How does a business lawyer help a company?
Every company will, at some point in its early stages, require the services of two professionals: an accountant and a lawyer. Employing an accountant is a good idea for reasons that should be obvious to you: you’ll need their assistance in creating a “chart of accounts,” conducting regular reviews of your financial records, and preparing all required federal, state, and local tax returns. On the other hand, it might not be immediately clear why you need a business attorney.
From simple matters like zoning compliance and copyright/trademark advice to more complex ones like incorporating a firm and dealing with liability and lawsuits, a good business attorney can be an invaluable resource. To begin, here are some ground rules for interacting with attorneys:
If you are facing a lawsuit, it’s already too late to take action: The majority of small businesses wait until the sheriff shows up at their door to serve them with a summons before they hire a lawyer. That’s a big mistake. Before you face a lawsuit, it is wise to connect with a competent business lawyer. By the time you receive a complaint and summons, it’s too late to do anything about the problem; it’s simply a matter of how much money you’ll have to pay (in settlements, court costs, and lawyer fees) to have it sorted.
It’s easy to get into court in the United States, but it’s really tough to get out once you’re “trapped.” Lawyers generally agree that paying for legal representation isn’t everyone’s idea of a good time (okay, we’ll admit it: nobody looks forward to dealing with lawyers), but that the fee for preventing legal trouble is far lower than the fee for resolving it after it’s happened.
Big company or little business? In general, you can expect to pay a higher hourly rate from a larger law firm due to the higher overhead costs. Larger companies still have many benefits that smaller ones don’t. Extreme specialization among attorneys has emerged during the last two decades. You run the risk of not getting the comprehensive representation you need from a solo practitioner or a small firm if you retain their services as your lawyers.
Legal matters such as filing patents or trademarks, drafting software license agreements, advising on terminating disruptive employees, negotiating office or retail space leases, and overseeing corporate annual meetings are beyond the capabilities of solo practitioners and small firms (under 10 lawyers).You might end up interacting with two, three, or even more attorneys as a result of these “generalists” referring you to specialists.
Larger firms may be more costly to work with, but they offer two major benefits: 1) they typically have all the lawyers you need “under one roof,” and 2) they are highly influential in the legal communities of your area, state, and country. No amount of threatening correspondence from an unlicensed solo practitioner in the defendant’s state can compare to that of a “powerhouse” law firm with 30 locations.
An additional perk of having ties to a big, well-established law firm is the possibility of receiving intangible benefits, such as introductions to potential funding sources or the opportunity to leverage their name in partnership negotiations. Running a rapidly expanding entrepreneurial business with aspirations of going public (or selling out to a large company) in the future necessitates collaborating with attorneys whose reputations are well-known in the venture capital and investment banking circles.
Lawyer Specializations
Lawyers, similar to physicians, are gaining more and more expertise in niche areas. You shouldn’t hire someone whose main focus is on “non-business” matters like wills and home closings. The following abilities are bare minimum requirements. The greater the number of skills that a business lawyer possesses, the better.
- Legal agreements. In order to protect your company, you should retain an attorney who can learn your industry inside and out, draft the standard contracts you’ll need to do business with clients, customers, and suppliers, and advise you on how to react to contracts that others may ask you to sign.
- Organizations in the business world. A lawyer can assist you in deciding between forming an LLC and a corporation and will also be able to handle the paperwork required to form either entity.
- Land and property. Office and retail space leases are notoriously complicated and written in a landlord’s favor. You might assume they are non-negotiable due to the fact that they are typically “printed form” documents. This is false. You can supplement the standard form lease with a “tenant’s addendum” that your attorney can provide. It will include provisions that are beneficial to you.
- Taxes and permits. A lawyer should be familiar with the tax implications of even the most fundamental business transactions, in addition to registering your company for federal and state tax identification numbers, even though your accountant will be responsible for preparing and filing your company’s tax returns annually.
- Intellectual property. Having a lawyer who can assist you in registering your products and services for federal trademark and copyright protection is definitely a “plus” if your business is related to media, design, or anything else creative. But in most cases, experts whose sole focus is “intellectual property” law handle these kinds of matters. If your attorney claims to “specialize in small businesses,” it’s reasonable to expect them to maintain strong relationships with intellectual property experts.
Questions to Ask Potential Lawyers
Have you been in this field before? Asking a lawyer straight questions regarding their experience is entirely appropriate. For instance, inquire as to whether or not they have experience with company incorporations if you intend to do so.
Is your network extensive? An ideal business attorney will have the skills of a “internist” in the legal field, able to assess your situation, execute any necessary “minor surgery,” and, if necessary, refer you to local specialists for more extensive services. Every branch of law is complex, and no lawyer can hope to be an expert in every one.
Your lawyer should either have expertise in the specific area of law that your company requires or be in close contact with someone who does. This is especially important for businesses that have unique legal needs, such as graphic designers who may require guidance regarding copyright laws. No one should have to scrape together money to hire a new lawyer every time a new kind of legal issue arises.
Have you worked with any other companies in my field? You should expect your lawyer to have a basic understanding of the laws and regulations that pertain to your field. If not, they ought to be open to learning all about it. Look through your candidate’s magazine rack or bookshelf for copies of the same scholarly publications and trade books that you read.
On the other hand, you should avoid lawyers who are associated with your rivals. You shouldn’t take the chance of sensitive information getting into the wrong hands, even though your lawyer is bound to keep everything you tell them confidential per the legal code of ethics.
Do you teach well? It is important that your attorney is prepared to spend time explaining the law as it pertains to your company to you and your employees. To help you anticipate potential issues, he or she should inform you of the law’s wording and clarify how it impacts your company operations. A good lawyer will provide you with freebies like newsletters and memoranda that explain how the law has changed recently and how it impacts your company.
Do you prefer to find, mind, or grind things? You can find three main kinds of lawyers at any given firm. The “finder” approaches potential customers and brings in new ones, the “minder” handles existing customers’ needs and takes on new ones, and the “grinder” actually completes the tasks assigned by the clients. Make sure you’re comfortable with the “grinder”—the part of your attorney’s role who will actually be handling your case—if you get the impression that the lawyer you’re speaking with isn’t the one who will be handling it.
Can you be accommodating with your pricing? There is a “buyer’s market” and lawyers are negotiating their fees more than ever before due to the “glut” of lawyers in the legal industry. However, there are limitations to this trend: business lawyers, in contrast to the “contingency fee” attorneys featured on television, will almost never accept payment until they have successfully resolved your case.
When you hire a lawyer for a common task, like forming an LLC or corporation, they will likely charge a flat rate. However, they will not offer this rate unless you specifically request it. Be cautious to inquire about the expected payment date and whether the flat fee covers disbursements (the attorney’s out-of-pocket expenses like filing fees and overnight courier charges). To cover their out-of-pocket costs, many attorneys ask for a flat fee in advance. A good rule of thumb is to request that the lawyer “hold back” 10–20% of the total fee in case they mess up.
If the case includes negotiations with outside parties or litigation, lawyers will be hesitant to provide flat rates. So, in such cases, you will need to pay the attorney’s hourly rate. Any time you hire a lawyer, be sure to get a written estimate of the time involved and ask for advance notice if the lawyer expects the job to take longer than expected.
Be sure the money will actually go toward paying the lawyer’s services before putting down any kind of retainer or deposit; you don’t want your money sitting in escrow collecting dust. Also, get your money back if the deal falls through for whatever reason. Any lawyer who offers to take a stake in your company in exchange for payment should raise red flags.
Things to Consider Before Engaging a Lawyer
1. Could this individual be an angry businessman posing as an attorney?
Being on the sidelines of business deals is something that some lawyers grow weary of. An attorney of this kind may try to cast doubt on your business acumen. A lawyer who becomes overly invested in the personal details of your case should raise red flags.
2. Are they good communicators?
A good lawyer won’t just say “That’s OK” or “No, you can’t do that,” but will instead lay out all the options available to you and explain how other companies in your position typically handle similar questions.
3. Is it easy to find the offices?
It is essential that you schedule regular appointments with your attorney, particularly during the first years of your business. Getting legal counsel shouldn’t mean wasting a day traveling to and from two cities. It is always a better idea to pick a business lawyer who is local to you.
4. Is this person someone I like?
Always listen to your gut and trust your emotions. You and your lawyer should always be able to speak freely and openly. You should keep looking for a lawyer if you have any doubts about their reliability or if you feel that you and your potential advisor hold opposing viewpoints. Keep in mind that Ally McBeal is just a fictional character; in real life, a lawyer’s reliability, precision, intelligence, devotion to their clients, and attention to detail are more important than their charisma and good looks. Basically, don’t get distracted by the flashy option.
Where to Begin Your Search
The American Bar Association is an excellent organization to contact first. If you or someone you know has a legal question, you can find the answers you need on the ABA’s website. Under the “Hire a Lawyer” tab, you can learn about public service lawyer referral programs that assess your situation through an interview, determine your legal needs, and then connect you with an attorney or other community resources.
In addition, you can find for-profit lawyer referral services online. For example, if you visit FindLaw, you will be able to see thousands of lawyers’ profiles instantly. When you enter a city and state in the search bar, a list of results containing information about local law firms with profiles that include their history, specializations, publications, attorneys on staff, and more will appear. On the ABA website, you can find listings for other comparable services.
You can also inquire about any disciplinary actions against the lawyers you’re considering by requesting a search of the ABA’s National Lawyer Regulatory Data Bank, though it costs money.
Ways to Cut Costs
Many business owners shudder at the thought of hiring a lawyer because they envision hefty legal fees. Although the high cost of legal representation is undeniable, there are now more options than ever before for limiting outlays. Take a look at the different ways lawyers charge for their services:
- Rates based on the hour or day: The majority of lawyers charge by the hour. They may charge on a daily basis if travel is necessary.
- Fixed cost: When it comes to reviewing contracts or closing loans, for example, some lawyers suggest charging a flat fee.
- Contingent monthly payment: For a flat monthly fee, you can get unlimited access to routine legal advice, which is a good option if you think you’ll have a lot of questions.
- Contingent fee: Lawyers frequently accept contingency fees when handling complicated cases. So, if everything works out, they’ll get a cut (anywhere from 25% to 40%) of the proceeds. If they are unsuccessful, all they will receive are their personal costs.
- Billing based on value: When it comes to business matters, some law firms charge more if the attorneys get a good outcome, like saving the client thousands of dollars through contract negotiations. Stay away from attorneys who use this strategy, which goes by the name “partial contingency.”
Feel free to discuss your preferences with the lawyer; many of them will be willing to work with you to find a solution that works best for you. Make sure to include the billing method in the agreement (also known as a “engagement letter”) when you hire a lawyer. If you have more than one attorney working on your case, it’s important to note their respective hourly rates. Otherwise, you might end up paying $200 for an associate’s $75 worth of legal work.
In this agreement, you should also spell out exactly which costs you’re responsible for paying back. Although many people consider expenses like meals, secretarial overtime, postage, and photocopies to be part of running a business, some attorneys insist on getting their money back for these things. Will your attorney contact you to seek your permission in the event of an unforeseen charge? Confirm that you will only pay for essential and reasonable out-of-pocket costs.
Here are some things you can do to keep legal expenses in check, regardless of your lawyer’s billing method:
To help you decide if it’s worth it to pursue each matter, have the attorney put their cost estimate in writing. Find out why the actual cost is higher than the projected amount. Another service that some lawyers provide is a written guarantee of the maximum amount that a certain service will cost. You get more certainty than with an estimate alone, and it helps with budgeting.
Find out how the company determines its billing intervals. Legal professionals typically keep track of their time in increments ranging from six minutes to thirty minutes. How much would it cost for a five-minute phone call?
Ask for detailed invoices sent to you every month. Not all attorneys send out invoices right away; some wait until the amount owed is substantial. Instead, request and carefully review invoices sent monthly. High costs should serve as a warning that too many people, or the wrong people, are involved with your case. Verify all of your invoices thoroughly; otherwise, you might end up paying for someone else’s services.
Ask about discounts for paying quickly. If you can pay within 30 days of the invoice date, ask for a discount. A savings of just 5% on legal fees can have a significant impact on your bottom line each year.
Get ready. Make sure you have all of the required paperwork and a clear idea of what you want to discuss before contacting or meeting with a lawyer. Prepare ahead of time by faxing any necessary documents. This will allow your attorney to skip reading them during the meeting and get straight to the point. Also, don’t contact your lawyer a hundred times a day.
Have frequent meetings with your attorney. This may not seem like a cost-effective solution at first, but it really helps attorneys and entrepreneurs avoid the never-ending game of phone tag. Even if it’s just over the phone, a monthly five- or ten-minute meeting can help you save a ton of money by preventing minor legal issues from becoming major headaches.
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