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What changed in LEGALZOOM.COM, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of LEGALZOOM.COM, INC.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+385 added−384 removedSource: 10-K (2026-02-23) vs 10-K (2025-02-26)

Top changes in LEGALZOOM.COM, INC.'s 2025 10-K

385 paragraphs added · 384 removed · 310 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe have insights into our customers and leverage our product as a channel to introduce small businesses to a variety of third party partners in our partner ecosystem. Our third party partners are leading providers of complementary small business services that extend beyond our core offerings such as banking, insurance, tax, credit cards, website design, and payment processing, among others.
Biggest changeFurther, we partner with leading providers of complementary small business services that extend beyond our core offerings such as banking, insurance, tax, credit cards, website design, and payment processing, among others. We have insights into our customers and leverage our platform to introduce small businesses to a variety of third-party partners in our partner ecosystem.
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. Corporate and Other Information We are headquartered in Mountain View, California.
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. 9 Corporate and Other Information We are headquartered in Mountain View, California.
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 use a strategic mix of online and offline marketing in combination with inbound sales.
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 use a strategic mix of online and offline marketing and strategic partnerships in combination with inbound sales.
We received a license to operate one of our U.S. subsidiaries as an ABS in Arizona in September 2021. This Arizona ABS employs and contracts with licensed attorneys to provide limited scope legal services to U.S.-based consumers who 6 purchase such services on our websites.
We received a license to operate one of our U.S. subsidiaries as an ABS in Arizona in September 2021. 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.
Law firms and solo attorneys, who provide in-person consultations, 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.
Law firms and solo attorneys who provide in-person consultations are able to provide direct legal advice that we generally cannot offer directly due to laws and regulations regarding the unauthorized practice of law, or UPL.
As a result, we compete with a variety of companies and government entities, including the following: • online business formation providers and registered agent service providers; • traditional offline law firms and solo attorneys, online legal document services and secretaries of state; and • large platform companies that could develop competing technology solutions to address the needs of our small business or consumer customers.
As a result, we compete with a variety of companies and government entities, including the following: • online business formation providers and registered agent service providers; • traditional offline law firms and solo attorneys, online legal document services and secretaries of state; and • large platform companies that could develop or partner to provide competing technology solutions to address the needs of our small business or consumer customers.
We have various trademark registrations in the U.S. and in foreign jurisdictions, as well as pending trademark applications in the U.S. and internationally. We have no issued patents, but we have a patent-pending application that we are pursing in the U.S. and internationally. We also license intellectual property from third-parties, such as software used to support our technology and operations.
We have various trademark registrations in the U.S. and in foreign jurisdictions, as well as pending trademark applications in the U.S. and internationally. We have no issued patents, but we have a patent-pending application that we are pursuing in the U.S. and internationally. We also license intellectual property from third-parties, such as software used to support our technology and operations.
With our registered agent subscription, we serve as our customer’s registered agent: accepting their documents through the mail, digitizing critical business documents, and alerting them of critical business documents or notices. This serves to help them adhere to critical tax and annual report deadlines, among other benefits.
With our registered agent subscription, we serve as our customer’s registered agent: accepting their documents through the mail, digitizing critical business documents, and alerting them of critical business documents or notices. This subscription serves to help small business owners adhere to critical tax and annual report deadlines, among other benefits.
The rise of the gig economy and remote work have resulted in an increasing number of small businesses operating out of a home or personal address. Our virtual mail subscription protects our customers’ personal information by providing an independent business address. It also provides our customers flexibility by allowing them to check their mail from anywhere.
Virtual mail subscriptions. The rise of the gig economy and remote work have resulted in an increasing number of small businesses operating out of a home or personal address. Our virtual mail subscription protects a customer’s personal information by providing an independent business address. It also provides our customers flexibility by allowing them to check their mail from anywhere.
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. UPL generally refers to an entity or person giving or offering legal advice who is not licensed to practice law.
Our business model includes the provision of services that represent an alternative to traditional legal services, which has subjected us to allegations of UPL. UPL generally refers to an entity or person giving or offering legal advice who is not licensed to practice law.
However, our ABS in Arizona is allowed to provide independent legal advice to our customers and, as a result, can compete directly with traditional offline law firms and solo attorneys. In addition, there are structural impediments that make it difficult for traditional offline attorneys to adapt to technology advancements and consumer behaviors.
However, our ABS in Arizona and our independent legal plan network of attorneys are allowed to provide independent legal advice to our customers and, as a result, can compete directly with traditional offline law firms and solo attorneys. In addition, there are structural impediments that make it difficult for traditional offline attorneys to adapt to technology advancements and consumer behaviors.
Robust CRM platform 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 4 one contact center technologies.
Robust CRM platform Our account executives, customer care and sales organization and fulfillment specialists leverage a multi-channel customer relationship management platform, powered by integrating a variety of tier one contact center technologies.
We also make available certain corporate governance information, including our Code of Business Conduct and Ethics, and select press releases. 7
We also make available certain corporate governance information, including our Code of Business Conduct and Ethics, and select press releases. 10
During the year ended December 31, 2024, we had staffed registered agent locations covering all 50 states. 3 Compliance subscriptions . Our compliance subscriptions provide assistance with state-mandated regulatory filings, such as corporate annual reports that are required to keep a business entity in good standing.
During the year ended December 31, 2025, we had staffed registered agent locations covering all 50 U.S. states. Compliance subscriptions . Our compliance subscriptions provide assistance with state-mandated regulatory filings, such as corporate annual reports that are required to keep a business entity in good standing.
We are diversifying our customer acquisition strategy, which includes testing a mix of marketing channels with the goal of diversifying our marketing investments across overall brand, small business and consumer customers, and product categories versus our historical focus on business formations.
We are diversifying our customer acquisition strategy, which includes testing a mix of marketing channels with the goal of diversifying our marketing investments across overall brand, small business formation, emerging and established business customers, and product categories versus our historical focus on business formations.
These networks, which are open to all employees, have built internal mentorship and development programs, host meaningful and educational events, and have contributed to their broader communities outside of LegalZoom through their initiatives. In 2024, we remained committed to our principles of taking care of our employees holistically while continuously looking for ways to improve our overall benefits offering.
These networks, which are open to all employees, have built internal mentorship and development programs, host meaningful and educational events, and have contributed to their broader communities outside of LegalZoom through their initiatives. We remain committed to our principles of taking care of our employees holistically while continuously looking for ways to improve our overall benefits offerings.
We are testing and implementing ways to better reorient our products towards subscription offerings. We are also continuing to optimize our product line-up with the goal of improving the quality of our subscriber base.
We are testing and implementing ways to better reorient our products towards subscription offerings. We are also continuing to optimize our product line-up with the goal of improving the quality of our subscriber base and customer retention over time.
Our Strategy We are in the early stages of penetrating and growing the online market for legal, compliance and business management solutions. We aim to continue to grow our customer base and retain and expand our customer relationships with the following strategic priorities: Optimizing Our Subscription Business .
Our Strategy We are focused on penetrating and growing the online market for legal, compliance and business management solutions. We aim to continue to grow our customer base and retain and expand our customer relationships with the following strategic priorities: Optimizing Our Subscription Business .
Our Competition We operate in a very competitive industry, and the competitive landscape in which we operate is constantly evolving as we move into new markets and expand our ecosystem.
Our Competition We operate in a very competitive industry, and the competitive landscape in which we operate is constantly evolving as we expand our ecosystem.
Our virtual mail services include mail receipt, sorting, digitization, check depository services, and shipment or storing of select mail. Legal forms and eSignature subscriptions. We offer other subscriptions, including unlimited access to our library of customizable legal forms, electronic storage of applicable LegalZoom documents, and document revisions.
Our virtual mail services include mail receipt, sorting, digitization, check depository services, and shipment or storing of select mail. 6 Legal forms and eSignature subscriptions. Our legal forms subscription includes unlimited access to our library of customizable legal forms, electronic storage of applicable LegalZoom documents, and document revisions.
Our primary subscription services are listed in the following table, and a more detailed description of certain of our subscription services is provided below: Small Business Subscriptions Consumer Subscriptions Registered Agent Compliance Attorney Advice through our Legal Plans Bookkeeping eSignature Legal Forms Virtual Mail and Check Deposit Services Trademark Monitoring Attorney Advice through our Legal Plans Estate Planning Bundle Legal Forms Virtual Mail and Check Deposit Services Registered agent subscriptions .
Our primary subscription services are listed below, and a more detailed description of certain of our subscription services follows below: Compliance Subscription Services Registered Agent Compliance Legal Subscription Services Small Business Attorney Advice through our Legal Plans Consumer Attorney Advice through our Legal Plans Legal Forms Concierge Subscription Services Compliance Concierge Compliance and Legal Concierge Reinstatement Concierge and Compliance Concierge Business Concierge Business and Legal Concierge Business Management and Other Subscription Services Business Licenses Virtual Mail and Check Deposit Services Estate Planning Bundle Bookkeeping eSignature Trademark Monitoring Registered agent subscriptions .
Our subscription agreements generally have annual terms, while some have monthly terms.
Our subscriptions generally have annual terms, while some have monthly terms.
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. Scalable and secure infrastructure Our platform resides on a combination of on-premises infrastructure and best-in-class public cloud-based platforms.
The platform is integrated into various systems and enables us to support customers through communications via multiple channels including our websites, email, text, phone and online chat. 7 Scalable and secure infrastructure 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.
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. Our website allows users to access the same content on our platform from their laptops, tablets, or smart phones.
We have designed our websites to be highly intuitive and secure using proprietary software and commercially supported tools. Our website allows users to access the same content on our platform from their laptops, tablets, or smart phones. Intellectual Property We believe that our proprietary technology is an important and valuable part of our business.
We also offer attorney advice subscription packages that include other benefits, such as the ability to edit and electronically sign forms from our attorney-drafted legal forms library, discounts on additional legal services offered by the network attorney, and, in some cases, an annual checkup with the network attorney for estate planning purposes. Virtual mail subscriptions.
These attorney advice subscription packages include other robust benefits, such as having an attorney review a customer’s documents, the ability to edit and electronically sign forms from our attorney-drafted legal forms library, discounts on additional legal services offered by the network attorney, and, in some cases, an annual checkup with the network attorney for small business or estate planning purposes.
We continue to engage our employees with in-person and social impact events, like our annual Impact Week, where we come together to volunteer, learn about causes, and fundraise.
We also host social impact events, like our annual Impact Week, where we come together to volunteer, learn about causes and fundraise.
These compliance subscription plans also monitor the status of our customers’ businesses with certain state agencies to help customers stay abreast of important deadlines and to provide alerts to notify them if their business falls out of good standing. Attorney advice subscriptions .
These compliance subscriptions also monitor the status of a customer’s business with certain state agencies to help the customer stay abreast of important deadlines and to provide alerts if their business falls out of good standing. Compliance concierge subscription.
For example, as forming a business is an important life event for the entrepreneurs that we support, some of our small business customers opt to purchase an estate plan after they form their business. See below under “ Our Products and Services ” for additional information regarding our transaction products and subscription offerings. Our technology platform.
For example, as forming a business is an important life event for the entrepreneurs that we support, some of our small business customers opt to purchase an estate plan after they form their business.
Our Products and Services Our transaction products and subscription services are designed to support the legal, compliance, and business management needs of small businesses and consumers. We continue to evaluate new ways to commercialize both our transaction and subscription offerings, which may include the bundling of certain of our products and offering certain of our historical transaction offerings as subscriptions.
We continue to evaluate new ways to commercialize both our transaction and subscription offerings, which include the bundling of certain of our products and offering certain of our historical transaction offerings as subscriptions.
Transaction products Our primary transaction products are listed in the following table: Transaction Products for Small Businesses Transaction Products for Consumers Business Formation Limited Liability Company, or LLC Incorporation of C and S Corporations Nonprofit Formation Doing-Business-As, or DBA Corporate Changes and Filings Business Licenses Legal Forms Beneficial Ownership Information Report Intellectual Property Trademark Application Copyright Registration Patent Application Consumer, Estate Planning and Other Last Will and Testament Living Will Living Trust Power of Attorney Subscription services At December 31, 2024, we h ad approximately 1.8 million subscription units outstanding.
Transaction products Our primary transaction products are listed below: Business Formation Services Limited Liability Company, or LLC Incorporation of C and S Corporations Nonprofit Formation Doing-Business-As, or DBA Corporate Changes and Filings Business Formation Related Services EIN (Federal Tax ID Number) Operating Agreement Credit Monitoring Intellectual Property Trademark Application Copyright Registration Patent Application Concierge Transaction Services Dissolution Concierge 501(c)(3) Concierge Entity Conversion Concierge Consumer, Estate Planning and Other Last Will and Testament Living Will Living Trust Power of Attorney Legal Forms 5 Subscription services At December 31, 2025, we h ad approximately 1.9 million subscription units outstanding.
By combining intuitive technology with access to experienced attorneys—whether through our vast independent attorney network or LegalZoom Legal Services (LZLS) law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to estate planning and ongoing legal support. We operate across all 50 states and in over 3,000 counties in the U.S.
By combining intuitive technology with access to experienced attorneys—whether through our vast independent attorney network or our own law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to intellectual property protection and ongoing business management and legal support.
We continue to see positive engagement scores, particularly in overall satisfaction, or OSAT, and Net Promoter Score, or NPS, when our employees are asked the likelihood of recommending LegalZoom as a great place to work. In 2021, we adopted our remote-first model.
We 8 monitor the state of our employees’ happiness with regular engagement surveys, open feedback forums, and action planning based on results. We continue to see positive engagement scores, particularly in overall satisfaction, or OSAT, and Net Promoter Score, or NPS, when our employees are asked the likelihood of recommending LegalZoom as a great place to work.
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 approach so that every U.S. based employee has a component of their compensation that is performance or incentive driven.
Our primary compensation strategy is to promote a pay-for-performance culture. 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.
For example, after forming their business entity, our customers can opt to register their company name and/or logo as a trademark or sign up for a business advisory subscription to receive additional legal support for their small business needs.
For example, our customers can purchase a legal advisory subscription to receive additional legal support for their small business needs, subscribe to our compliance concierge offering for complete management of business compliance requirements, or complete a one-time transaction to register their company name and/or logo as a trademark.
Further, even when formed properly, small businesses often fail to comply with ongoing compliance requirements, thereby reintroducing personal liability or facing significant financial and operational risk.
Further, even when formed properly, small businesses often fail to comply with ongoing compliance requirements, thereby reintroducing personal liability or facing significant financial and operational risk. Per the U.S. Chamber of Commerce Small Business Index (Q4 2025), 44% of small businesses say that compliance requirements make it harder to grow their business.
Further, we intend to continue to strategically partner with leading brands that can improve our partner ecosystem by offering small business and consumer solutions outside of our core offerings. Leveraging Artificial Intelligence to Deliver Expertise to Our Customers .
We intend to continue to strategically partner with leading brands that we believe can strengthen our partner ecosystem. Leveraging Artificial Intelligence to Deliver Expertise to Our Customers .
Customer Care 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.
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 or email. We actively monitor our service levels, fulfillment speed and quality to maintain a high level of customer care.
We believe we earn our customers’ trust and drive significant organic traffic through our brand name recognition and reputation. Our small business customers’ initial purchase is typically a business formation product that streamlines the process of starting a business. As of December 31, 2024, we had formed over 4.6 million businesses since our inception.
See below under “ Our Products and Services ” for additional information regarding our transaction products and subscription offerings. We believe we earn our customers’ trust and drive significant organic traffic through our brand name recognition and reputation. Our small business customers’ initial purchase is typically a business formation product that streamlines the process of starting a business.
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 We invest significantly to create a highly recognizable brand, online and offline and we attract a meaningful percentage of unpaid website traffic, underscoring our brand strength and content offering.
Sales and Marketing We invest significantly to create a highly recognizable brand, online and offline and we attract a meaningful percentage of unpaid website traffic, underscoring our brand strength and content offering.
At December 31, 2024, we also engaged approximately 600 contractors and consultants globally and no seasonal workers. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we believe that our employee relations are strong. Our primary compensation strategy is to promote a pay-for-performance culture.
Human Capital Management At December 31, 2025, we, together with all our subsidiaries, had 1,196 employees worldwide. At December 31, 2025, we also engaged approximately 700 contractors and consultants globally. None of our employees are represented by a labor union. We have not experienced any work stoppages, and we believe that our employee relations are strong.
From there, the initial customer 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.
Attorneys benefit from participating in our independent network as we handle the customer acquisition, as well as the scheduling and support of the customer consultations. From there, customer consultations may serve as a platform for business development, where the participating attorney can offer to provide billable legal services to our customers at discounted rates. Our owned law firm.
The recurring revenue gained through subscription services and additional purchases from existing customers during the lifecycle of their business allows us to increase customer lifetime value. Our consumer offerings range from estate planning to legal advice, and there is overlap in our small business and consumer offerings.
The recurring revenue gained through subscription services and additional purchases from existing customers during the lifecycle of their business allows us to increase customer lifetime value. For the year ended December 31, 2025, approximately 65% of our revenue was derived from subscriptions.
With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses navigate legal needs with confidence. The LegalZoom Ecosystem Millions of people in the U.S. start small businesses every year. Many small businesses operate without forming a legal entity, unintentionally introducing financial risk to the owners’ personal assets.
Our Customers and Solutions As of June 30, 2025. there were over 36 million U.S. small businesses in operation, and millions of new small businesses are formed in the U.S. every year. Many small businesses operate without forming a legal entity, unintentionally introducing financial risk to the owners’ personal assets.
We will leverage Formation Nation’s “Inc Authority” brand, which provides business formation offerings at a lower priced alternative, to service customers seeking “do-it-yourself” solutions, ensuring the appropriate level of service across our customer base and reserving the LegalZoom brand for more premium offerings.
We are leveraging Formation Nation’s “Inc Authority” brand as a lower priced alternative to service customers seeking DIY solutions, reserving the LegalZoom brand for more premium offerings.
These values shine through in all that we do to foster an inclusive and empowering culture, as we continue to focus on the well-being and success of our employees. We monitor the state of our employees’ happiness with regular engagement surveys, open feedback forums, and action planning based on results.
At LegalZoom, our values are Lift Each Other Up, Champion Our Customers, See the Whole Picture, Focus on Results, and Keep It Simple. These values shine through in all that we do to foster an inclusive and empowering culture, as we continue to focus on the well-being and success of our employees.
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.
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. As part of our acquisition of Formation Nation in February 2025, we expanded our sales team with the onboarding of a team of seasoned sales experts.
Our technology platform combines the power of technology and people to demystify and simplify complicated processes, creating user-friendly experiences for our customers. Our proprietary technology enables us to automate many complex legal and compliance processes, allowing us to offer solutions at transparent, flat-fee prices that are at a significant discount to traditional offline alternatives.
Our proprietary technology, including AI-enabled workflow and decisioning tools, enables us to automate many complex legal and compliance processes and offer solutions at transparent, flat-fee prices that are at a significant discount to traditional offline alternatives. While the majority of our customers complete these transactions without direct human assistance, many prefer to have guidance through the process.
Our position at business formation gives us unparalleled knowledge of our customers’ needs, oftentimes prior to the business being operational or discoverable by other service providers. We leverage this valuable knowledge and our position as a small business’ first advisor to introduce our customers to the most relevant business solutions to help them manage other aspects of their business.
We leverage this valuable knowledge and our position as a small business’ first advisor to introduce our customers to the most relevant business solutions to help them manage other aspects of their business. We are also beginning to expand our customer funnel to reach current small business owners who are not yet a part of the LegalZoom ecosystem.
We also continue to fuel our organization’s passion for social good, with our employee giving program and platform that provides dollar-for-dollar matching and paid time off for volunteering. We believe we are thriving when every voice is nurtured and heard.
We also invest in employee engagement to help improve connection. Our employee recognition program rewards and provides visibility to our employees’ accomplishments as they align to our business goals and operating values. We also continue to fuel our organization’s passion for social good, with our employee giving program and platform that provides dollar-for-dollar matching and paid time off for volunteering.
For small businesses and consumers seeking legal advice, we offer subscription legal plans that provide access to independent attorneys in all 50 states.
This offering is designed to serve more complex and higher‑value small businesses that prefer to delegate compliance tasks rather than self‑serve through our digital workflows. Attorney advice subscriptions . For small businesses and consumers seeking legal advice, we offer subscription legal plans that provide access to independent attorneys in all 50 U.S. states.
In addition, participating law firms can leverage our brand awareness, as well as the customer feedback and testimonials, to market their own practice. 1 In addition, since September 2021, one of our U.S. subsidiaries operates as an alternative business structure, or ABS, in Arizona, which allows us to provide cost-effective legal services to our customers.
Since September 2021, one of our U.S. subsidiaries operates as an alternative business structure, or ABS, in Arizona, which allows us to provide cost-effective attorney services to our customers. Currently, our ABS primarily supports our intellectual property business, and its experienced attorneys help guide customers through the trademark registration and provisional and design patent processes.
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 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.
Our largest customer acquisition media spend is in search engine marketing to capture demand generated by our other paid and organic channels.
Our independent attorney network provides customers access to attorneys licensed in their jurisdiction and experienced in the types of legal matters that impact our customers at a significant discount to traditional offline alternatives. Our attorneys benefit from participating in our network as we handle the customer lead generation, as well as the scheduling and billing of the initial customer consultation.
Our legal plans provide customers access to attorneys licensed in their jurisdiction and experienced in the types of legal matters that impact our customers at a significant discount to traditional offline alternatives. The attorneys who service our legal plans are compensated by LegalZoom on a per-month basis based on enrolled plan members.
This includes enhancing the value of our subscription products and increasing the price of certain of our LegalZoom branded offerings to better reflect the value we believe we provide. In addition, our recent acquisition of Formation Nation, Inc., or Formation Nation, will allow us to drive cross-sell opportunities of our complementary ecosystems of legal and business services.
We are also introducing new, higher value, premium DIFM subscription offerings, enhancing the value of our existing subscription products and increasing the price of certain of our LegalZoom branded offerings to better reflect the value we believe we provide.
Since then, 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. We utilize our office locations in multiple states for engagement events, in-person meetings, team offsites, leadership conferences, and more to build connection and productivity.
We have a flexible work policy, which enables flexibility to work remotely and collaborate in offices. We utilize virtual tools and office locations in multiple states for engagement events, in-person meetings, team offsites, leadership conferences, and more to build connection and productivity. This approach has allowed us to build foundational infrastructure and establish a stronger culture both virtually and in-person.
We offer customers ongoing access to experts to help handle complex matters, including through a network of independent law firms. As of December 31, 2024, we had over 1,000 attorneys in our independent attorney network.
The combination of technology and people is at the heart of our customer experience. See below under “ Our Technology ” for additional information. Our independent attorney network. We offer customers ongoing access to experienced attorneys to answer their legal questions and review legal documents. As of December 31, 2025, we had over 1,000 attorneys in our independent attorney network.
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These difficulties are becoming more acute as the number of U.S. business formations increases, 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 formation and compliance solution. Our customer funnel.
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Our ongoing business management services include virtual mail, legal forms, bookkeeping and estate planning services, among others. We operate across all 50 states and in over 3,000 counties in the U.S. With over two decades of experience and millions of customers served, LegalZoom helps individuals and small businesses navigate legal needs with confidence.
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As a result, our customers often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction in order to solve additional legal, compliance and business management needs, deepening our relationship with our customers.
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In February 2025, we acquired Formation Nation, Inc., or Formation Nation, a small business service company. Formation Nation provides services ranging from white-glove business formation and compliance offerings under its Nevada Corporate Headquarters (NCH) business to low-cost business formations under its flagship Inc Authority brand.
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While the majority of our customers complete these transactions without human assistance, many prefer to have some guidance through the process. The combination of technology and people is at the heart of our customer experience. See below under “ Our Technology ” for additional information. Our experts.
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Our solutions aim to simplify these complex legal and regulatory tasks, remove friction, and enable small business owners to focus on running and growing their businesses. We aim to service a broad range of small business owners, from first-time formers to seasoned small business owners.
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Currently, our ABS primarily supports our intellectual property business, and its experienced attorneys help guide customers through the trademark registration process. Our legal services are provided across all 50 states in the U.S. Our partners.
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We provide a mix of transaction and subscription offerings relevant for new and existing small businesses to solve their legal, compliance and business management needs. Our services range from technology-enabled do-it-yourself, or DIY, offerings to emerging full-service do-it-for-me, or DIFM, solutions led by concierge managers and attorneys.
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See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for additional information regarding our acquisition of Formation Nation. Reorienting Our Go-to-Market Strategy .
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Our small business customers’ initial purchase is typically a business formation product that streamlines the process of starting a business. After business formation, we aim to deepen our relationship with our customers by providing ongoing legal, compliance and business management support throughout the lifecycle of their business.
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In addition, we recently acquired Formation Nation, which we believe accelerates our strategy of attracting higher value customers and positioning LegalZoom as a premium brand.
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As of December 31, 2025, we had formed over 5.0 million businesses since our inception. Our position at business formation gives us unparalleled knowledge of our customers’ needs, oftentimes prior to the business being operational or discoverable by other service providers.
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In addition, through this acquisition, we are reinvesting in our sales capabilities, which will include leveraging Formation Nation’s 2 best-in-class customer service team to improve our cross-selling, up-selling, bundling, and packaging to our customers.
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As of June 30, 2025, there were approximately 36 million U.S. existing small businesses who were required to remain compliant with federal and state laws in order to remain operational and we can help them mitigate the risk, cost and time invested in managing these requirements. 2 Our Platform, Experts and Human Support As more businesses are created, the need for a trusted legal and compliance partner only grows, and we believe that our combination of technology and human assistance helps our customers stay compliant, protected, and confident over time.
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We will further invest in artificial intelligence in an effort to drive growth and efficiencies in our business and to improve our customer experience. We also aim to better leverage artificial intelligence into our solutions to promote the value and services of our attorney network, given artificial intelligence cannot provide direct legal advice.
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Our technology platform. Our technology platform combines the power of technology, artificial intelligence, or AI, and human expertise to demystify and simplify complicated processes, creating user-friendly experiences for our customers.
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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.
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As a result, our services range from technology-enabled DIY offerings to emerging full-service DIFM concierge subscriptions led by small business specialists. We aim to continue to embed AI tools into our internal workflows to improve productivity, reduce manual fulfillment time and enable our customer care, fulfillment, business specialists and experts to support more customers.
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In addition, our website and mobile experience contain extensive educational content in an article center, FAQs and a knowledge center designed to assist customers in choosing the products and services that best suit their needs. We actively monitor our service levels, fulfillment speed and quality to maintain a high level of customer care.
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Our legal services are provided across all 50 U.S. states. Our concierge managers. We employ a team of small business concierge managers who support our emerging concierge offerings. These specialists provide white-glove service related to ongoing business and compliance needs, such as periodic filings, renewals and recordkeeping requirements.
Removed
In addition, we acquired Formation Nation in February 2025, which will allow us to benefit from the immediate onboarding of over 140 seasoned small business service experts. 5 Human Capital Management At December 31, 2024, we, together with all our subsidiaries, had 964 employees worldwide.
Added
As our customers’ businesses grow and evolve, such as by the hiring of employees or expansion into additional states, the complexity of their legal, tax and compliance needs typically increases. Our concierge managers are positioned to handle white-glove filing and fulfillment services intended to address these more sophisticated requirements.
Removed
We offer competitive compensation that we believe is aligned with the market and fair relative to our peers. At LegalZoom, our values are Lift Each Other Up, Champion Our Customers, See the Whole Picture, Focus on Results, and Keep It Simple.
Added
The objective of our concierge managers is to help customers understand and meet applicable requirements so the customer’s business remains in good standing and the risk of incurring fees and penalties is minimized. Our concierge managers receive specialized training and use AI-enabled tools to deliver a consistent service experience at scale.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

105 edited+13 added−26 removed219 unchanged
Biggest changePursuant to a director nomination agreement previously entered into with FP, we will have the obligation to support the nomination of, and to cause our board of directors to include in the slate of nominees recommended to our stockholders for election, a number of designees equal to at least: (i) two individuals for so long as FP continuously beneficially owns shares of common stock representing at least 50% of the shares of common stock owned by FP immediately following our IPO and (ii) one individual for so long as FP continuously beneficially owns shares of common stock representing at least 25%, but less than 50% of the shares of common stock, owned by FP immediately following the completion of our IPO. 27 Provisions in our corporate charter documents and provisions under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.
Biggest changePursuant to a director nomination agreement previously entered into with FP, we will have the obligation to support the nomination of, and to cause our board of directors to include in the slate of nominees recommended to our stockholders for election, a number of designees equal to at least: (i) two individuals for so long as FP continuously beneficially owns shares of common stock representing at least 50% of the shares of common stock owned by FP immediately following our IPO and (ii) one individual for so long as FP continuously beneficially owns shares of common stock representing at least 25%, but less than 50% of the shares of common stock, owned by FP immediately following the completion of our IPO.
As a result, we cannot accurately predict subscription renewal rates or the number of our existing or new customers that will subscribe to our subscription services, including whether customers will continue to subscribe at the same rate as they have historically. During 2024, we experienced a deceleration in our subscription revenue growth rate.
As a result, we cannot accurately predict subscription renewal rates or the number of existing or new customers that will subscribe to our subscription services, including whether customers will continue to subscribe at the same rate as they have historically. During 2024, we experienced a deceleration in our subscription revenue growth rate.
In addition, fluctuations in our quarterly operating results may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our results could also cause a number of other problems.
In addition, fluctuations in our quarterly operating results may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. Fluctuations in our operating results could also cause a number of other problems.
Any inability to respond to these changes effectively and in a cost-effective manner, or any reduction or loss of any of our current advertising channels, could adversely affect our ability to attract new customers, which could adversely affect our business, results of operations, financial condition and future prospects.
Any inability to respond to these changes effectively and in a cost-effective manner, or any future reduction or loss of any of our current advertising channels, could adversely affect our ability to attract new customers, which could adversely affect our business, results of operations, financial condition and future prospects.
We also utilize third parties in connection with the fulfillment and distribution of our services, including the independent attorneys in our legal plan network and to support our registered agent and virtual mail subscription services. We also outsource certain operational functions, including certain sales and customer service functions.
We also utilize third parties in connection with the fulfillment and distribution of our services, including the independent attorneys in our legal plan network and to support our registered agent and virtual mail subscription services. We also outsource certain operational functions, including certain sales, customer service and fulfillment functions.
If our financial and operating metrics are not accurate representations of our business, or if investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies in our metrics, our reputation may be harmed, and our business, results of operations, financial condition and future prospects could be adversely affected.
If our financial and operating metrics are not accurate representations of our business, if investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies in our metrics, our reputation may be harmed, and our business, results of operations, financial condition and future prospects could be adversely affected.
Our decisions and actions in pursuit of long-term success and long-term stockholder value, which may include changes to our platform to enhance the experience of our customers, partners and the 15 communities in which we operate, enabling equitable access to legal and compliance services, investing in our relationships with our customers, partners, and employees, investing in and introducing new services, or changing our approach to working with local or national jurisdictions on laws and regulations governing our business, may not result in the long-term benefits that we expect, in which case our business, results of operations, financial condition and the trading price of our common stock could be materially adversely affected.
Our decisions and actions in pursuit of long-term success and long-term stockholder value, which may include changes to our platform to enhance the experience of our customers, partners and the communities in which we operate, enabling equitable access to legal and compliance services, investing in our relationships with our customers, partners, and employees, investing in and introducing new services, or changing our approach to working with local or national jurisdictions on laws and regulations governing our business, may not result in the long-term benefits that we expect, in which case our business, results of operations, financial condition and the trading price of our common stock could be materially adversely affected.
Risks Relating to Ownership of Our Common Stock The market price of our common stock may be volatile or may decline regardless of our operating performance, resulting in substantial losses for our investors The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our revenue and results of operations; • our ability to effectively and successfully integrate the operations of Formation Nation into our existing business; • our ability to successfully implement our strategic execution priorities; • the operating and financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • an increase or loss of customers; • fluctuations in product sales mix; • changes in our pricing strategy or those of our competitors; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; • our involvement in any litigation; • actual or anticipated changes in our growth rate relative to those of our competitors; • announcements of technological innovations or new services offered by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • additions or departures of key personnel; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or investor expectations; • fluctuations in the valuation of companies perceived by investors to be comparable to us; 26 • technical factors in the public trading market for our common stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our common stock, access to margin debt, and trading in options and other derivatives on our common stock; • additional shares of our common stock or other securities being sold into the market by us or our existing stockholders or the anticipation of such sales; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • general macroeconomic, political, regulatory and market conditions, such as those related to recessionary fears, tariffs, inflation and/or elevated interest rates; and • other events or factors, including those resulting from war, incidents of terrorism, a public health pandemic or epidemic, bank failures, or responses to these events.
Risks Relating to Ownership of Our Common Stock The market price of our common stock may be volatile or may decline regardless of our operating performance, resulting in substantial losses for our investors The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our revenue and results of operations; • our ability to effectively and successfully integrate the operations of Formation Nation into our existing business; • our ability to successfully implement our strategic execution priorities; 28 • the operating and financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • an increase or loss of customers; • fluctuations in product sales mix; • changes in our pricing strategy or those of our competitors; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; • our involvement in any litigation; • actual or anticipated changes in our growth rate relative to those of our competitors; • announcements of technological innovations or new products or services offered by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; • additions or departures of key personnel; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or investor expectations; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • technical factors in the public trading market for our common stock that may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our common stock, access to margin debt, and trading in options and other derivatives on our common stock; • additional shares of our common stock or other securities being sold into the market by us or our existing stockholders or the anticipation of such sales; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • general macroeconomic, political, regulatory and market conditions, such as those related to recessionary fears, tariffs, inflation and/or elevated interest rates; and • other events or factors, including those resulting from war, incidents of terrorism, a public health pandemic or epidemic, bank failures, or responses to these events.
Breaches and other types of security incidents of our data, networks or systems, or those of the third parties with whom we work, could negatively impact our ability to conduct our business, our brand and reputation, 23 our ability to retain existing customers and attract new customers, and may cause us to incur significant liabilities and adversely affect our business, results of operations, financial condition and future prospects We collect, use, store, transmit and otherwise process data and information about our customers, employees and others, some of which are sensitive, personal and/or confidential.
Breaches and other types of security incidents of our data, networks or systems, or those of the third parties with whom we work, could negatively impact our ability to conduct our business, our brand and reputation, our ability to retain existing customers and attract new customers, and may cause us to incur significant liabilities and adversely affect our business, results of operations, financial condition and future prospects We collect, use, store, transmit and otherwise process data and information about our customers, employees and others, some of which are sensitive, personal and/or confidential.
The negative covenants include, among others, limitations on our and certain of our subsidiaries’ abilities to carry out the following, in each case subject to certain exceptions: • incur additional indebtedness and guarantee indebtedness; • create or incur liens; • pay dividends and distribute or repurchase capital stock; • merge, liquidate and make asset sales; • change lines of business; • change our fiscal year; • incur restrictions on our subsidiaries’ ability to make distributions and create liens; • modify our organizational documents; • make investments, loans and advances; and • enter into certain transactions with affiliates.
The negative covenants include, among others, 21 limitations on our and certain of our subsidiaries’ abilities to carry out the following, in each case subject to certain exceptions: • incur additional indebtedness and guarantee indebtedness; • create or incur liens; • pay dividends and distribute or repurchase capital stock; • merge, liquidate and make asset sales; • change lines of business; • change our fiscal year; • incur restrictions on our subsidiaries’ ability to make distributions and create liens; • modify our organizational documents; • make investments, loans and advances; and • enter into certain transactions with affiliates.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change income or taxes may be limited.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards to offset its post-change 22 income or taxes may be limited.
We expect to face increasing competition from offline and online legal services providers in our market, including through their use of generative AI, and our failure to effectively compete with these providers could result in revenue reductions, reduced margins, or loss of market share, any of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.
We expect to face increasing competition from offline and online legal services providers in our market, including through their use of AI, and our failure to effectively compete with these providers could result in revenue reductions, reduced margins, or loss of market share, any of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. Item 1B. Unresolved Staff Comments None
If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. Item 1B. Unresolved Staff Comments None 31
If such claims are made against us, there can be no assurances that favorable final outcomes will be obtained; if such claims were to be determined adversely to our interests, or if we were forced to settle such matters for a significant amount, such resolutions or settlements may result in changes to or discontinuance of some of our services, potential liabilities or additional costs.
If such claims are made against us, there can be no assurances that favorable final outcomes will be obtained; if such claims were to be determined adversely to our interests, or if we were forced to settle such matters for a significant amount, such resolutions or settlements may result in changes 19 to or discontinuance of some of our services, potential liabilities or additional costs.
If such regulatory authorities or state, federal or foreign courts were to determine that these attorneys, accountants or other contractors and consultants are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes, to pay unemployment and other related payroll taxes and could face allegations of UPL or CPL.
If such regulatory authorities or state, federal or foreign courts were to determine that these attorneys or other contractors and consultants are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes, to pay unemployment and other related payroll taxes and could face allegations of UPL or CPL.
A security breach or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information. We have in the past and may in the future expend significant resources or modify our business activities to try to protect against security breaches.
A security breach or other interruption could result in unauthorized, 26 unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information. We have in the past and may in the future expend significant resources or modify our business activities to try to protect against security breaches.
We depend on top talent, including our senior management team, to grow and operate our business, and if we are unable to hire, retain or motivate our employees, we may not be able to grow or operate effectively, which may adversely affect our business and future prospects 12 Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain top talent.
We depend on top talent, including our senior management team, to grow and operate our business, and if we are unable to hire, retain or motivate our employees, we may not be able to grow or operate effectively, which may adversely affect our business and future prospects Our future success will depend upon our continued ability to identify, hire, develop, motivate and retain top talent.
If we are unable to respond in a timely and cost-effective manner to these rapid technological developments and changes in standards, our platform may become less marketable, less competitive or obsolete, and our business, results of operations, financial condition and future prospects would be harmed.
If we are unable to respond to these rapid technological developments and changes in a timely and cost-effective manner, our platform may become less marketable, less competitive or obsolete, and our business, results of operations, financial condition and future prospects would be harmed.
It is also possible that we could face claims of joint employment from the independent professionals who 22 participate in our partner networks or from individuals working as a consultant, temporary employee, or contractor, if they were to pursue employment claims against LegalZoom.
It is also possible that we could face claims of joint employment from the independent professionals who participate in our partner networks or from individuals working as a consultant, temporary employee, or contractor, if they were to pursue employment claims against LegalZoom.
We may face claims from others claiming ownership of open source software or patents reading on 25 that software, rights to our intellectual property or breach of open source license terms, including a demand for release of material portions of our source code or otherwise seeking to enforce the terms of the applicable open source license.
We may face claims from others claiming ownership of open source software or patents reading on that software, rights to our intellectual property or breach of open source license terms, including a demand for release of material portions of our source code or otherwise seeking to enforce the terms of the applicable open source license.
You should not rely on the results of any given quarter as an indication of future performance. 9 We have a history of net losses and we may not be able to maintain profitability Since inception, we have incurred an accumulated deficit and may incur net losses in the foreseeable future.
You should not rely on the results of any given quarter as an indication of future performance. We have a history of net losses and we may not be able to maintain profitability Since inception, we have incurred an accumulated deficit and may incur net losses in the foreseeable future.
We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications which may, among other things, impede our ability to execute our growth strategies or continue to operate our business in a satisfactory manner.
We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate 15 qualifications which may, among other things, impede our ability to execute our growth strategies or continue to operate our business in a satisfactory manner.
In addition, any failure of our solutions to operate effectively with these 13 business applications could reduce the demand for our solutions and harm to our business and we may also be held responsible for obligations that arise from the actions or omissions of third parties.
In addition, any failure of our solutions to operate effectively with these business applications could reduce the demand for our solutions and harm to our business and we may also be held responsible for obligations that arise from the actions or omissions of third parties.
To the extent we are unable to process submissions or filings in a timely manner, our brand and reputation may be adversely affected, or our customers may seek other avenues for their business formation or intellectual property needs.
To the extent we are unable to process submissions or filings in a timely 16 manner, our brand and reputation may be adversely affected, or our customers may seek other avenues for their business formation or intellectual property needs.
Our failure to comply with the restrictive covenants and other terms of our indebtedness could result in an event of default, which, if not cured or waived, could result in the lenders declaring all obligations, together with accrued and unpaid interest, immediately due and payable and take control of the collateral, potentially requiring us to renegotiate the 2021 Revolving Facility on terms less favorable to us and could also trigger cross-default provisions in other contracts, potentially resulting in serious consequences to our business, results of operations, financial condition and future prospects, including bankruptcy or insolvency.
Our failure to comply with the restrictive covenants and other terms of our indebtedness could result in an event of default, which, if not cured or waived, could result in the lenders declaring all obligations, together with accrued and unpaid interest, immediately due and payable and take control of the collateral, potentially requiring us to renegotiate the Amended Revolving Facility on terms less favorable to us and could also trigger cross-default provisions in other contracts, potentially resulting in serious consequences to our business, results of operations, financial condition and future prospects, including bankruptcy or insolvency.
We have also incurred in the past, and expect to incur in the future, costs associated with responding to, defending, resolving, and/or settling proceedings, particularly those related to UPL, competitor claims and the provision of our services more generally.
We have also incurred in the past, and expect to incur in the future, costs associated with responding to, defending, resolving, and/or settling proceedings, particularly those related to UPL, competitor claims, employee claims and the provision of our services more generally.
In addition, the global regulatory framework for privacy and data security issues is rapidly evolving and privacy and data security laws have been and may in the future be enacted by other U.S. states and countries in which we do business.
In addition, the global regulatory framework for privacy and data security issues is rapidly evolving and privacy 25 and data security laws have been and may in the future be enacted by other U.S. states and countries in which we do business.
Risks Relating to Legal, Compliance and Regulatory Matters Our business and services subject us to complex and evolving U.S. and foreign laws and regulations Our business involves providing services that meet the legal and other needs of our customers and, as a result, we are subject to a variety of complex and evolving government laws, rules and regulations, including but not limited to, laws and regulations related to labor, advertising, sales and marketing, deceptive trade practices, our subscription offerings and related billing, renewal and cancellation practices, virtual mail, legal document processing services, registered agent services, our legal plans, electronic funds transfer, consumer protection, real estate, e-commerce, promotions, intellectual property (e.g., ownership, examination, registration and infringement), postal, anti-bribery and anti-corruption, insurance, foreign exchange controls and cash repatriation restrictions, anti-competition, environmental, health and safety, and other regulated activities.
Risks Relating to Legal, Compliance and Regulatory Matters Our business and services subject us to complex and evolving U.S. and foreign laws and regulations Our business involves providing services that meet the legal and other needs of our customers and, as a result, we are subject to a variety of complex and evolving government laws, rules and regulations, including but not limited to, laws and regulations related to labor, advertising, sales and marketing, deceptive trade practices, our subscription offerings and related billing, renewal and cancellation practices, virtual mail, legal document processing services, registered agent services, our legal plans, electronic funds transfer, consumer protection, artificial intelligence, real estate, e-commerce, promotions, intellectual property (e.g., ownership, examination, registration and infringement), postal, anti-bribery and anti-corruption, insurance, foreign exchange controls and cash repatriation restrictions, anti-competition, environmental, health and safety, and 23 other regulated activities.
In addition, our remote first work policy, which results in a predominantly remote workforce, has made it difficult to orient, train, develop, motivate, and engage with our employees and embed them into the LegalZoom culture.
In addition, our flexible first work policy, which results in a predominantly remote workforce, has made it difficult to orient, train, develop, motivate, and engage with our employees and embed them into the LegalZoom culture.
The risks and uncertainties we face in connection with the recent acquisition of Formation Nation or any future acquisitions or investments, whether or not they are consummated, include, but are not limited to: • an acquisition may require us to incur charges or assume substantial debt or other liabilities, cause adverse tax consequences, expose us to claims and disputes by stockholders and third parties, 14 including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • encountering difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any acquired company, particularly if key personnel of the acquired company decide not to work for us; • inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired business; • our inability to realize the financial and strategic goals or anticipated synergies of the acquisition or investment on a timely basis, if at all; • incurring higher than anticipated costs to effectively integrate an acquired business, to bring an acquired company into compliance with applicable laws and regulations or due to additional compensation issued or assumed in connection with an acquisition; • disruption to our ongoing business, diversion of resources and distraction of our management; • delays or reductions in customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • challenges integrating the employees of the acquired company into our company culture; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition; • potential identified or unknown security vulnerabilities in acquired products or technologies that expose us to additional security risks or delay our ability to integrate the products or technologies into our offerings; • difficulty in maintaining controls, procedures and policies during the transition and integration and inability to conclude that our internal controls over financial reporting are effective; • our use of cash to pay for acquisitions or other investments would limit other potential uses for our cash; • if we incur debt to fund any acquisitions, such debt may subject us to material restrictions on our ability to conduct our business due to new financial maintenance and other covenants; and • the issuance of a significant amount of equity securities in connection with any future acquisitions, existing stockholders may be diluted and earnings per share may decrease.
The risks and uncertainties we face in connection with the recent acquisition of Formation Nation or any future acquisitions or investments, whether or not they are consummated, include, but are not limited to: • an acquisition may require us to incur charges or assume substantial debt or other liabilities, cause adverse tax consequences, expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, and may not generate sufficient financial return to offset any additional costs and expenses related to such acquisition; • difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of the acquired company, particularly if key personnel of the acquired company decide not to work for us; • the inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired business; • our inability to realize the financial and strategic goals or anticipated synergies of the acquisition or investment on a timely basis, if at all; 17 • incurring higher than anticipated costs to effectively integrate an acquired business, to bring an acquired company into compliance with applicable laws and regulations or due to additional compensation issued or assumed in connection with an acquisition; • disruption to our ongoing business, diversion of resources and distraction of our management; • delays or reductions in customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • challenges integrating the employees of the acquired company into our company culture; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition; • potential identified or unknown security vulnerabilities in acquired products or technologies that expose us to additional security risks or delay our ability to integrate the products or technologies into our offerings; • difficulty in maintaining controls, procedures and policies during the transition and integration and inability to conclude that our internal controls over financial reporting are effective; • our use of cash to pay for acquisitions or other investments would limit other potential uses for our cash; • if we incur debt to fund any acquisitions, such debt may subject us to material restrictions on our ability to conduct our business due to new financial maintenance and other covenants; and • the issuance of a significant amount of equity securities in connection with any future acquisitions could dilute existing stockholders and earnings per share may decrease.
Our future quarterly results of operations may fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict Our revenue and results of operations have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including, but not limited to the risks and uncertainties discussed herein and the following: • our ability to successfully implement our updated strategic execution priorities; • the ongoing integration of the operations of Formation Nation, which we acquired in February 2025; • the number of business formations and the rate of failure of small businesses; • the level of demand for our services; • our ability to attract new customers and retain existing customers, including the rate of renewal of subscriptions by, and extent of sales of additional subscriptions to, existing customers; • the size, timing and terms of our subscription agreements with existing and new customers; • changes to our product offerings, including any new or discontinued products, pricing changes, the bundling of certain product offerings and our testing of new product line-ups; • the mix of subscriptions and transactional products sold during a period; • the introduction of new products and product enhancements by existing competitors or new entrants into our markets, and changes in pricing for solutions offered by us or our competitors; • seasonal variations, including those related to orders placed, sales and marketing and other activities or other seasonal fluctuations in our results of operations that are out of our control; • changes in stock-based compensation; • the application of new or changing financial accounting standards or practices; • our ability to increase, retain and incentivize the strategic partners that market and sell our platform; • our ability to control costs, including our operating expenses; • changes in governmental or other regulations affecting our business; • changes to government agency staffing and other practices and the functionality of their websites, which may cause delay or disruptions in our business, including the processing of business formations or Employer Identification Numbers, or EINs; • adverse global macroeconomic and market conditions or uncertainty with respect thereto, including economic conditions specifically affecting industries in which our customers operate; and • general geopolitical events and conditions, both domestically and internationally.
Our future quarterly results of operations may fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict Our revenue and results of operations have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including, but not limited to the risks and uncertainties discussed herein and the following: • our ability to successfully implement our updated strategic execution priorities; • the number of business formations and the rate of failure of small businesses; • the level of demand for our services; • our ability to attract new customers and retain existing customers, including the rate of renewal of subscriptions by, and extent of sales of additional subscriptions to, existing customers; • the size, timing and terms of our subscription agreements with existing and new customers; • changes to our product offerings, including any new or discontinued products, pricing changes, the bundling of certain product offerings and our testing of new product line-ups; • the mix of subscriptions and transactional products sold during a period; • the introduction of new products and product enhancements by existing competitors or new entrants into our markets, and changes in pricing for solutions offered by us or our competitors; • seasonal variations, including those related to orders placed, sales and marketing and other activities or other seasonal fluctuations in our results of operations that are out of our control; • changes in stock-based compensation; • the application of new or changing financial accounting standards or practices; • our ability to increase, retain and incentivize the strategic partners that market and sell our platform; • our ability to control costs, including our operating expenses; • changes in governmental or other regulations affecting our business; • changes to government agency staffing and other practices and the functionality of their websites, which may cause delay or disruptions in our business, including the processing of business formations or Employer Identification Numbers, or EINs; • adverse global macroeconomic and market conditions or uncertainty with respect thereto, including economic conditions specifically affecting industries in which our customers operate; and • general geopolitical events and conditions, both domestically and internationally.
Accordingly, we may lose a corporate opportunity or 28 suffer competitive harm, which could negatively impact our business, operating results, financial condition and future prospects.
Accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business, operating results, financial condition and future prospects.
If our revenue and gross profit do not grow at a greater rate than our operating expenses, we will not be able to maintain or increase profitability and our business may be harmed. We may incur significant losses in the future for a number of reasons, including due to the risks and uncertainties described herein.
If our revenue and gross profits do not grow at a greater rate than our operating expenses, we will not be able to maintain or increase profitability and our business may be harmed. We may incur significant losses in the future for a number of reasons, including due to the risks and uncertainties described herein.
The number of business formations on our platform is subject to unpredictable declines or fluctuations as a result of a number of factors, many of which are out of our control, including an overall decline in the number of U.S. business formations, an economic slowing or downturn, a public health pandemic or epidemic, increased competition, regulatory obstacles, changes in law (including changes in tax laws and regulations), changes in the business environment from inflation, interest rates, government assistance, increased compliance or operating costs (including wage and benefit pressures) and dissatisfaction with our services.
The number of business formations on our platform is subject to unpredictable declines or fluctuations as a result of a number of factors, many of which are out of our control, including an overall decline in the number of U.S. business formations, an economic slowing or downturn, a public health pandemic or epidemic, increased competition, regulatory obstacles, changes in law (including changes in tax laws and regulations), changes in the business environment due to inflation, tariffs, interest rates, government assistance, increased compliance or operating costs (including wage and benefit pressures) and dissatisfaction with our services.
Even if the 2021 Revolving Facility is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants. In addition, the 2021 Revolving Facility also permits borrowings denominated in Euros, British pound sterling and other alternative currencies that may be approved by the administrative agent and revolving lenders.
Even if the Amended Revolving Facility is terminated, any additional debt that we incur in the future could subject us to similar or additional covenants. In addition, the Amended Revolving Facility also permits borrowings denominated in Euros, British pound sterling and other alternative currencies that may be approved by the administrative agent and revolving lenders.
Failure to effectively manage our growth could result in declines in service quality or customer satisfaction, increased costs, difficulties or delays in introducing new products or services or other operational 8 difficulties. Any of these difficulties could adversely impact our brand and reputation, business, results of operations, financial condition or future prospects.
Failure to effectively manage our growth could result in declines in service quality or customer satisfaction, increased costs, difficulties or delays in introducing new 11 products or services or other operational difficulties. Any of these difficulties could adversely impact our brand and reputation, business, results of operations, financial condition or future prospects.
Our customers generally pay for transactions in advance by credit or debit card except for certain services provided under installment plans where we allow customers to pay for their order in two or three equal payments. Acceptance and processing of credit and debit cards requires that we pay interchange and other fees.
Our customers generally pay for transactions in advance by credit or debit card except for certain services provided under installment plans where we allow customers to pay for their order in three or twelve equal payments. Acceptance and processing of credit and debit cards requires that we pay interchange and other fees.
The 2021 Revolving Facility also contains a financial covenant that requires us to maintain a total net first lien leverage ratio not to exceed 4.50:1.00 on the last day of any fiscal quarter during which our 2021 Revolving Facility usage exceeds 35% of the 2021 Revolving Facility capacity.
The Amended Revolving Facility also contains a financial covenant that requires us to maintain a total net first lien leverage ratio not to exceed 4.50:1.00 on the last day of any fiscal quarter during which our Amended Facility usage exceeds 35% of the Amended Facility capacity.
The restrictions in the 2021 Revolving Facility may prevent us from taking actions that we believe would be in the best interests of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted.
The restrictions in the Amended Revolving Facility may prevent us from taking actions that we believe would be in the best interests of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted.
Such non-U.S. dollar-denominated debt may not necessarily correspond to the cash flow we generate in such currencies. 19 We are subject to fluctuations in interest rates Any borrowings under the 2021 Revolving Facility will be subject to variable rates of interest and expose us to interest rate risk.
Such non-U.S. dollar-denominated debt may not necessarily correspond to the cash flow we generate in such currencies. We are subject to fluctuations in interest rates Any borrowings under the Revolving Facility will be subject to variable rates of interest and expose us to interest rate risk.
Our ability to manage this expected growth effectively and to integrate new employees, operations and technologies of Formation Nation into our existing business will require us to continue to expand our operational and financial infrastructure, to improve our management controls and reporting systems and procedures and to continue to retain, attract, train, motivate and manage employees.
Our ability to manage this expected growth effectively and to continue to integrate the employees, operations and technologies of Formation Nation into our existing business will require us to continue to expand our operational and financial infrastructure, to improve our management controls and reporting systems and procedures and to continue to retain, attract, train, motivate and manage employees.
Although we remediated our material weaknesses and management concluded that our internal control over financial reporting was effective as of December 31, 2024, we cannot assure you that there will not be additional material weaknesses in our internal control over financial reporting in the future.
Although we remediated our material weaknesses and management concluded that our internal control over financial reporting was effective as of December 31, 2025, we cannot assure you that there will not be additional material weaknesses in our internal control over financial reporting in the future.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Inflation Reduction Act of 2022, or the IRA, and the Tax Act; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • the effects of acquisitions.
Our effective tax rate could increase due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Inflation Reduction Act of 2022, or the IRA, and the One Big Beautiful Bill Act, or the OBBBA; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • the effects of acquisitions.
We have invested and intend to continue to invest resources in technology and development in order to continue improving the simplicity and effectiveness of our platform. We have also developed and introduced new and unproven services, including using technologies with which we have little or no prior development or operating experience, such as generative artificial intelligence, or AI.
We have invested and intend to continue to invest resources in technology and development to continue improving the simplicity and effectiveness of our platform. We have also developed and introduced new and unproven services into our platform, including using technologies with which we have little or no prior development or operating experience, such as artificial intelligence, or AI.
For example, we currently partner with a variety of third-parties to provide our customers with tax solutions, website development, credit card and banking services, productivity tools and business insurance, among others. Our sales and customer experience depend on our ability to connect and integrate easily to such third party solutions.
For example, we currently partner with a variety of third parties to provide us with lead referrals and to provide our customers with tax solutions, website development, credit card and banking services, productivity tools and business insurance, among others. Our sales and customer experience depend on our ability to connect to, and integrate easily with, such third-party solutions.
These laws and regulations to which we are subject could also make it more difficult for us to convert our transactional customers to subscribers or attract new subscribers to grow our subscription services.
The laws and regulations to which we are subject could also make it more difficult for us to convert our transactional customers to subscribers or attract new subscribers to grow our subscription services.
In recent years, there have been significant new regulations and heightened focus by the government on many of these areas. In addition, as we expand our products and services and evolve our business models, we may become subject to additional government regulation or increased regulatory scrutiny.
In recent years, there have been significant new and changing regulations in many of these areas and we expect continued heightened focus by the government on many of these areas. In addition, as we expand our products and services and evolve our business models, we may become subject to additional government regulation or increased regulatory scrutiny.
Finally, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers and significant increases in the size of subscriptions with existing customers must be recognized over the applicable subscription term.
Further, our subscription-based revenue model also makes it difficult for us to rapidly increase our revenue through 20 additional sales in any period, as revenue from new customers and significant increases in the size of subscriptions with existing customers must be recognized over the applicable subscription term.
Our ability to comply with the covenants and restrictions contained in the 2021 Revolving Facility may be affected by economic, financial and industry conditions beyond our control.
Our ability to comply with the covenants and restrictions contained in the Amended Revolving Facility may be affected by economic, financial and industry conditions beyond our control.
We have completed a Section 382 study and have determined that none of our NOLs will expire solely due to Section 382 limitations. However, we may experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control.
We have determined that none of our NOLs will expire solely due to Section 382 limitations. However, we may experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control.
If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business The revolving facility that we entered into on July 2, 2021, or the 2021 Revolving Facility, contains affirmative and negative covenants, indemnification provisions and events of default.
If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business The revolving facility that we entered into on July 2, 2021, or, as amended from time to time, the Amended Revolving Facility, contains affirmative and negative covenants, indemnification provisions and events of default.
At December 31, 2024, holders of approximately 65 million shares of our common stock, are entitled to rights pursuant to an investors’ rights agreement, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
At December 31, 2025, holders of approximately 55 million shares of our common stock, are entitled to rights pursuant to an investors’ rights agreement, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
If new technologies emerge that are able to deliver competitive services at lower prices, more efficiently, more conveniently or more securely than LegalZoom, such technologies could adversely impact our ability to compete.
If new technologies emerge that can deliver competitive services at lower prices, more efficiently, more conveniently or more securely than LegalZoom, such technologies could adversely impact our ability to compete.
Fluctuations in our quarterly operating results and the price of our common stock may be particularly pronounced in the current global macroeconomic environment, including due to uncertainty caused by recessionary fears, elevated inflation and interest rates and their respective impacts on consumer spending patterns, the success of existing small businesses and the formation of new small businesses.
Fluctuations in our quarterly operating results may be particularly pronounced in the current global macroeconomic environment, including due to uncertainty caused by recessionary fears, inflation, tariffs and interest rates and their respective impacts on consumer spending patterns, the success of existing small businesses and the formation of new small businesses.
If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our results of operations could suffer Our success depends on continued innovation to provide features that make our platform useful for existing and prospective customers.
If we do not continue to innovate and provide a platform that is useful to our customers, we may not remain competitive, and our results of operations could suffer Our success depends on our ability to provide innovative features that make our platform useful for existing and prospective customers.
Failure to effectively manage our growth could adversely impact our business In the past, we have experienced significant growth in both operations and headcount, which placed increased demands on our management team and our administrative, operational and financial infrastructure. Our management team, including our new Chief Executive Officer, has developed a strategy to continue growing our business.
Failure to effectively manage our growth could adversely impact our business In the past, we have experienced significant growth in both operations and headcount, which placed increased demands on our management team and our administrative, operational and financial infrastructure. Our management team has developed a strategy to continue growing our business.
In addition, our brand and reputation could be impacted by any damage or reputational harm to our newly acquired Inc. Authority and Nevada Corporate Headquarters brands. Our services, as well as those of our competitors, are regularly reviewed and commented upon by online and social media sources.
In addition, our brand and reputation could be impacted by any damage or reputational harm to the Inc Authority and Nevada Corporate Headquarters brands we acquired in February 2025. Our services, as well as those of our competitors, are regularly reviewed and commented upon by online and social media sources.
Our business depends substantially on our customers expanding their use of our platform, including converting our transactional customers to subscribers and our subscribers renewing their subscriptions with us For the past few years, a significant amount of our revenue has been derived from our subscriptions for small businesses and individuals. In 2024, approximately 64% of our revenue came from subscriptions.
Our business depends substantially on our customers expanding their use of our platform, including our transactional customers converting into subscribers and our subscribers renewing their subscriptions with us For the past few years, a significant amount of our revenue has been derived from our subscriptions for small businesses and individuals. In 2025, approximately 65% of our revenue came from subscriptions.
This reliance on third party providers also subjects us to risks arising from the loss of control over processes, and potentially, termination of these services by the third parties. A failure of our third party providers to perform services in a satisfactory manner may have a significant adverse effect on our business.
This reliance on third-party providers also subjects us to risks arising from the loss of control over processes, and potentially, termination of these services by the third parties. A failure of our third-party providers to perform services in a satisfactory manner may have a significant adverse effect on our business. In addition, our platform interoperates with certain third-party sites.
We have hired and may need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to maintain effective internal control over financial reporting.
We have hired and may need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to maintain effective internal control over financial reporting. We have found material weaknesses in our internal control over financial reporting in the past.
Because the Los Angeles area, where a large portion of our employees are located, is in an earthquake fault zone and because both the Los Angeles area and Frisco, Texas, where a lot of our registered agent and virtual mail operations are currently located, are subject to the increased risk of wildfires, tornadoes and power outages, we are particularly sensitive to the risk of damage to, or total destruction of, our offices and two key fulfillment and delivery centers.
Because the Los Angeles and Silicon Valley areas, where a large portion of our employees are located, are in earthquake fault zones and because both the Los Angeles area and Frisco, Texas, where a lot of our virtual mail operations are currently located, are subject to the increased risk of wildfires, tornadoes and power outages, we are particularly sensitive to the risk of damage to, or total destruction of, our offices and two key fulfillment and delivery centers.
Additionally, sensitive information of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.
Further, sensitive information regarding the Company or its customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of AI technologies.
Each “authorized person”, as defined in ACJA 702-9, including the members of our board of directors, could be required to file an ABS Authorized Person application with the Arizona Supreme Court when determined to be seeking a restricted interest. The Arizona Supreme Court may attach conditions to any authorization granted in respect to holding of a restricted interest.
Each “authorized person”, as defined in ACJA 702-9, including the members of our board of directors, could be required to file an ABS Authorized Person application with the Arizona Supreme Court when determined to be seeking a restricted interest.
If the recommendations, content, or analyses that AI applications, including Doc Assist, assist in producing are or are alleged to be deficient or inaccurate or if they are determined to constitute UPL, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Some AI scenarios may also present ethical issues.
If the output, recommendations, content, or analyses that our AI 14 applications assist in producing are or are alleged to be deficient, inaccurate, biased or discriminatory, or if they are determined to constitute UPL, we could be subjected to competitive harm, legal or regulatory liability, and brand or reputational harm. Some AI scenarios may also present ethical issues.
As we seek to add different types of partners to our partner ecosystem, it is uncertain whether these third parties will be successful in building integrations, co-marketing our solutions to provide a significant volume and quality of lead referrals and orders, or continuing to work with us as their own products evolve.
As we continue to add different types of partners to our partner ecosystem, it is uncertain whether any new or current third-party partners will be successful in building integrations, co-marketing our solutions to provide a significant volume and quality of lead referrals and orders, or continuing to work with us as their own businesses evolve.
The Arizona Supreme Court can force any person who acquires a restricted interest in contravention of the applicable rules, whether knowingly or unknowingly, to divest its share ownership in the licensed ABS or its parent company.
The Arizona Supreme Court may attach conditions to any authorization granted in respect to holding of a restricted interest. 24 The Arizona Supreme Court can force any person who acquires a restricted interest in contravention of the applicable rules, whether knowingly or unknowingly, to divest its share ownership in the licensed ABS or its parent company.
At December 31, 2024, we had an accumulated deficit of $1,069.3 million. We will need to generate and sustain increased revenue levels in future periods in order to maintain or increase our level of profitability.
At December 31, 2025, we had an accumulated deficit of $1,134.4 million. 12 We will need to generate and sustain increased revenue levels in future periods to maintain or increase our level of profitability.
In addition, we acquired Formation Nation in February 2025, which we are now in the process of integrating into our operations.
In addition, we acquired Formation Nation in February 2025, which we are integrating into our operations.
Furthermore, our brand and reputation are in part reliant on third-parties, including the independent attorneys who participate in our network and the partners to which we refer our customers for business insurance, tax solutions or banking services, among others.
Furthermore, our brand and reputation are in part reliant on third-parties, including the independent attorneys who participate in our network and the partners to which we refer our customers for business insurance, tax solutions or banking services, among others. The failure or perceived failure of these third parties to satisfy customer expectations could negatively impact our brand and reputation.
Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to certain stockholders The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.
These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock. 30 Our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” will not apply with respect to certain stockholders The doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity.
In addition, our platform interoperates with certain third party sites. As a result, our results may be affected by the performance of those parties and the interoperability of our platform with other sites.
As a result, our results may be affected by the performance of those parties and the interoperability of our platform with other sites.
Risks Relating to Our Business and Industry Our business primarily depends on business formations The majority of our transaction revenue is generated by providing business formation services to guide our customers through the transition from being aspiring business owners to launching their entities. In 2024 and 2023, business formations represented the largest share of our total transaction orders.
Risks Relating to Our Business and Industry Our business primarily depends on business formations The majority of our transaction revenue is generated by providing business formation services to guide our customers. In 2025 and 2024, business formations represented the largest share of our total transaction orders.
Our insurance limits against any certain losses or expenses that may result from a disruption to our business due to earthquakes or wildfires may not be sufficient to cover all such losses or expenses, and the occurrence of either of these events could adversely affect our business, results of operations, financial condition and future prospects. 16 We may from time to time become involved in litigation, arbitration or government investigation matters that are expensive and time consuming and, if resolved adversely, could harm our brand and reputation, business, results of operations, financial condition or future prospects We are susceptible to various legal claims, lawsuits, arbitration, regulatory action or other proceedings, including those related to UPL, patent, trademark, trade secret and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy, data use, data protection, data security, network security, wiretapping, consumer protection and product liability, unfair business practices, breach of contract and other matters.
We may from time to time become involved in litigation, arbitration or government investigation matters that are expensive and time consuming and, if resolved adversely, could harm our brand and reputation, business, results of operations, financial condition or future prospects We are susceptible to various legal claims, lawsuits, arbitration, regulatory action or other proceedings, including those related to UPL, patent, trademark, trade secret and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy, data use, data protection, data security, network security, wiretapping, consumer protection and product liability, unfair business practices, breach of contract and other matters.
Patent and Trademark Office, to process business formation documents and related filings and intellectual property applications. These agencies have in the past and may in the future be unable or refuse to process submissions in a timely manner, including as a result of any government shutdowns, slowdowns or staffing shortages.
These agencies have in the past and may in the future be unable or refuse to process submissions in a timely manner, including as a result of any government shutdowns, slowdowns or staffing shortages.
In addition, we intend to continue to add new products and services and enhance our existing products and services, both of which will require us to devote significant resources before we know whether such products or services will be successful.
In addition, we intend to continue to add new products and services and enhance our existing products and services, both of which will require us to devote significant resources before we know whether such products or services will be successful. For instance, in late 2025 we launched new concierge offerings for DIFM management of business compliance requirements.
Many other U.S. states have enacted, or have proposed enacting, similar comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices, obtaining consumer consent and affording residents with certain rights concerning their personal data. The exercise of these rights may impact our business and ability to provide our products and services.
Many other U.S. states have enacted, or have proposed enacting, similar comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices, conducting privacy and security assessments, obtaining consumer consent and affording residents with certain rights concerning their personal data.
If the assumptions regarding the growth of our business are incorrect or change in reaction to changes in our markets, our results of operations and financial condition could differ materially from our expectations, our business could suffer and the trading price of our stock may decline.
Our ability to achieve our growth strategy also impacts our ability to forecast our future operating results. If the assumptions regarding the growth of our business are incorrect or change, our results of operations and financial condition could differ materially from our expectations, our business could suffer and the trading price of our stock may decline.
In addition, changes in the tax laws of foreign jurisdictions could arise as a result of the global implementation of the Inclusive Framework on Base Erosion and Profit Shifting and Pillar Two Model Rules, announced by The Organization for Economic Cooperation and Development (OECD).
Any such enactment, interpretation, change, modification, or repeal could adversely affect us, possibly with retroactive effect. In addition, changes in the tax laws of foreign jurisdictions could arise as a result of the global implementation of the Inclusive Framework on Base Erosion and Profit Shifting and Pillar Two Model Rules, announced by The Organization for Economic Cooperation and Development (OECD).
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
Our risks are likely to increase as we continue to expand, grow our customer base, and process increasingly large amounts of sensitive information. 27 In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
We may not effectively ensure that online services and physical locations are protected from significant outages, denial or degradation of service attacks, natural disasters, including adverse weather conditions, and other disruptions, any of which could adversely affect our brand and reputation, business, results of operations, financial condition and future prospects A key element of our business operations and continued growth is the ability of our customers to access our websites and mobile applications and our ability to fulfill orders placed through such platforms.
There could be circumstances in which the attorneys who participate in our network and fulfill the attorney assisted legal offerings believe that in order to comply with these duties they may have to act against the interests of our stockholders and the short-term profitability of our business. 18 We may not effectively ensure that online services and physical locations are protected from significant outages, denial or degradation of service attacks, natural disasters, including adverse weather conditions, and other disruptions, any of which could adversely affect our brand and reputation, business, results of operations, financial condition and future prospects A key element of our business operations and continued growth is the ability of our customers to access our websites and mobile applications and our ability to fulfill orders placed through such platforms.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeTo help inform our cybersecurity risk identification, assessment and management, we also employ a range of tools and services, including network and endpoint monitoring, vulnerability assessments, periodic penetration testing, bug bounty program and tabletop exercises. 29 In an effort designed to provide for the availability of critical data and systems, manage our material risks from cybersecurity threats, and protect against, detect, and respond to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we also undertake the below listed activities: • closely monitor emerging data protection laws and implement any necessary changes to our processes; • conduct annual security training for all our employees; • conduct annual cybersecurity management and incident training designed for certain employees such as those who handle sensitive data; • conduct phishing email simulations for personnel with access to corporate email systems in an effort to enhance awareness and responsiveness to such possible threats; • periodically evaluate customer support interactions to help ensure compliance with security protocols and service standards; • through policy, practice and contract (as applicable) require employees, as well as third-parties who provide services on our behalf, to treat customer information and data with care; • hold regular meetings of an internal multidisciplinary working group to discuss our cybersecurity incident preparedness; • run tabletop exercises to simulate a cybersecurity incident and use findings from such exercises in an effort to improve our processes and technologies; • maintain and regularly review and test a framework designed to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; • carry information security risk insurance designed to mitigate potential losses arising from cybersecurity incidents.
Biggest changeIn an effort designed to provide for the availability of critical data and systems, manage our material risks from cybersecurity threats, and protect against, detect, and respond to cybersecurity incidents, as such term is defined in Item 106(a) of Regulation S-K, we also undertake the below listed activities: • closely monitor emerging data protection laws and implement any necessary changes to our processes; • conduct annual security training for all our employees; • conduct annual cybersecurity management and incident training designed for certain employees such as those who handle sensitive data; • conduct phishing email simulations for personnel with access to corporate email systems in an effort to enhance awareness and responsiveness to such possible threats; • periodically evaluate customer support interactions to help ensure compliance with security protocols and service standards; • through policy, practice and contract (as applicable) require employees, as well as third parties who provide services on our behalf, to treat customer information and data with care; • hold regular meetings of an internal multidisciplinary working group to discuss our cybersecurity incident preparedness; • run tabletop exercises to simulate a cybersecurity incident and use findings from such exercises in an effort to improve our processes and technologies; • maintain and regularly review and test a framework designed to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; and • carry information security risk insurance designed to mitigate potential losses arising from cybersecurity incidents.
Our 30 audit committee also receives an annual information security report, which contains information regarding, among other things, the data security processes and procedures that have been implemented across company business units. In addition, our full board of directors is presented with updates on our cybersecurity threat risk management and strategy processes at least annually.
Our audit committee also receives an annual information security report, which contains information regarding, among other things, the data security processes and procedures that have been implemented across company business units. In addition, our full board of directors is presented with updates on our cybersecurity threat risk management and strategy processes at least annually.
Certain risks associated with our use of service providers are included within our enterprise risk management assessment program, as well as our processes designed to identify, assess and manage cybersecurity-specific risks, both of which are discussed above. In addition, cybersecurity considerations may affect the selection and oversight of our service providers.
Certain risks associated with our use of service providers are included within our enterprise risk management assessment program, as well as our processes designed to identify, assess and manage cybersecurity-specific risks, both of which are 32 discussed above. In addition, cybersecurity considerations may affect the selection and oversight of our service providers.
Our enterprise risk management committee, a multidisciplinary committee that includes our Chief Financial & Operating Officer and Chief Revenue Officer and is chaired by our Chief Legal Officer, collaborates with internal subject matter specialists in an effort to gather information for identifying, assessing and managing material cybersecurity risks, such as information related to their severity, likelihood of occurrence and potential mitigation strategies.
Our enterprise risk management committee, a multidisciplinary committee that includes our Chief Financial & Operating Officer and Chief Business & Customer Officer and is chaired by our Chief Legal Officer, collaborates with internal subject matter specialists in an effort to gather information for identifying, assessing and managing material cybersecurity risks, such as information related to their severity, likelihood of occurrence and potential mitigation strategies.
At least semiannually, and more frequently depending upon applicable facts and circumstances, our audit committee receives an overview of our cybersecurity threat risk management and strategy processes, which covers topics such as our incident response plan, results from third-party assessments, our cybersecurity risk roadmap and any threat risks, cybersecurity incidents or developments, and our progress towards risk-mitigation-related goals.
At least semiannually, and more frequently depending upon applicable facts and circumstances, our audit committee receives a presentation on our cybersecurity threat risk management and strategy processes, which covers topics such as our incident response plan, results from third-party assessments, our cybersecurity risk roadmap and any threat risks, cybersecurity incidents or developments, and our progress towards risk-mitigation-related goals.
Added
To help inform our cybersecurity risk identification, assessment and management, we also employ a range of tools and services, including network and endpoint monitoring, vulnerability assessments, periodic penetration testing, bug bounty program and tabletop exercises.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe previously announced our intention to sell our operating headquarters in Austin, Texas, which is discussed in more detail in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We also lease office spaces in other locations throughout the U.S. and internationally.
Biggest changeItem 2. Properties Our corporate headquarters are located in Mountain View, California, under a lease expiring in 2029. In March 2025, we completed the sale of our operational headquarters in Austin, Texas, which is discussed in more detail in Note 4 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We believe that these facilities are sufficient for our current needs and that additional facilities will be available to accommodate the expansion of our business should they be needed .
We also lease office spaces in other locations throughout the U.S. and internationally. We believe that these facilities are sufficient for our current needs and that additional facilities will be available to accommodate the expansion of our business should they be needed .
Removed
Item 2. Properties Our corporate headquarters are located in Mountain View, California, under a lease expiring in 2029. We currently own approximately 209,000 square feet of space in Austin, Texas, which is our operating headquarters.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are a party to various currently pending legal proceedings and government inquiries, and we anticipate that legal proceedings, government investigations, government inquiries or claims could be brought against us in the future.
Biggest changeItem 3. Legal Proceedings We are not currently a party to any material legal proceedings. However, from time to time we become subject to legal proceedings, claims and litigation arising in the ordinary course of business, and we anticipate that legal proceedings, claims and litigation could be brought against us in the future. Item 4.
Removed
For more information on our material pending legal proceedings and governmental inquiries, see Note 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures None. 31 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock repurchase activity during the three months ended December 31, 2024 was as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet be purchased Under the Plans October 1, 2024 through October 31, 2024 358,706 $ 6.41 358,706 $ 9,986,329 November 1, 2024 through November 30, 2024 — — — $ 49,986,329 December 1, 2024 through December 31, 2024 — — — $ 49,986,329 Total 358,706 $ 6.41 358,706 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Biggest changePerformance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The stock repurchase program does not obligate us to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of our board of directors.
This stock repurchase program does not obligate us to acquire any particular amount of common stock and may be modified, suspended or terminated at any time at the discretion of our board of directors.
The following graph depicts the total cumulative stockholder return on our common stock from June 30, 2021, the first day of trading of our common stock on the Nasdaq Global Select Market, through December 31, 2024, relative to the cumulative total returns of the Nasdaq Composite Index and Nasdaq CTA Internet Index.
The following graph depicts the total cumulative stockholder return on our common stock from June 30, 2021, the first day of trading of our common stock on the Nasdaq Global Select Market, through December 31, 2025, relative to the cumulative total returns of the Nasdaq Composite Index and Nasdaq CTA Internet Index.
The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. 32 June 30, 2021 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 LegalZoom.com, Inc. $ 100.00 $ 42.46 $ 20.45 $ 29.85 $ 19.84 Nasdaq Composite $ 100.00 $ 108.20 $ 73.00 $ 105.58 $ 136.81 Nasdaq CTA Internet $ 100.00 $ 84.20 $ 44.15 $ 71.27 $ 92.64 Item 6. [Reserved] 33
The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. 34 June 30, 2021 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 LegalZoom.com, Inc. $ 100.00 $ 42.46 $ 20.45 $ 29.85 $ 19.84 $ 26.24 Nasdaq Composite $ 100.00 $ 108.20 $ 73.00 $ 105.58 $ 136.81 $ 165.73 Nasdaq CTA Internet $ 100.00 $ 84.20 $ 44.15 $ 71.27 $ 92.64 $ 107.77 Item 6. [Reserved] 35
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Global Select Market under the symbol “LZ.” Holders of Record As of February 14, 2025, there were 112 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Global Select Market under the symbol “LZ.” Holders of Record As of February 13, 2026, there were 90 holders of record of our common stock.
Dividend Policy We have not paid any dividends on our common stock in the last three years and do not intend to pay dividends in the foreseeable future.
Dividend Policy We have not paid any dividends on our common stock in the last three years and do not intend to pay dividends in the foreseeable future. Purchases of Equity Securities In October 2023, our board of directors approved a stock repurchase program authorizing repurchases of our common stock, with no fixed expiration.
At December 31, 2024, approximately $50.0 million remained available for future repurchases of our common stock under the stock repurchase program. The stock repurchase program authorizes us to repurchase our common stock through any manner, including open market transactions, accelerated stock repurchase agreements, or in privately negotiated transactions with third parties, and in such amounts as management deems appropriate.
Stock repurchases under this program may be made through any manner, including in open market transactions (including pursuant to Rule 10b5-1 plans), through accelerated stock repurchase agreements, or in privately negotiated transactions with third parties, and in such amounts as management deems appropriate.
In May 2024, our board of directors approved a $75.0 million increase in the stock repurchase program, bringing the aggregate amount authorized to $175.00 million. In November 2024, our board of directors approved an additional $40.0 million increase in the stock repurchase program, bringing the aggregate amount authorized to $215.0 million.
In May 2025, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $315.0 million. At December 31, 2025, approximately $69.5 million remained available for future repurchases of our common stock under the stock repurchase program.
Removed
Purchases of Equity Securities In October 2023, our board of directors approved a stock repurchase program, or the stock repurchase program, authorizing us to repurchase up to $100.0 million of our common stock, with no fixed expiration.
Added
Stock repurchase activity during the three months ended December 31, 2025 was as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet be purchased Under the Plans October 1, 2025 through October 31, 2025 2,909,376 $ 9.98 2,909,376 $ 82,971,621 November 1, 2025 through November 30, 2025 1,174,584 9.55 1,174,584 $ 71,757,977 December 1, 2025 through December 31, 2025 245,439 9.37 245,439 $ 69,458,183 Total 4,329,399 $ 9.83 4,329,399 In February 2026, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $415.0 million.
Removed
Open market repurchases may be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Exchange Act. We may also from time to time enter into Rule 10b5-1 plans to facilitate repurchases of our shares of common stock under this authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTechnology and development Year Ended December 31, 2024 2023 $ change % change (in thousands, except percentages) Technology and development $ 89,584 $ 83,181 $ 6,403 8 % Technology and development expenses for the year ended December 31, 2024 increased primarily due to an increase in payroll and related benefits largely due to increased technology and development headcount during the year ended December 31, 2024 . 41 General and administrative Year Ended December 31, 2024 2023 $ change % change (in thousands, except percentages) General and administrative $ 108,939 $ 106,352 $ 2,587 2 % General and administrative expenses for the year ended December 31, 2024 increased primarily due to a $1.4 million increase in severance and related termination benefits costs primarily related to the reduction of our global workforce during the year ended December 31, 2024 , and a $1.3 million increase in stock-based compensation.
Biggest changeTechnology and development Year Ended December 31, 2025 2024 $ change % change (in thousands, except percentages) Technology and development $ 81,941 $ 89,584 $ (7,643) (9 %) Technology and development expenses for the year ended December 31, 2025 decreased primarily due to a decrease in payroll and related benefits largely due to a decrease in average technology and development headcount including a $4.5 million decrease in stock-based compensation expense during the year ended December 31, 2025 .
For transaction and subscription revenue, we generally collect payments and fees at the time orders are placed and prior to services being rendered. We record amounts collected for services that have not been performed as deferred revenue on our consolidated balance sheet.
For transaction and subscription revenue, we generally collect payments and fees at the time orders are placed and prior to services being rendered. We record amounts collected for services that have not been performed as deferred revenue on our consolidated balance sheet.
The transaction price that we record is generally based on the contractual amounts and is reduced for estimated sales allowances for price concessions, charge-backs, sales credits and refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize.
The transaction price that we record is generally based on the contractual amounts and is reduced for estimated sales allowances for price concessions, charge-backs, sales credits and refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize.
These expenses include costs incurred in the development and implementation of our products, websites, mobile applications, online legal platform, research and development and related infrastructure. Technology and development expenses are expensed as incurred, except to the extent that such costs are associated with internal-use software costs that qualify for capitalization.
These expenses include costs incurred in the development and implementation of our products, websites, mobile applications, online 37 legal platform, research and development and related infrastructure. Technology and development expenses are expensed as incurred, except to the extent that such costs are associated with internal-use software costs that qualify for capitalization.
Therefore, the participating independent law firms in our legal plans control the service to the customer and have the primary service obligation to provide attorney consultations to our customers, for which we pay the law firms a monthly fee. 49 For these arrangements, we recognize revenue on a net basis as an agent.
Therefore, the participating independent law firms in our legal plans control the service to the customer and have the primary service obligation to provide attorney consultations to our customers, for which we pay the law firms a monthly fee. For these arrangements, we recognize revenue on a net basis as an agent.
At contract inception, we assess the services promised in our contracts with customers and identify performance obligations for each promise 48 to transfer to the customer a service or bundle of services that is distinct. The identification of distinct performance obligations within our packages may require significant judgment.
At contract inception, we assess the services promised in our contracts with customers and identify performance obligations for each promise to transfer to the customer a service or bundle of services that is distinct. The identification of distinct performance obligations within our packages may require significant judgment.
We consider ARPU to be an important metric because it helps to illustrate our ability to provide and monetize higher value subscriptions. In addition, when viewed 38 together with subscription units, ARPU provides insight into the impact that higher-value subscriptions have on our ability to grow our subscription units.
We consider ARPU to be an important metric because it helps to illustrate our ability to provide and monetize higher value subscriptions. In addition, when viewed together with subscription units, ARPU provides insight into the impact that higher-value subscriptions have on our ability to grow our subscription units.
Subject to the satisfaction of certain criteria, we will be able to increase the 2021 Revolving Facility by an amount equal to the sum of (i) the greater of $90.0 million and 75% of consolidated last twelve months cash earnings before interest expense, tax, depreciation and amortization, or LTM CEBITDA, plus (ii) unused amounts under the general debt basket (i.e., an amount equal to the greater of $50.0 million and an equivalent percentage of consolidated LTM CEBITDA), plus (iii) an unlimited amount so long as we are in pro forma compliance with the Financial Covenant (as defined below), in each case, with the consent of the lenders participating in the increase.
Subject to the satisfaction of certain criteria, we will be able to increase the Amended Revolving Facility by an amount equal to the sum of (i) the greater of $90.0 million and 75% of consolidated last twelve months cash earnings before interest expense, tax, depreciation and amortization, or LTM CEBITDA, plus (ii) unused amounts under the general debt basket (i.e., an amount equal to the greater of $50.0 million and an equivalent percentage of consolidated LTM CEBITDA), plus (iii) an unlimited amount so long as we are in pro forma compliance with the Financial Covenant (as defined below), in each case, with the consent of the lenders participating in the increase.
Other than the special dividends declared in 2015, 2017, 2018, 2020 and 2021 which resulted in corresponding reductions in the exercise price of the stock options, we have not declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. 51 • Common stock valuation.
Other than the special dividends declared in 2015, 2017, 2018, 2020 and 2021 which resulted in corresponding reductions in the exercise price of the stock options, we have not declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. • Common stock valuation.
In 2024, cash provided by operating activities was $135.6 million resulting from a net income of $30.0 million, adjusted for stock-based compensation and other non-cash expenses of $104.9 million and net cash flows provided by changes in operating assets and liabilities of $0.8 million.
In 2024, cash provided by operating activities was $135.6 million resulting from net income of $30.0 million, adjusted for stock-based compensation and other non-cash expenses of $104.9 million and net cash flows provided by changes in operating assets and liabilities of $0.8 million.
See the section titled “—Critical Accounting Estimates—Revenue Recognition” below for a description of the accounting policies related to revenue recognition, including arrangements that contain multiple deliverables. Cost of revenue Cost of revenue includes all costs of providing and fulfilling our services.
See the section titled “— Critical Accounting Estimates—Revenue Recognition ” below for a description of the accounting policies related to revenue recognition, including arrangements that contain multiple deliverables. Cost of revenue Cost of revenue includes all costs of providing and fulfilling our services.
Income taxes We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been 50 recognized in our consolidated financial statements.
Income taxes We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements.
The assumptions that were used to calculate the grant-date fair value of our RSUs with a performance and market conditions granted during the year ended December 31, 2024, using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 0.4-0.8 Risk-free interest rate 5.2%-5.4% Expected volatility 47.4%-66.1% Expected dividend yield — The assumptions that were used to calculate the grant-date fair value of the RSUs with a market vesting condition granted in July 2024 using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 5 Risk-free interest rate 4.2 % Expected volatility 59.4 % Expected dividend yield — 52 The assumptions that were used to calculate the grant-date fair value of the RSUs with a market vesting condition granted in November 2024 using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 3 Risk-free interest rate 4.2 % Expected volatility 60.9 % Expected dividend yield —
The assumptions that were used to calculate the grant-date fair value of our RSUs with a performance and market conditions granted during the year ended December 31, 2024, using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 0.4-0.8 Risk-free interest rate 5.2%-5.4% Expected volatility 47.4%-66.1% Expected dividend yield — The assumptions that were used to calculate the grant-date fair value of the RSUs with a market vesting condition granted in July 2024 using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 5 Risk-free interest rate 4.2 % Expected volatility 59.4 % Expected dividend yield — The assumptions that were used to calculate the grant-date fair value of the RSUs with a market vesting condition granted in November 2024 using a Monte Carlo simulation model were as follows: Year Ended December 31, 2024 Expected life (years) 3 Risk-free interest rate 4.2 % Expected volatility 60.9 % Expected dividend yield — 55
The 2021 Revolving Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our restricted subsidiaries to incur additional indebtedness and guarantee indebtedness; create or incur liens; pay dividends and distributions or repurchase capital stock; merge, liquidate and make asset sales; change lines of business; change our fiscal year; incur restrictions on our subsidiaries’ ability to make distributions and create liens; modify our organizational documents; make investments, loans and advances; and enter into certain transactions with affiliates.
The Amended Revolving Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our restricted subsidiaries to incur additional indebtedness and guarantee indebtedness; create or incur liens; pay dividends and distributions or repurchase capital stock; merge, liquidate and make asset sales; change lines of business; change our fiscal year; incur restrictions on our subsidiaries’ ability to make distributions and create liens; modify our organizational documents; make investments, loans and advances; and enter into certain transactions with affiliates.
We use the Black-Scholes option pricing model for estimating the fair value of options granted under our stock option plans that vest based on service and performance conditions.
We use the Black-Scholes option pricing model for estimating the fair value of options granted under our stock option plans that 53 vest based on service and performance conditions.
Net cash used in investing activities Our primary investing activities have consisted of capital expenditures to purchase property and equipment necessary to support our customer contact center, network and operations, the capitalization of internal-use software necessary to develop and maintain our platform and deliver new products and features, which provide value to our customers, business acquisitions and investments in other companies.
Net cash used in investing activities Our primary investing activities have historically consisted primarily of capital expenditures to purchase property and equipment necessary to support our customer contact center, network and operations, the capitalization of internal-use software necessary to develop and maintain our platform and deliver new products and features, which provide value to our customers, business acquisitions and investments in other companies.
We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw down on our 2021 Revolving Facility or incur other indebtedness. Interest income Interest income consists primarily of interest income generated from our investment in money market funds.
We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw down on our Amended Revolving Facility or incur other indebtedness. Interest income Interest income consists primarily of interest income generated from our investment in money market funds.
We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our 2021 Revolving Facility.
We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our Amended Revolving Facility.
The Financial Covenant will be tested at quarter-end only if the total principal amount of all revolving loans, swingline loans and drawn letters of credit that have not been reimbursed exceeds 35% of the total commitments under the 2021 Revolving Facility on the last day of such fiscal quarter.
The Financial Covenant will be tested at quarter-end only if the total principal amount of all revolving loans, swingline loans and drawn letters of credit that have not been reimbursed exceeds 35% of the total commitments under the Amended Revolving Facility on the last day of such fiscal quarter.
We believe that these non-GAAP financial measures provide useful information about our financial performance and liquidity, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important measures used by our management for financial and operational decision-making.
We believe that these non-GAAP financial measures provide investors with useful information about our financial performance and liquidity, 48 enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important measures used by our management for financial and operational decision-making.
In 2024, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction.
In 2025, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction.
Obligations under the 2021 Revolving Facility are guaranteed by our existing and future direct and indirect material wholly-owned domestic subsidiaries, subject to certain exceptions. The 2021 Revolving Facility is secured by a first-priority security interest in substantially all of the assets of the borrower and the guarantors, subject to certain exceptions.
Obligations under the Amended Revolving Facility are guaranteed by our existing and future direct and indirect material wholly-owned domestic subsidiaries, subject to certain exceptions. The Amended Revolving Facility is secured by a first-priority security interest in substantially all of the assets of the borrower and the guarantors, subject to certain exceptions.
Non-GAAP Financial Measures To supplement our unaudited condensed consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
For our goodwill impairment test performed in the fourth quarter of 2024 and 2023, the fair value of our consolidated reporting unit significantly exceeded our carrying value. Loss contingencies We record loss contingencies in our consolidated financial statements in the period when they are probable and reasonably estimable.
For our goodwill impairment test performed in the fourth quarter of 2025 and 2024, the fair value of our consolidated reporting unit significantly exceeded our carrying value. Loss contingencies We record loss contingencies in our consolidated financial statements in the period when they are probable and reasonably estimable.
Our customers generally pay for transactions in advance by credit or debit card except for certain services provided under installment plans where we allow customers to pay for their order in either two, three or twelve equal payments.
Our customers generally pay for transactions in advance by credit or debit card except for certain services provided under installment plans where we allow customers to pay for their order in three or twelve equal payments.
Cost of revenue primarily includes government filing fees, costs of fulfillment, customer care, including the cost of credentialed professionals for tax, and payroll services, and related benefits, including stock-based compensation, and costs of independent contractors for document preparation, telecommunications and data center costs, amortization of acquired developed technology, depreciation and amortization of network computers, equipment and internal-use software, printing, shipping and handling charges, credit and debit card fees, allocated overhead, legal document kit expenses, and sales and use taxes.
Cost of revenue primarily includes government filing fees, costs of fulfillment, customer care, and payroll services, and related benefits, including stock-based compensation, and costs of independent contractors for document preparation, telecommunications and data center costs, amortization of acquired developed technology, depreciation and amortization of network computers, equipment and internal-use software, printing, shipping and handling charges, credit and debit card fees, allocated overhead, legal document kit expenses, and sales and use taxes.
For other services provided by third parties, including deed transfer, accounting, business data protection, revenue is recognized net of fees payable to third-parties. For partner revenue, we receive a fee for the referral of our customer to the partner or we retain a portion of the fee paid by the customer and share the remainder with the partner.
For other services provided by third parties, including deed transfer, accounting, revenue is recognized net of fees payable to third-parties. For partner revenue, we receive a fee for the referral of our customer to the partner or we retain a portion of the fee paid by the customer and share the remainder with the partner.
The 2021 Revolving Facility requires compliance with a total net first lien leverage ratio not to exceed 4.50 to 1.00, or the Financial Covenant.
The Amended Revolving Facility requires compliance with a total net first lien leverage ratio not to exceed 4.50 to 1.00, or the Financial Covenant.
If our assumptions and consequently our estimates, change in the future, the valuation allowance may be increased or decreased, resulting in an increase or decrease, which may be material, to our provision for (benefit from) income taxes and the related impact on our net income (loss).
If our assumptions and consequently our estimates, change in the future, the valuation allowance may be increased or decreased, resulting in an increase or decrease, which may be material, to our provision for income taxes and the related impact on our net income.
Free cash flow was also impacted by higher capital expenditures for the purchase of property and equipment, including capitalization of internal-use software.
Free cash flow was also impacted by lower capital expenditures for the purchase of property and equipment, including capitalization of internal-use software.
The risk-free interest rate assumption is based upon observed interest rates on the U.S. government securities appropriate for the expected term of our stock options and restricted stock units with market condition. • Expected volatility .
The risk-free interest rate assumption is based upon observed interest rates on the U.S. government securities appropriate for the expected term of our stock options and RSUs with market condition. • Expected volatility .
The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If we had made different assumptions, our stock-based compensation expense, and our net income (loss) for 2024, 2023 and 2022 may have been materially different. Options .
The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If we had made different assumptions, our stock-based compensation expense, and our net income for 2025, 2024 and 2023 may have been materially different. 54 Options .
The expected term of options granted is estimated based upon actual historical exercise and post-vesting cancellations, adjusted for expected future exercise behavior. The expected term of restricted stock units is defined as the remaining term from the grant date to the end of the performance period. • Risk-free interest rate .
The expected term of options granted is estimated based upon actual historical exercise and post-vesting cancellations, adjusted for expected future exercise behavior. The expected term of RSUs is defined as the remaining term from the grant date to the end of the performance period. • Risk-free interest rate .
We have the option to voluntarily repay outstanding loans at any time without premium or penalty, other than customary “breakage” costs with respect to SOFR loans. There is no scheduled amortization under the 2021 Revolving Facility. The principal amount outstanding is due and payable in full at maturity on July 1, 2026.
We have the option to voluntarily repay outstanding loans at any time without premium or penalty, other than customary “breakage” costs with respect to SOFR loans. There is no scheduled amortization under the Amended Revolving Facility. The principal amount outstanding is due and payable in full at maturity on July 14, 2030.
For arrangements that contain multiple performance obligations, such as our bundled arrangements, we allocate the transaction price to each performance obligation based on estimates of the standalone selling price of each performance obligation within the bundle.
The transaction price excludes sales taxes. For arrangements that contain multiple performance obligations, such as our bundled arrangements, we allocate the transaction price to each performance obligation based on estimates of the standalone selling 51 price of each performance obligation within the bundle.
While we continue to actively monitor the impacts of the evolving macroeconomic environment on all aspects of our business, future negative or decelerating impacts from factors such as inflation, tariffs, higher interest rates, regulatory obstacles or changes in laws and regulations remain uncertain. • Our share of business formations .
While we continue to actively monitor the impacts of the evolving macroeconomic environment on all aspects of our business, future negative or decelerating impacts from factors such as inflation, tariffs, higher interest rates, regulatory obstacles or changes in laws and regulations remain uncertain. • Our share of small and medium-sized businesses (SMBs) .
Some of these limitations include that the non-GAAP financial measure: • may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure; • does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments; • excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated may be replaced in the future; • does not reflect changes in, or cash requirements for, our working capital needs; • excludes stock-based compensation expense, which has been, and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy; and • does not reflect certain other expenses that we do not consider representative of our underlying operating performance, but that reduce cash available to us.
There are a number of limitations related to the use of Adjusted EBITDA rather than net income, which include that Adjusted EBITDA: • may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure; • does not reflect our capital expenditures, future requirements for capital expenditures or contractual commitments; • excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated may be replaced in the future; • does not reflect changes in, or cash requirements for, our working capital needs; • excludes stock-based compensation expense, which has been, and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy; and • does not reflect certain expenses that we do not consider representative of our underlying operating performance, but that reduce cash available to us.
As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of these formations. • Ability to enhance customer lifetime value .
As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of new business formations and to attract existing businesses to our platform. • Ability to enhance customer lifetime value .
The $13.6 million of net cash flows provided from changes in our operating assets and liabilities included a net $6.8 million increase in accounts payable, accrued expenses and other liabilities, and operating lease liabilities due to the timing of our payments, a $3.3 million increase in deferred revenue largely due to growth of our subscription units, which are predominantly billed in advance of our revenue recognition, and a $3.0 million decrease in accounts receivable, prepaid expenses and other current assets.
The $0.8 million of net cash flows provided by changes in our operating assets and liabilities included a $6.6 million increase in deferred revenue largely due to growth of our subscription units, which are predominantly billed in advance of our revenue recognition, and a net $0.5 million decrease in accounts receivable, prepaid expenses and other current assets, partially offset by a $6.9 million decrease in accounts payable, accrued expenses and other liabilities, and operating lease liabilities due to the timing of our payments.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined 36 as a greater than 50% change, by value, in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its post-change income or taxes may be limited.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change, by value, in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its post-change income or taxes may be limited. 38 We had an ownership change in prior years, and as a result certain federal and state NOLs were limited pursuant to Section 382 of the Code.
At December 31, 2024, our principal sources of liquidity were cash and cash equivalents of $142.1 million, which consisted of cash on deposit with banks and money market funds, of which approximately $3.3 million related to our foreign subsidiaries.
At December 31, 2025, our principal sources of liquidity were cash and cash equivalents of $203.1 million, which consisted of cash on deposit with banks and money market funds, of which approximately $4.4 million related to our foreign subsidiaries.
The weighted-average assumptions that were used to calculate the grant-date fair-value of our stock option grants were as follows: Year Ended December 31, 2023 2022 Expected life (years) 5.9 5.6 Risk-free interest rate 3.4%-3.8% 2.6 % Expected volatility 50.4%-50.7% 48 % Expected dividend yield — — Restricted stock units .
The weighted-average assumptions that were used to calculate the grant-date fair-value of our stock options granted during the year ended December 31, 2023 were as follows: Year Ended December 31, 2023 Expected life (years) 5.9 Risk-free interest rate 3.4%-3.8% Expected volatility 50.4%-50.7% Expected dividend yield — Restricted stock units .
Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, including depreciation and amortization expense, stock-based compensation and impairments of long-lived assets, as well as the effect of changes in operating assets and liabilities.
Net cash provided by operating activities is impacted by our net income adjusted for certain non-cash items, including depreciation and amortization expense, stock-based compensation and gain on sale of assets held for sale, as well as the effect of changes in operating assets and liabilities.
The total fees collected by us for our services include, as applicable, expedited services fees, government filing fees and shipping fees. Subscription services are generally paid monthly or annually in advance of the subscription period except for SaaS services in the U.K. and virtual mail subscriptions, which are invoiced monthly in arrears.
The total fees collected by us for our services include, as applicable, expedited services fees, government filing fees and shipping fees. Subscription services are generally paid monthly or annually in advance of the subscription period except for virtual mail subscriptions, which are invoiced monthly in arrears. Amounts collected in advance of revenue recognition are recorded in deferred revenue.
Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of December 31, 2024 was approximately 63%.
Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers.
Our material cash requirements include the below contractual and other obligations: Commitments We have non-cancelable agreements with various vendors, which require us to pay $36.4 million over a three-year period, of which $25.2 million remains to be paid as of December 31, 2024.
Our material cash requirements include the below contractual and other obligations: Commitments We have non-cancelable agreements with various vendors, which require us to pay $55.1 million over a four-year period, of which $41.2 million remains to be paid as of December 31, 2025.
Overall U.S. business formations declined 5% during the year ended December 31, 2024, compared to the year ended December 31, 2023, based on a review of U.S. Census data revealing new applications for EINs.
Overall U.S. business formations grew by 9% during the year ended December 31, 2025 compared to the year ended December 31, 2024, based on a review of U.S. Census data revealing new applications for EINs.
The below table sets forth the average order value for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Average order value $ 219 $ 238 Average order value decreased by 8% during the year ended December 31, 2024 compared to the year ended December 31, 2023.
The below table sets forth the average order value for the years ended December 31, 2025 and 2024: Year Ended December 31, 2025 2024 Average order value $ 236 $ 219 Average order value increased by 8% during the year ended December 31, 2025 compared to the year ended December 31, 2024.
At December 31, 2024, we had state NOL carryforwards of $28.8 million, which will begin to expire in 2025 and we had foreign NOL carryforwards of $35.1 million, which can be carried forward indefinitely and are not subject to expiration.
At December 31, 2025, we had state NOL carryforwards of $41.3 million, which will begin to expire in 2026 and we had foreign NOL carryforwards of $32.8 million, which can be carried forward indefinitely and are not subject to expiration.
Estimates are used for, however not limited to, revenue recognition, sales allowances and credit reserves, available-for-sale debt securities, recoverability of long-lived assets and goodwill, income taxes, commitments and contingencies, valuation of assets and liabilities acquired in business combinations, valuation of assets in asset acquisitions, fair value of derivative instruments and stock-based compensation. Actual results could differ materially from those estimates.
Estimates are used for, however not limited to, revenue recognition, sales allowances and credit reserves, available-for-sale debt securities, recoverability of long-lived assets and goodwill, income taxes, commitments and contingencies, valuation of assets and liabilities acquired in business combinations and stock-based compensation. Actual results could differ materially from those estimates. Our most critical accounting policies and estimates are summarized below.
Cash flows The following table sets forth a summary of our cash flows for the periods indicated: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities 135,639 124,308 Net cash used in investing activities (35,696) (31,555) Net cash used in financing activities (183,285) (56,150) Effect of exchange rate changes on cash and cash equivalents (313) 34 Net (decrease) increase in cash and cash equivalents (83,655) 36,637 For a discussion of our cash flows for the year ended December 31, 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024.
Cash flows The following table sets forth a summary of our cash flows for the periods indicated: Year Ended December 31, 2025 2024 (in thousands) Net cash provided by operating activities 178,197 135,639 Net cash used in investing activities (40,077) (35,696) Net cash used in financing activities (77,256) (183,285) Effect of exchange rate changes on cash and cash equivalents 172 (313) Net increase (decrease) in cash and cash equivalents 61,036 (83,655) For a discussion of our cash flows for the year ended December 31, 2023, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 26, 2025.
The increase in net cash provided by operating activities resulted from a $24.1 million increase in net income after adjusting for stock-based compensation and other non-cash items, partially offset by a $12.8 million unfavorable change in our operating assets and liabilities.
The increase in net cash provided by operating activities resulted from a $34.1 million increase in net income after adjusting for stock-based compensation and other non-cash items, and an $8.5 million favorable change in our operating assets and liabilities.
While there may be a general correlation between annual small business retention rate and our ability to increase customer lifetime value and the growth of our customer base, we do not view it as a predictor of future revenue given the varying needs of a small business during its lifecycle and the varying use cases of the products underlying our subscription units.
While there may be a general correlation between annual small business retention rate and our ability to increase customer lifetime value and the growth of our customer base, we do not view it as a predictor of future revenue given the varying needs of a small business during its lifecycle and the varying use cases of the products underlying our subscription units. 41 Results of Operations The table below sets forth our consolidated statement of operations data for each of the periods indicated.
The 2021 Revolving Facility, as amended, provides for the issuance of up to $20.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount of up to $10.0 million .
We refer to the amended and restated credit and guaranty agreement, as amended from time to time, as the Amended Revolving Facility. The Amended Revolving Facility provides for the issuance of up to $20.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount of up to $10.0 million .
For 2023, restructuring costs related to the reduction of our U.S. and U.K. headcount. Restructuring expenses include salary and benefits for the impacted employees and are included in general and administrative expenses in the accompanying consolidated statements of operations appearing elsewhere in this Annual Report on Form 10-K.
Restructuring expenses include salary and benefits for the impacted employees and are included in general and administrative expenses in the accompanying consolidated statements of operations appearing elsewhere in this Annual Report on Form 10-K.
At December 31, 2024, we had no borrowings outstanding and $150.0 million was available for use under our 2021 Revolving Facility.
At December 31, 2025, we had no borrowings outstanding and $100.0 million was available for use under our Amended Revolving Facility.
Lease Obligations At December 31, 2024, we had various non-cancelable operating leases for office space, which expire between June 2025 and February 2033. At December 31, 2024, we had total minimum operating lease maturities of $8.8 million, $1.9 million of which mature within twelve months.
Lease Obligations At December 31, 2025, we had various non-cancelable operating leases for office space, which expire between June 2026 and June 2033. At December 31, 2025, we had total minimum operating lease maturities of $16.3 million, $4.5 million of which mature within twelve months.
ARPU as of December 31, 2024 was flat sequentially compared to September 30, 2024. Annual small business retention rate We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later.
On a sequential basis, ARPU as of December 31, 2025 increased 4% compared to September 30, 2025. Annual small business retention rate We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later.
We consider free cash flow to be an important measure because it provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet.
We believe free cash flow provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business and strengthening our balance sheet once our business needs and obligations are met.
We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly no taxes have been provided on such earnings. We continue to evaluate our plans for reinvestment or repatriation of unremitting foreign earnings and have not changed our previous indefinite reinvestment determination following the enactment of the 2017 Tax Cuts and Jobs Act.
We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly no taxes have been provided on such earnings. We continue to evaluate our plans for reinvestment or repatriation of unremitting foreign earnings.
Subscription revenue —Subscription revenue is generated primarily from subscriptions to our registered agent, compliance packages, attorney advice, legal forms, tax and accounting, virtual mail and e-signature services, and software-as-a-service, or SaaS, accounting solution subscriptions and SaaS subscriptions in the U.K. We generally recognize revenue from our subscriptions ratably over the subscription term.
Subscription revenue —Subscription revenue is generated primarily from subscriptions to our registered agent, compliance packages, attorney advice, legal forms, tax and accounting, virtual mail and eSignature 36 services, and software-as-a-service, or SaaS, subscriptions. We generally recognize revenue from our subscriptions ratably over the subscription term. Subscription terms generally range from thirty days to one year.
Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solutions, our small business legal advisory plan and subscriptions acquired through our purchase of Earth Class Mail Inc. and Revvsales Inc., and exclude subscriptions from our enterprise customers, our operations in the U.K. and our consumer legal advisory plan.
Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solution, our virtual mail, forms and eSignature solutions and our small business legal advisory plan, and exclude subscriptions from our enterprise customers, our prior operations in the U.K. and our consumer legal advisory plan.
Our alternative business structures, or ABS, offer legal advisory services that are marketed through our websites. Our ABS provides independent legal advice to our customers and is directly responsible for, and control the fulfillment of, the legal services. Accordingly, for services provided by our ABS, we recognize revenue as the principal.
Our ABS provides independent legal advice to our customers and is directly responsible for, and control the fulfillment of, the legal services. Accordingly, for services provided by our ABS, we recognize revenue as the principal.
Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net income (loss) adjusted to exclude interest expense, interest income, provision for (benefit from) income taxes, depreciation and amortization, other expense (income), net, stock-based compensation, impairment of goodwill, long-lived and other assets, restructuring expenses, legal expenses, transaction-related expenses and certain non-recurring income and expenses from time to time.
Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net income adjusted to exclude interest expense, interest income, provision for (benefit from) income taxes, depreciation and amortization, other expense (income), net, stock-based compensation and certain non-recurring income and expenses from time to time. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of revenue.
Provision for income taxes Year Ended December 31, 2024 2023 $ change % change (in thousands, except percentages) Provision for income taxes $ 13,120 $ 17,541 $ (4,421) (25 %) Effective tax rate 30 % 56 % The $4.4 million favorable change in our provision for income taxes in 2024 as compared to 2023 was primarily due to lower non-deductible stock-based compensation, lower shortfalls on stock-based compensation and a decrease in unrecognized tax benefits for the year ended December 31, 2024 compared to the year ended December 31, 2023. 42 Comparison of the Years Ended December 31, 2023 and 2022 For a discussion related to the results of operations and changes in financial condition for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024.
Provision for income taxes Year Ended December 31, 2025 2024 $ change % change (in thousands, except percentages) Provision for income taxes $ 17,011 $ 13,120 $ 3,891 30 % Effective tax rate 52 % 30 % There was a $3.9 million increase in the provision for income taxes in 2025 as compared to 2024 primarily due to higher nondeductible tax benefits from stock-based compensation and lower research and development tax credits for the year ended December 31, 2025 compared to the year ended December 31, 2024. 45 Comparison of the Years Ended December 31, 2024 and 2023 For a discussion related to the results of operations and changes in financial condition for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 26, 2025.
The interest rate margins under the 2021 Revolving Facility are subject to a reduction of 0.25% and a further reduction of 0.25% if the total net first lien leverage ratio does not exceed 3.50 to 1.00 and 2.50 to 1.00, respectively.
The interest rate margins under the Amended Revolving Facility are subject to one reduction of 0.25%, a second reduction of 0.25% and a further reduction of 0.25% each upon achieving total net first lien leverage ratios of 3.50 to 1.00, 2.50 to 1.00 and 1.00 to 1.00, respectively.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow: Year Ended December 31, 2024 2023 (in thousands) Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Net cash provided by operating activities $ 135,639 $ 124,308 Purchase of property and equipment (35,696) (31,593) Free cash flow $99,943 $ 92,715 The increase in our free cash flow of $7.2 million for the year ended December 31, 2024 was primarily due to an $11.3 million increase in net cash provided by operating activities.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow: Year Ended December 31, 2025 2024 (in thousands) Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Net cash provided by operating activities $ 178,197 $ 135,639 Purchase of property and equipment (30,277) (35,696) Free cash flow $147,920 $ 99,943 The increase in our free cash flow of $48.0 million for the year ended December 31, 2025 was primarily due to a $42.6 million increase in net cash provided by operating activities.
Subscription revenue was 64% and 62% of total revenue for the year ended December 31, 2024 and 2023, respectively, and transaction revenue was 36% and 38% of total revenue for the year ended December 31, 2024 and 2023, respectively.
Subscription revenue was 65% and 64% of total revenue for the years ended December 31, 2025 and 2024, respectively, and transaction revenue was 35% and 36% of total revenue for the years ended December 31, 2025 and 2024, respectively.
Net cash used in financing activities Our primary uses of cash in financing activities are for repurchases of common stock and settlements of stock options and RSUs. Net cash provided by financing activities is primarily impacted by exercises of stock options by our employees and issuances of common stock.
Net cash provided by financing activities is primarily impacted by exercises of stock options by our employees and issuances of common stock.
We are the principal in most of our legal document preparation and registered agent services, including legal entity formations and similar arrangements and formation, and since December 2021, tax advisory and preparation services through our fulfilled tax subscription, LZ Tax. For these services, revenue includes filing and similar fees.
We are the principal in most of our legal document preparation, tax advisory and preparation, and registered agent services, including legal entity formations and similar arrangements and formation. For these services, revenue includes filing and similar fees. Our alternative business structures, or ABS, offer legal advisory services that are marketed through our websites.
Accordingly, a significant number of our arrangements include multiple performance obligations, such as the preparation of legal documents combined with related document revision, document storage, registered agent services, and free trial periods of our subscriptions.
Services we offer can generally either be purchased on a stand-alone basis or bundled together as part of a package of services. Accordingly, a significant number of our arrangements include multiple performance obligations, such as the preparation of legal documents combined with related document revision, document storage, registered agent services, and free trial periods of our subscriptions.
The below table sets forth the number of subscription units as of December 31, 2024 and 2023: As of December 31, 2024 2023 (in thousands) Number of subscription units 1,766 1,545 We achieved 14% growth in the number of subscription units from December 31, 2023 to December 31, 2024, primarily driven by an increase in forms and e-signature and accounting solution subscriptions resulting from the bundling of these products into certain business formation offerings and an increase in compliance subscriptions.
The below table sets forth the number of subscription units as of December 31, 2025 and 2024: As of December 31, 2025 2024 (in thousands) Number of subscription units 1,939 1,766 We achieved 10% growth in the number of subscription units from December 31, 2024 to December 31, 2025, primarily driven by an increase in compliance, legal advisory and accounting subscriptions from the bundling of these products into business formation offerings, as well as an increase in virtual mail subscriptions and the inclusion of subscription units from our Formation Nation acquisition.
Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. 52 Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the accompanying consolidated statements of operations.
We consider average order value to be an important metric given that it indicates how much customers are spending on average on our platform per transaction.
Average order value We define average order value for a given period as total transaction revenue divided by total number of transactions in such period. We consider average order value to be an important metric given that it indicates how much customers are spending on average on our platform per transaction.
Material Cash Requirements We believe our current cash and cash equivalents, as well as cash expected to be generated by future operating activities, will be sufficient to meet our material cash requirements for the next twelve months.
In 2024, net cash used in financing activities was $183.3 million, primarily for the repurchase of common stock under our stock repurchase program. Material Cash Requirements We believe our current cash and cash equivalents, as well as cash expected to be generated by future operating activities, will be sufficient to meet our material cash requirements for the next twelve months.
By combining intuitive technology with access to experienced attorneys—whether through our vast independent attorney network or LegalZoom Legal Services (LZLS) law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to estate planning and ongoing legal support. We operate across all 50 states and in over 3,000 counties in the U.S.
By combining intuitive technology with access to experienced attorneys—whether through our vast independent attorney network or our own law firm—we offer the tools and guidance people need to confidently manage everything from business formation and compliance to intellectual property protection and ongoing business management and legal support.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further information on certain accounting standards adopted in 2024 and recent accounting announcements that have not yet been required to be implemented and may be applicable to our future operations. 47 Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further information on certain accounting standards adopted in 2025 and recent accounting announcements that have not yet been required to be implemented and may be applicable to our future operations.
Results of Operations The following table sets forth our consolidated statement of operations data for each of the periods indicated. The period-to-period comparison of financial results should not be considered as a prediction or indicative of our future results.
The period-to-period comparison of financial results should not be considered as a prediction or indicative of our future results.
In October 2023, our board of directors approved a stock repurchase program, pursuant to which our management is authorized to repurchase up to $100.0 million of shares of our common stock from time to time.
In October 2023, our board of directors approved a stock repurchase program authorizing the repurchase of shares of our common stock from time to time. In May 2025, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $315.0 million.
Technology and development Technology and development expenses consist primarily of personnel costs and related benefits, including stock-based compensation for technology and development personnel, expenses for outside consultants, an allocation of depreciation and amortization and allocated overhead.
We anticipate that sales and marketing expenses will continue to be our largest operating expense category for the foreseeable future. Technology and development Technology and development expenses consist primarily of personnel costs and related benefits, including stock-based compensation for technology and development personnel, expenses for outside consultants, an allocation of depreciation and amortization and allocated overhead.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInflation risk To date, we do not believe that inflation has had a material effect on our business, financial condition, results of operations or future prospects. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
Biggest changeHowever, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, results of operations and future prospects.
However, we would be subject to fluctuation in interest rates if we draw down under our 2021 Revolving Facility, including issuance of any letters of credit. Foreign currency exchange risk We have foreign currency risks related to our revenue, expenses, and intercompany balances denominated in currencies other than our functional currency, the U.S. Dollar, principally GBP.
However, we would be subject to fluctuation in interest rates if we draw down under our Amended Revolving Facility, including issuance of any letters of credit. Foreign currency exchange risk We have foreign currency risks related to our revenue, expenses, and intercompany balances denominated in currencies other than our functional currency, the U.S. Dollar, principally GBP.
Further, if current inflationary pressures are sustained for a prolonged period of time, the success of existing small businesses and the formation of new small businesses could continue to be adversely impacted, which could harm our business, results of operations, financial condition or future prospects. 53
Further, if current inflationary pressures are sustained for a prolonged period of time, the success of existing small businesses and the formation of new small businesses could continue to be adversely impacted, which could harm our business, results of operations, financial condition or future prospects. 56
We had no outstanding debt subject to interest rate risk as of December 31, 2024 and 2023, and, as a result, we do not expect to be exposed to fluctuations in interest rates for the foreseeable future.
We had no outstanding debt subject to interest rate risk as of December 31, 2025 and 2024, and, as a result, we do not expect to be exposed to fluctuations in interest rates for the foreseeable future.
Interest rate fluctuation risk At December 31, 2024 and 2023, we had cash and cash equivalents of $142.1 million and $225.7 million, respectively, which consisted of cash on deposit with banks and in short-term highly-liquid money market funds. Interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant.
Interest rate fluctuation risk At December 31, 2025 and 2024, we had cash and cash equivalents of $203.1 million and $142.1 million, respectively, which consisted of cash on deposit with banks and in short-term highly-liquid money market funds. Interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant.
We recognized foreign currency transaction loss of $0.6 million in the year ended December 31, 2024. A 10% adverse change in foreign exchange rates on foreign-denominated accounts for the year ended December 31, 2024, including intercompany balances, would have resulted in a $0.5 million increase in our reported foreign currency loss for the year ended December 31, 2024.
We recognized foreign currency transaction loss of $0.1 million in the year ended December 31, 2025. A 10% adverse change in foreign exchange rates on foreign-denominated accounts including intercompany balances, for the year ended December 31, 2025 would be immaterial. In the event our non-U.S.
At this time, we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities could have on our results of operations.
Dollar-denominated sales and expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. At this time, we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk.
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In the event our non-U.S. Dollar-denominated sales and expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business.
Added
It is difficult to predict the impact hedging activities could have on our results of operations. Inflation risk To date, we do not believe that inflation has had a material effect on our business, financial condition, results of operations or future prospects.
Removed
Our inability or failure to do so could harm our business, financial condition, results of operations and future prospects.

Other LZ 10-K year-over-year comparisons