who are located near our existing offices to enable them to leverage offices for in-person meetings where live collaboration could help foster improved productivity and engagement.

To facilitate this, in the summer of 2022, we re-opened our Glendale, California, and Austin, Texas, locations to our remote first teams, creating intentional collaboration spaces that would enable in-person working sessions and team engagement.

We also opened a new location in Mountain View, California and Playa Vista, California, where we had a large cluster of employees residing, to have a space where our remote first teams could have the opportunity to engage with their co-workers in person.

This approach has allowed us to build foundational infrastructure and establish a stronger culture both virtually and in-person.

We have also invested in employee engagement to help improve connectedness in our remote-first work environment.

In 2022, we launched an employee recognition tool that rewards and provides visibility to our employees’ accomplishments.

We also continue to fuel our organization’s passion for social good, and launched a new employee giving program and tool that provides dollar-for-dollar matching and paid time off or volunteering for causes our employees care about most.

Finally, we continue to engage our employees in in-person and remote social impact events, like our second annual Impact Week, where we come together to volunteer and raise funds for various causes.

In 2022, we remained committed to our principles of taking care of our employees holistically while continuously looking for ways to improve our overall benefits offering.

We offer competitive benefits including:

100% employer-paid medical, travel reimbursement for out-of-state procedures, dental and vision plans, fertility coverage, mental health coverage, physical wellness, and paid-time off, including a continuous week off, called Wellness Break for all employees.

In addition, we made a number of meaningful enhancements in 2022’s November Open Enrollment for 2023, including increasing our offerings on mental health and parental leave for non-birthing parents, additional gender equality benefits, additional sick-time off and paid company holidays, and new lifestyle benefits for our employees to use in a way that represents them and expanding coverage on our dental and vision plans.

We believe we are thriving when every voice is nurtured and heard.

We have five employee networks today, including Pride Zoomer Alliance Network, Life Every Voice Black Network, Rise Up- Women’s Network, Women in Tech Network and LatinX Network, each with dedicated internal funding, executive sponsorship and a focus on supporting diversity equity and inclusion within and outside of LegalZoom.

We have six employee resource groups today, including Pride Zoomer Alliance Network, Lift Every Voice Black Network, RiseUp Women’s Network, Women in Tech Network, and Nos Unimos LatinX Network, each with dedicated internal funding, executive sponsorship and a focus on supporting diversity, equity, and inclusion within and outside of LegalZoom.

These networks have built internal mentorship and development programs, and contributed to their broader communities outside of LegalZoom through their initiatives.

Environmental, Social, and Governance

We believe legal help should be available to everyone, and take to heart the responsibility that comes with our mission of democratizing law.

According to the Center for American Progress, 40-60% of the middle class have legal needs that go unmet, which contributes to economic and entrepreneurial inequality, especially in under-represented communities.

The cost and complexity of legal assistance is daunting for many without the financial means and legal training.

In the early 2000s, we set out to make legal resources more accessible and disrupt an industry many believed couldn’t be disrupted given the rules and regulations of the legal system.

We built a platform of technology and people to demystify and simplify complicated processes, creating user-friendly and cost-effective experiences for our customers while keeping their data and privacy top-of-mind.

Fast-forward 20 years, now people can form a business starting at a flat fee of $79 (plus state-imposed filing fees), a significant cost savings compared to traditional offline legal services.

We are committed to continuing to work so that anyone with a dream can protect their business, family and creative work by accessing our small business, estate planning, tax, and intellectual property products.

We believe that we also have a responsibility to serve those who do not have access to legal services because of who they are, who they love, where they live, the color of their skin, or their economic status.

While the inherent nature of our business opens up new opportunity for many who may not have had it otherwise, we aim to do more to empower under-represented communities.

Our social impact efforts involve partnerships with two nonprofits, Accion Opportunity Fund and Defy Ventures, both of whom support and further small business ownerships in under-represented communities.

By helping to fund their programs, we’re able to help further economic growth in the small business community, focusing on people of color, women, immigrants, and formerly incarcerated individuals.

We also fund a scholarship at University of Southern California’s Brittingham Social Enterprise Lab, which is the only social impact master’s program in the country.

And finally, in the Fall of 2021, we announced a multi-year deal with the National Basketball Association, or NBA, Women’s National Basketball Association, or WNBA, and NBA G League in a first-of-its-kind partnership rooted in social impact.

We committed $6 million in grants and services to small business owners in under-represented communities.

In our first cycle, we had over 11,000 applicants, of which 84% identified as people of color, 54% women, and 58% reported a revenue of $50,000 or less.

We expect the remaining cycles to have similar numbers.

Aside from helping those with legal matters that tie closely to our business, we also feel a responsibility to contribute to the larger access to justice movement, no matter what type of legal matter it is.

That is why we helped fund the first national disaster relief pro bono portal built by Paladin, a justice technology b-corp.

The portal is the result of a partnership with the American Bar Association Young Lawyer’s Disaster Legal Services Program, the exclusive legal services coordinator for the Federal Emergency Management Agency, or FEMA, and it connects legal

nonprofits all over the country with attorneys who raise their hand to provide legal assistance during times of crisis.

The COVID-19 crisis and other national disasters have created immediate legal needs for millions of Americans.

With many people now having to navigate unlawful evictions, loss of wages and benefits, delays in court proceedings and more, there is an unprecedented need to connect low-income Americans to pro bono attorneys.

Since inception, the portal has connected 5,300 Americans with attorneys to pro bono legal support.

Our social impact goes beyond our external partnership efforts and support—it’s embedded in our culture and employee experience.

Addressing inequities starts internally, which is why we made hires for roles in diversity, equity, and inclusion to help us be the most diverse and inclusive company we can be.

We have created and hired into new roles to ensure these priorities continue to rise in importance, including senior roles:

Head of Social Impact and Director of Talent Development Diversity Equity & Inclusion.

63% of our C-Suite identify as either female or people of color.

Being a purpose-driven company is crucial to our employee experience, which is why we have dedicated groups, events, initiatives, and programs that help contribute to the greater good.

For instance, we are part of the Time to Vote initiative, a nonpartisan movement led by the business community to contribute to the culture shift needed to increase voter participation in our country’s elections, and we have also made the Presidential Election Day a company holiday to ensure that every employee can participate in the democratic process and make time to vote.

Additionally, in July 2021, we joined 147 other companies in signing the Human Rights Campaign’s Business Statement Opposing Anti-LGBTQ State Legislation that opposes harmful legislation aimed at restricting the access of LGBTQ+ people in society.

We also support giving back outside of our walls through our employee giving and volunteerism programs.

Every full-time employee has two volunteer PTO days, and can apply for a company donation match to organizations they fundraise for.

In the summer of 2021, we had our inaugural Impact Week, where we came together as a company and broke records in volunteer hours, fundraising, and event attendance.

And in December 2021, we had our second End-of-Year Giving campaign where we raised over $70,000 for nonprofit organizations aligned with our mission and values.

Aside from our social initiatives, we also find environmental issues to be important.

We are committed to clean, renewable energy.

In our Austin, Texas office, we have installed a 520 kW solar electric system.

This produces 756,000 kWh of energy per year.

The environmental impact amounts to an annual reduction of 1,180,000 pounds, or 536 tons of carbon dioxide emissions, an environmental benefit equivalent to planting 8,000 carbon-sequestering trees.

Data security and privacy is also important to our operations.

Ensuring that we meet or exceed expectations with respect to maintaining the confidentiality of the information in our possession is embedded throughout our operations.

Our customers and employees trust us with their most sensitive information, including business plans, intellectual property, tax information, and the intimate details of their personal documents, for example wills.

To ensure the security of this data, we have implemented security practices that maintain physical, technical and administrative safeguards.

We also conduct regular risk assessments to evaluate the effectiveness of our program to ensure that we are continuing to expand and adapt to a changing threat landscape.

We are equally committed to protecting our customers’ privacy.

As part of this commitment, we have adopted data stewardship principles that inform our partnerships with third parties and other data sharing arrangements.

These principles, which are based on principles of transparency and consent, align with our commitment to never sell our customers’ data.

We conduct robust privacy reviews of our vendors for new or modified internal processes.

Finally, despite the invalidation of Privacy Shield, we have opted to continue to participate in third-party audits of our privacy practices to help supplement our internal privacy program activities.

Intellectual Property

We believe that our proprietary technology is an important and valuable part of our business.

We protect this proprietary technology by relying on a variety of intellectual property mechanisms including copyright and trademark laws, restrictions on disclosure and other methods.

We frequently file applications for trademarks and service marks in order to protect our intellectual property.

At December 31, 2021, we had 18 trademark registrations and 11 pending trademark applications in the U.S.

We also had over 35 trademark registrations in 16 foreign jurisdictions or under international or European Union and European Community registrations.

We have no issued patents.

We also license intellectual property from third parties, such as software used to support our technology and operations.

Government Regulation

We operate in a particularly complex legal and regulatory environment.

We are subject to a variety of U.S., United Kingdom, or U.K., and other foreign laws, rules and regulations, including those related to internet activities, UPL, the corporate practice of law, or CPL, privacy, data protection, cybersecurity, data retention, consumer protection, content regulation, automatically renewing subscriptions, the processing of legal documents, legal plans, human resource services, employment and labor laws, workplace safety, intellectual property and the provision of online payment services, including credit card processing, anti-bribery and anti-corruption laws, federal securities laws, tax regulations and other matters, which are continuously evolving and developing.

We own and operate an alternative business structure, or ABS, in the U.K.

to provide legal services to U.K.

based consumers.

The ABS employs and contracts with solicitors licensed in the U.K.

as well as attorneys licensed in the U.S.

to provide limited scope legal services to consumers who purchase such services on our websites.

The ABS is regulated by the Solicitors Regulation Authority.

While we believe this structure is legally permissible, it is generally untested in U.S.

courts and we cannot assure you that it will insulate us from claims of CPL or UPL.

These laws and regulations are regularly evolving and tested in courts, and may be interpreted, applied, created, or amended, in a manner that could harm our business.

We are subject to a variety of U.S.

and foreign laws, rules and regulations, including those related to internet activities, UPL, the corporate practice of law, or CPL, privacy, data protection, cybersecurity, data retention, consumer protection, content regulation, the processing of legal documents, legal plans, the provision of online payment services and other matters, which are continuously evolving and developing.

Our business model includes the provision of services that represent an alternative to traditional legal services, which has subjected us to allegations of UPL in the U.S.

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subsidiary, LZ Legal Services, LLC.

While several states have or are implementing exploratory programs to allow non-lawyers to own law firms under strict ethical parameters, outside of our Arizona ABS, we are currently unable to acquire a license to practice law in the U.S., or employ licensed attorneys to provide legal advice to our customers, because we do not meet the regulatory requirement of being exclusively owned by licensed attorneys.

Our business model is also subject to laws and regulations that govern business transactions between attorneys and persons who are not licensed attorneys, including those related to the ethics of attorney fee-splitting and CPL.

We are subject to certain regulations relating to the processing of legal documents, which vary among the jurisdictions in which we conduct business.

Regulation of our legal plans also varies considerably among the insurance departments, bar associations and attorneys general of the particular states in which we offer our legal plans.

In addition, some states may seek to regulate our legal plans as insurance or specialized legal service products.

This Arizona ABS employs and contracts with licensed attorneys to provide limited scope legal services to U.S.-based consumers who purchase such services on our websites.

While we believe this ABS structure is legally permissible, it is generally untested in U.S.

courts and we cannot assure you that it will insulate us from claims of CPL or UPL.

These laws and regulations are regularly evolving and tested in courts, and may be interpreted, applied, created, or amended, in a manner that could harm our business.

In addition, we are subject to numerous foreign and domestic laws, regulations, and standards regarding privacy and data security governing the personal information and other data that we may collect, store, use, or process.

Such privacy and data security laws and regulations, including with respect to the European Union's General Data Protection Regulation and the California Consumer Privacy Act of 2018, and the interpretation and enforcement of such laws and regulations, are continuously developing and evolving and there is significant uncertainty with respect to how compliance with these laws and regulations may evolve and the costs and complexity of future compliance.

Our compliance with applicable government laws and regulations is not expected to materially affect our earnings or competitive position or result in material capital expenditures.

However, we cannot predict what laws will be enacted in the future, or how existing or future laws will be administered, interpreted or enforced.

We also cannot predict the amount of future expenditures that we may need to make to comply with, or to satisfy claims and lawsuits relating to, these various laws and regulations.

See Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for additional information.

Available Information

Our Investor Relations website is https://investors.legalzoom.com/ and we encourage investors to use it as a way of easily finding information about us.

We promptly make available on this website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission, or SEC (including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports), corporate governance information (including our Code of Conduct and Ethics), and select press releases.

We make available on this website, free of charge, the reports that we file or furnish with the SEC including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, as soon as reasonably practicable after we file such material with, or furnish it to, the SEC.

We also make available certain corporate governance information, including our Code of Business Conduct and Ethics, and select press releases.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business