How To Save Money When Hiring a Lawyer
By Patricia Rowe, Esq. CPA
A lot of people are afraid to even call an attorney because they think it will cost too much money. I'm an attorney and I'm afraid to hire an attorney.There are some things you can do to make sure you don't get ripped off or over-charged:
Get a Referral- Ask someone you trust if they can refer you to the type of attorney you need. This could be a friend or someone who works with attorneys on a regular basis, like a financial advisor, certified public accountant or banker. Make sure the attorney works in the area of law for which you need legal services.
Once someone passes the bar exam a lawyer can practice any kind of law and perform any legal service he or she wishes. Oftentimes attorneys take on clients that entail doing work for which they have no experience.
For some types of legal issues, such as to incorporate your business, you won’t need a “specialist.” However, it behooves you to choose an attorney, who does incorporations on a regular basis; who also understands the tax consequences of different entities and can explain the pros and cons of each entity to you. If, however, you are planning to take your company public now or in the future, you must hire an attorney or firm that specializes in Securities and Exchange Commission compliance law. This area of law is complex, requires extensive reporting to a government agency and an error in compliance can be costly.
Some of the legal issues with which you may need help are:
Incorporation- whether to operate as a C corporation, S corporation or an LLC, set up of board of directors, appointment of officers, tax elections for small business stock, employee benefit plans, stock option plans- business attorney, tax attorney, securities attorney
Acquiring Venture Capital- sale and distribution of capital interests in the company in the form of stock or LLC membership interests, stock subscription agreements, private placement memorandum, Regulation D filing, confidentiality agreements - business attorney, tax attorney, if you plan to go public in the future- securities attorney
Set Up of Accounting Systems and Internal Controls- capitalization and depreciation of equipment and software purchases, tax elections to expense capital items, tracking and recording capital investments and capital accounts, depreciation elections of leasehold improvements, Section 83(b) elections for stock options, international tax issues - along with your CPA you might want to have a tax attorney or securities attorney
Protection of Intellectual Property- protecting your work product from theft by employees, outside contractors or joint venture firms, confidentiality agreements, licensing agreements, use of open source software, creating trademarks, logos and service marks- patent attorney, intellectual property attorney
Operation of the Business- contracts with joint venture companies, independent contractor agreements, non-disclosure agreements, contracts with suppliers, leases for real property and equipment, employment agreements, employee stock ownership plans, employee benefit plans, buy-sell agreements- business attorney, contract attorney, intellectual property attorney
Interview at Least Two Attorneys- Find at least two attorneys who will tell you about themselves, their practice and the type of work they do. Make it clear when you call that you are interviewing to choose an attorney, that you are not asking for information about your business or legal issues, and confirm that there will be no charge for the call.
If the attorney is willing to give a brief phone interview, tell him or her some of the facts of your situation. Ask if their firm has experience with that kind of law. Then he or she will be able to tell you whether or not they perform those kinds of services and whether they will give you a free initial consultation.
Ask If They Give A Free Initial Consultation- Many attorneys give a free half-hour initial consultation. Ask for it. Sometimes the attorney will talk about your legal issue for one half hour or an hour and will credit it towards your job if you hire them. Example: talk for 30 to 45 minutes about your product or software, and then pay the flat fee for the patent if you hire them. If you don't hire them you pay for the 30 to 45 minutes at the attorney's hourly rate.
Ask For A Flat Fee- Many kinds of legal jobs can be done for a flat fee, that is, not at an hourly rate. Things like incorporating your business, obtaining a patent or trademark, or writing a consulting agreement can be done for a pre-arranged amount. Even jobs that are normally billed based on an hourly rate can be done for an agreed upon amount.
Set A Time Limit- Even if the job is the type that is normally charged at an hourly rate you can limit the amount of time to be spent on your job. You can ask that the firm spend X number of hours on your job and that you be contacted when the firm has reached your limit to see if you want them to continue. Just ask!
Send Your Documents Ahead for Review- If you have something like a consulting agreement or independent contractor agreement to be reviewed send it to the attorney before your meeting. Ask how long it will take for the review. Then you can meet for an hour to discuss your document.
Give Stock in Exchange for Services- Offer to give stock or an ownership interest in exchange for payment of some or all of the legal services. There are strict rules about this but it is the attorney’s responsibility to make sure he or she does not violate any attorney-client ethics rules.
Use a Small Local Law Firm- There are medium- to big-sized law firms that perform these services. The bigger they are, the more people work on your job and the more you have to pay. Look for a small local firm that has been around for a while that performs the services you need. It will save you money.
It’s true- this all costs a lot of money. However, getting good legal advice along the way will save you money in the long run by avoiding costly mistakes and resulting lawsuits the against which the company will have to hire an attorney to defend itself. Writing these costs into your projections and business plan will prove to potential investors that you are business savvy and smart enough to know when to hire the expertise you need to make your business successful.
Content copyright 2009. Law Offices of Patricia Rowe. All Rights Reserved.