Is Prepaid Legal a Profitable and Legit Opportunity? Prepaid Legal Review

I decided to investigate an opportunity called Prepaid Legal due to the number of scams running online, this is what I found out…

Legal Beginnings

Prepaid Legal Services, Inc. is a NYSE company that underwrites, develops, and markets legal services all over the U.S. and Canada for over 30 years. The company has access to law firms through low cost prepaid legal plans. The sales of their legal service plans began in 1983 and went public in 1984 through NASDAQ.

From there, the company has hopped from one stock exchange institution to another and was listed in NYSE as the 33rd fastest growing company. The founder felt the need to share his expertise to reach out to individuals who need assistance to various legal issues and expenses, thus the creation of the company.

It wasn’t always rainbows and sunshine for the Prepaid Legal Incorporated. It faced difficult challenges from both former members and legal authorities who charged accounting irregularities like fraud and deception, among others.

The Legal Plan

The services that the company offers allow its members to know their rights and actually exercise them. They provide services that make legal consultation available to their members for such time that they are members at the company. They also help you sort things out from basic problems with traffic tickets to large-scale insurance claims. They also market a theft monitoring and restoration service that can help catch alleged offenders. Apart from the direct selling that they do for their services, just like a social security service program, they are also able to sell these benefits to employees through payroll deduction.

A Few Dollars Go a Long Way

Availing prepaid legal services is made possible with $26 a month which will be pooled along the millions of other members. Of course, legal services are not enjoyed always at the same time by all members and are not always of the same legal fee, which addresses the imperative statement behind the success of their operation. It engages in direct network marketing by inviting people to join the company as associates and invite as many others as possible, leaving an impression that should 9 out of 10 members quit, it will still leave the pilot associate a steady income for a year.

From what I’ve seen so far, it seems to look like a legit opportunity.

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Pre-Paid Legal, A Review

Pre-Paid Legal has been offering their services for over thirty years and currently serves over one and a half million people. Firms in forty-eight states make them an accessible place for members across the United States and four provinces of Canada.

Pre-Paid Legal offers their services to members, by giving them access to professional counsel for traditional legal counsel, as well as creating a will. Handling problems on member’s behalf in regards to identity theft, problems with insurance companies and more.

This service is only for registered members of the Pre-Paid Legal System, which is only a toll-free call away. The firm consists of a provider law firm, screened by a legal team of experts.

The benefits members receive increased recently to give them over 60,000 forms available from their form service. The legal documents give a member the power that only the wealthy could do before they discovered and joined the Pre-Paid Legal service. Members can hold on to legal documents for the members for ten days before submitting to the legal experts.

The service is not only available for the public, but also employers can benefit from the specialized services of the team. An employer representing himself as the company representative as well as his employees can obtain the service. Even if the employees want to bring an act against the employer to have a clear and fair hearing, they can do so with one company representing both parties.

No more searching for lawyers, claim forms or being worried about being able to pay a lawyer, as Pre-Paid Legal is just a phone call away. The cost involved to obtain their services for a full legal plan ranges from $14.95 to 423.95 per month per family. Extra costs are for identity theft shield $9.95 per month if an employee has the legal plan included already. Without the legal services plan the employee has to pay $12.95 per month. Not having legal representation can be costly for any company, thus Pre-Paid Legal likes to offer themselves as the best solution.

The provider law firm is an assured established law firm and selected to serve a specific client after investigation from the Pre-Paid Legal team. The company assures that the provider law firm is in good standing with their particular state Bar Association and the Law Society. It has a service philosophy consistent with Pre-Paid Legal and will understand and empathize with your legal problems.

Generally, individuals have the perception that a lawyer is too expensive and out of budget range, but at a cost of $26, is totally affordable and less intimidating than actually entering a lawyer’s office. Other people may not know where or how to start a legal action, but with Pre-Paid Legal, it is simplified.

The monthly fee is quite reasonable and with all the links available and easily accessible on the web site, it will be easy to come to a conclusion, and come to a clear decision to join the company for value and cost saving legal services.

Separate Legal Personality of a Company

In Gilbert and Sullivan’s ‘Utopia’, the concept of a limited company is described, rather poetically:

“Some seven men form an Association (If possible, all Peers and Baronets), The start off with a public declaration To what extent they mean to pay their debts. That’s called their Capital; if they are wary They will not quote it at a sum immense. The figure’s immaterial–it may vary From eighteen million down to eighteenpence. I should put it rather low; The good sense of doing so Will be evident at once to any debtor. When it’s left to you to say What amount you mean to pay, Why, the lower you can put it at, the better…

They then proceed to trade with all who’ll trust ’em Quite irrespective of their capital (It’s shady, but it’s sanctified by custom); Bank, Railway, Loan, or Panama Canal. You can’t embark on trading too tremendous– It’s strictly fair, and based on common sense– If you succeed, your profits are stupendous– And if you fail, pop goes your eighteenpence”.

How does the concept of separate legal personality and limited liability give rise to the circumstances Gilbert and Sullivan describe? Does you think that the law goes far enough in disregarding, or avoiding the consequences of, separate legal personality, when justice requires it to do so? This article explains further.

An incorporated company, “united or combined into an organised body”, is recognised by law as a separate legal entity, or ‘legal person’ distinct from the separate personalities of the members of the body. The law treats it like “any other independent person” having rights and liabilities. A company, as a legal person, may enter into contracts, own property and even commit crimes. It is this concept of the Company being a fictitious person (then under the ‘Stock Company Act’ ) ‘Utopia’ ridicules, where Gilbert, in his libretto, toys with the idea that there could be a convergence of natural persons and legal entities.

Where a private company limited by shares owes money, and becomes insolvent, the law holds that since its creditors dealt with the Company – not its individual members – regardless of “the ideas or schemes of those who brought it into existence”, the extent of financial liability of its members is limited to the amount the members agree to pay for their shares: their “public declaration.. to what extent they mean to pay their debts”. Gilbert’s words satirize the consequences of this: if the Company becomes insolvent, the creditors do not get paid, regardless of the personal financial situations of its members. This can be contrasted with a partnership or sole proprietorship, where the owner would be held responsible for all debts of the corporation.

Conversely, where a company owns assets, those assets belong to the Company, not its members: in contrast with a partnership or sole proprietorship, where the owner(s) of the assets are the partners or the proprietor. Members cannot claim an interest as the assets were purchased by the Company, as legal owner which, as in Macaura can be to the detriment of the member.

On occasions, the law is prepared to circumvent the usual consequences of legal personality by ‘lifting’ or ‘piercing’ the veil of incorporation – for example, where a company’s shareholders are using the Company as a device to avoid their responsibilities. In Jones v Lipman, Lipman transferred a property to his company, to avoid having to transfer the property to Jones. The Court held the Company was a “device and a sham, a mask which [Lipman] holds before his face in an attempt to avoid recognition by the eye of equity”.

This does not mean that the Courts will always lift the corporate veil wherever justice requires it. The Courts have vigorously fought against any attempt to allow anyone, let alone themselves, “peer under the skirts of a company”. In Adams v Cape Industries, a company that marketed asbestos set up subsidiaries so that if a customer sued for asbestos-related claims, only the subsidiary would be liable. The bankruptcy of a subsidiary would not affect Cape. The Court held that Cape were entitled to “organise affairs.. so that it would have the… benefit of the group’s asbestos trade in the USA without the risks of tortuous liability”.

Similarly, in Ord and another v Belhaven Pubs Limited a defendant company that was not trading, transferred all of its assets to other companies in its group, and consequently claimants attempted to sue those other companies for the debt the defendant owed. The court dismissed the claim, stating that the transactions were overt and “conducted in accordance with the liberties conferred upon corporate entities by the Companies Act”.

In recent times, the approach would seem to be that the Court will go to any length to avoid any obvious penetration of the corporate veil. In Allen v Amalgamated Construction Co Ltd the European Court of Justice examined the workings of a company to investigate whether transfers between subsidiaries were capable of being a transfer under the TUPE regulations. Similarly, in Pirelli Cable Holding NV v IRC the Court, whilst denying that it was lifting the veil, “availed itself of a jolly good rummage around the internal workings” in order to examine certain facts.

The Courts have on occasion held directors personally liable for their actions. In C Evans & Sons Limited v Spritebrand Ltd, the Court held that, in every case it is necessary to examine with care what part the director played personally with regards to the act complained of. The Court declined the opportunity to formulate a comprehensive definition of circumstances that would always give rise to liability.

More recently, in MCA Records Inc, whilst not setting out general principles, the Court held that per CBS Songs Ltd and Unilever plc v Gilette (UK) Ltd, liability may arise where the individual ‘intends and procures and shares a common design that an infringement takes place’. Consequently, these cases establish that directors can sometimes be personally liable for torts for which the company is also liable. Still, the Courts have retained the principles of separate legal personality and limited liability, and defended the protection they offer. Whilst permitting some ‘rummaging’ under the veil to establish facts, they have severely limited any encroachment on those principles.

We have seen how the principles of separate legal personality and limited liability sometimes result in circumstances that may seem favourable to the Company’s shareholders and detrimental to its creditors. On one hand, there are good reasons for retaining these principles. The Courts feel that to subject individual shareholders or directors to onerous personal liabilities would discourage commercial enterprise. Additionally, whilst creditors are exposed to risk, they are fully aware of this risk: the Company’s Memorandum, a public document, freely states that the company is limited by shares, the liability of its members is limited, and by how much. So when the Company “proceed[s] to trade with all who’ll trust ’em”, the risk creditors take is easily calculable.

On the other hand, there are cases where, if it were not for company law, other principles would require the Courts find individual members liable for their debts and actions. Cases such as Adams v Cape Industries, where members have deliberately arranged their affairs to avoid liability if sued, are difficult to correlate with equitable principles of justice. The law is moving towards introducing provisions to prevent members abusing the principles to avoid liability for serious crimes and should go further to introduce provisions preventing the avoidance of liability for serious losses.

Materials referred to:

Payne, J, MA (1998) Lifting the Corporate Veil, Company Law Gilbert, W S – Utopia, Limited Halsbury’s Laws of England from LexisNexis – Corporations (Volume 9(2) (2006 Reissue) Halsbury’s Laws of England from LexisNexis – Companies (Volume 7(1) (2004 Reissue) Hill, C, Hubble, P, Longshaw, A, Morgan, T & Roberts, S (2007) W223 Company Law and Practice, Oxford University Press, Oxford New Law Journal from LexisNexis – von Wachter, V (13 July 2007) The Corporate Veil, 157 NLJ 990 New Law Journal from LexisNexis – Pedley, P (6 May 2005) Hints for hungry litigators, 155 NLJ 702

CASES:

Adams v Cape Industries (1990) Ch 433
Allen v Amalgamated Construction Co Ltd: C-234/98 [1999] ECR I-8643, [2000] All ER (EC) 97
Jones v Lipman (1962) 1 All ER 442
Macaura v Northern Assurance Co Ltd (1925) AC 619 Ord and another v Belhaven Pubs Limited (1998) BCC 607
Salomon v A Salmon and Co Ltd (1897) Ac 22 [1895-99] All ER Rep 33