National Advertising Division Finds Certain Claims for Online Corporate Formation Services Supported; Recommends LegalZoom Modify or Discontinue Others

New York, NY – August 15, 2024 – In a challenge brought by ZenBusiness, Inc., BBB National Programs’ National Advertising Division determined that LegalZoom, Inc. provided a reasonable basis for certain claims regarding its online corporate formation services but recommended that it discontinue or modify others.

Superiority Claims

ZenBusiness challenged several iterations of social media ad and sponsored search ad claims stating that LegalZoom is the “#1 Choice” for online small business formation and is “#1 Rated/Voted” by small businesses. 

The National Advertising Division (NAD) determined that the three surveys relied on by LegalZoom as evidence were not a good fit for supporting the claims and recommended they be discontinued. NAD noted that its decision does not prevent LegalZoom from relying on the surveys for different, supported claims.

Best LLC Claim

NAD found that LegalZoom’s “Best LLC Service” claim, which appeared in a sponsored search ad, is puffery and does not require support. NAD noted that, in context, the claim is used as a vague statement of corporate pride without conveying a message that LegalZoom has been measured to be the “best” in a quantified, objectifiable way.

Price Savings Claims

LegalZoom’s website features a direct comparison of its business formation services to those offered by ZenBusiness. NAD found the claims that ZenBusiness is “up to 20% more expensive than LegalZoom” and that customers who use LegalZoom’s business formation services “can save up to $39” compared to ZenBusiness were substantiated. However, NAD recommended that LegalZoom modify its comparison chart to accurately indicate that ZenBusiness offers a website builder free for one month with its starter package. 

NAD also found that LegalZoom’s proposed modification to its comparison chart to clearly and conspicuously identify both companies as offering compliance services (included by ZenBusiness for the first year) would not mislead consumers about the compliance offerings of each competitor.

Disclosure of Affiliate Relationship

LegalZoom’s website features a box with the language “as seen in” followed by the logos of Forbes, Mashable, The New York Times, CNBC, and The Today Show. NAD recommended that if LegalZoom has a material connection, including an affiliate relationship with the publications and media outlets featured in its “as seen in” advertisement, that material connection should be clearly and conspicuously disclosed on LegalZoom’s website.

On another part of its website, LegalZoom touts its relationship with its business partners stating in large black font “Build a successful business with help from our partners” followed by the statement “Whether you’re just starting out or looking to scale your business, our partners have solutions and special offers.” Below the text, six partner logos are featured, which NAD found clearly and conspicuously discloses the commercial relationship between LegalZoom and its partners.

Consumer Purchase Flows

NAD reviewed two challenged portions of LegalZoom’s LLC purchase flow and recommended that LegalZoom:

• Modify the registered agent purchase flow to clearly and conspicuously disclose the options available to consumers; and 
• Modify the order review page to clearly and conspicuously reflect the pricing of the add-on features, both in their line-item appearance and in the total price at the end of the page.

In its advertiser statement, LegalZoom stated that it “will comply with NAD’s decision.” LegalZoom further stated that although it “disagrees with some of NAD’s conclusions, as a strong supporter of industry self-regulation LegalZoom will take NAD’s recommendations into account as it revises its materials.”

All BBB National Programs case decision summaries can be found in the case decision library. For the full text of NAD, NARB, and CARU decisions, subscribe to the online archive. Per NAD/NARB procedures, this release shall not be used for advertising or promotional purposes.