What You Need to Know About Business Lawyer Fees
Hiring a business lawyer is an option that every business must consider, whether you are just in the initial stages of deciding if you want to hire an attorney or whether you already have a business lawyer. Small businesses, medium businesses, and large businesses all have varying legal needs depending on the company’s age, ownership and management structure, complexity of services or products, number of employees, etc. Businesses will generally have some level of need for a business lawyer to provide legal advice and guidance on an ongoing basis.
Companies must be aware of the costs associated with hiring a business lawyer. Legal fees , and the different ways in which business lawyers may charge for their services depending on the work being done or the type of legal service being provided, are important aspects of a business budget. Therefore, an overview of legal fees is appropriate, as it affects budgets and is a factor to be considered in choosing your business lawyer. While a detailed analysis of legal fees are not within the scope of this article, an overview is provided below.
What Affects the Cost of Business Lawyers?
In addition to these methods of billing, several factors may also influence the cost of hiring a business lawyer:
Location – Lawyers not situated in a major metropolitan area may charge less than their larger city counterparts. For example, as a general rule, business lawyers in Los Angeles or New York might charge $300 per hour, while their Chicago colleague might charge $325 per hour. A lawyer charging $200 per hour in Atlanta or Nashville is likely much less experienced, is less expensive to operate, or has lower overhead costs than lawyers in larger cities.
Experience – As you would expect, lawyers tend to get better at their jobs over time. An attorney with many years of experience who focuses his or her practice almost exclusively on corporate and commercial issues will be much better at spotting how a certain issue will affect your particular company. In many cases, it may not be necessary to hire the most experienced attorney.
Complexity of Legal Needs – Again, this may seem like a somewhat obvious factor, but a business that is complex or that operates in a heavily regulated industry, such as oil and natural gas exploration, will need proper legal guidance, and therefore pay higher legal fees, than a flower shop. They will have different legal needs, and the complexity and size of those needs has a direct effect on the amount an organization may have to pay their attorney.
How Much Do Business Lawyers Charge?
Business lawyers may utilize different fee structures when billing for services. Common options include an hourly rate, a flat fee, a retainer or a success fee, though variations on these approaches abound. It is important to understand the risks and benefits associated with each option so you can negotiate a fair structure with your future business lawyer.
Hourly Rate
Many lawyers charge by the hour, with the fee varying based on the experience of the practitioner. This is the most flexible fee structure because it allows for easy adjustment should your needs change during the course of your case. Although the fee is generally reasonable in terms of market rates, it can add up quickly if your attorney engages in unnecessary consultation.
Flat Fee
A lawyer may charge a flat fee based on a specific service or task, such as reviewing a contract or drafting a will. This approach is easy to budget for and gives you a good idea of the typical rate charged for specific tasks. The downside is that your attorney may not do as thorough a job as they would if they were billing by the hour or may charge a higher hourly rate to make up for the efficiency of flat fee work.
Retainer
Sometimes a lawyer will charge an upfront retainer fee to cover the estimated costs of anticipated legal work. The lawyer will then bill against this retainer, seeking the balance (or the difference) at the end of the arrangement. Clients are expected to replenish the retainer periodically or as needed. While a retainer is a way to ensure that your lawyer is compensated for the work performed, it can also be impractical, as the client may not always be able to keep the retainer fully funded and up to date.
Success Fee
A lawyer may offer to only charge a fee if your case is successful. While this type of arrangement may seem like the best deal, it could have a negative impact on the quality of the work provided because the attorney may have to take on a large number of clients to make it worth their while.
How Much Does a Business Lawyer Cost by Region?
Hourly rates for business lawyers typically vary by geography. Larger national firms operating across several markets have the highest overall rates, but solo and small firms may have rates which are at or near local averages. The differences among markets may be substantial. For example, Solos rated the best law firm for their money on Avvo in Washington D.C., Boston, and Los Angeles have hourly rates between $260 an hour and $450 an hour. By way of contrast, in Miami, the rates for the best business lawyer, according to Super Lawyers, are per hour of between $210/hour and $250/hour. The highest rate reflects a partner in a large national firm while the second rate is from a Small Law Firm. Canadian rates are similar with Toronto and Vancouver charges only slightly higher than New York City with hourly rates $295 to $525. Hourly rates for Canadian solos are reportedly lower, in the range of $150 to $400 per hour. As is the case with other types of lawyers, the highest hourly rates don’t always indicate the best value. Some of the best value solos may charge around $125 to $175 an hour.
Picking an Affordable Business Lawyer
One of the factors that influence the cost of hiring a business lawyer is the type of representation required. You can be charged an hourly or flat fee on a case-by-case basis. However, there are strategic ways you can select a business lawyer based on your budget. By employing your negotiating skills and comparing rates, you can find an attorney who’ll work for you and within your budget. If you’re paying for your lawyer’s help with a business transaction, such as a real estate purchase, and the transaction requires repeated visits to your lawyer’s office for advice and revisions, one option is to negotiate a flat fee for the transaction. This can be more cost efficient than paying your lawyer’s hourly rate. If you’re paying an hourly rate, however, you may want to explore which tasks you can do, such as reviewing and signing contracts, to help minimize the time you would have to pay your lawyer for, as well as the associated costs. Some lawyers charge by the purpose of a service (i.e., $X for incorporation, $Y per consultation, etc.). A flat rate usually depends on the purpose for which you’re engaging your lawyer’s services. For example , you might be charged a flat rate for drafting an advertising contract…but charged an hourly rate (or based on the individual tasks that comprise the contract) to review an agreement you’ve written. A flat fee does not always mean you’re getting a better deal than you would be with an hourly rate, so if you’re comparing lawyers with different payment plans, look carefully at how they’ll be charging you for their services. Sometimes it makes sense to seek a lawyer who’s less experienced (and therefore charges a lower rate). If you’re doing something simple, such as registering a DBA or LLC, you likely won’t need to hire an attorney with 20 years’ experience and a file cabinet full of complex intellectual property cases. Employing your negotiating skills can also help you strike the deal you want. Keep in mind the amount of money you have to spend, and try to get the services you want for that amount. Don’t be afraid to request reduced fees. It’s also helpful to compare rates when selecting a lawyer for your business. As you compare, remember that not all fees are created equal. When looking at a lawyer’s hourly rate, look at the whole picture-your needs, the services that will be provided, and the fee in relation to the services offered.
Be on the Lookout for Hidden Legal Expenses
To summarize some of the pitfalls in trying to avoid having any legal costs:
- Don’t engage an inexperienced or unqualified lawyer to save money.
- Don’t try to do it yourself (even if you’re an exceptionally savvy consumer).
- Don’t engage a lawyer without a clear and specific written fee agreement that includes the scope of the work to be covered by the fees.
- Beware of sloppy draftspersons.
Some suggestions on avoiding hidden legal costs:
– Watch out for lawyers who try to bill their "flat fee" hourly anyway:
A good example was given to me yesterday by a local association executive director who was recently quoted a flat fee to help him with a legal issue in the amount of $450.00.
After paying the lawyer’s retainer, he received an invoice from the lawyer for the fee charged him. The discrepancy? The lawyer has tried to invoice his time by the hour, and had not been paid the full amount for the retainer paid. I think we all know what the lawyer is going to say when an angry client points out to him what his mistake was, and then refuses to pay the remainder of the fee.
– Make sure you get the scope of the work to be done in writing:
This should include a sentence that says that this fee covers the scope of work as described, and nothing more.
– Be wary of lawyers who don’t do their homework (this is borne out in the case law):
When lawyers are sloppy about their agreements and do not understand the scope of what they are doing (or they agree to too much work without price point), they can wind up unfortunately embroiled in the loads of litigation we see now. This can mean big expenses to those who did not clearly understand what they were getting into. In the case of one recent case, the Court awarded judgment against an attorney who clearly missed the mark.
The lesson here is that all legal work should be reviewed by a knowledgeable client who fully understands what his or her lawyer is charging him with, and that the client must use common sense in reviewing the fee agreements before signing off on the representation.
It’s a Balance Between Quality and Cost
It is always important to balance the cost of your lawyer with the quality of legal services provided. There’s no getting around the fact that law firms charge for their services, and that they are not cheap. Good lawyers are not cheap lawyers, and especially those who focus on business law matters will demand a premium over family or criminal law practitioners. This is to be expected – an experienced lawyer can make or cost their client a lot of money.
However, a good lawyer is usually worth their legal fees to a business owner for many reasons, including: A business law firm that knows your industry inside and out is worth its weight in gold. There is no better expert on the intricacies of your industry than a business lawyer who has worked with your company, your competitors, and your suppliers for the last decade. It is logical for them to know how to make agreements and contracts that will bolster your business. They are well versed in identifying the risks involved in your company’s agreements (and the activities behind those agreements) and how to write contracts that will protect you from those risks .
A good business lawyer is also worth it if it protects you from legal actions against your company. The Canadian legal system can be used as a tool by competitors to undermine small businesses. It’s rare, but a poorly written contract could be used to destroy a business through litigation until it is no longer viable. Overall, bad contracts cost businesses billions of dollars in legal fees and settlements every year. A business lawyer can help you draft a solid contract that has been tested over and over again with their previous clients. A good business lawyer will have written contracts on the same topic hundreds of times, and know how to write in all the safeguards so you are not taken advantage of in a similar manner.
Legal fees should always be a consideration when choosing the right corporate law firm for your business, but a close second should be the quality of the legal services you will receive. Ultimately, the decision will be made on a case-by-case basis in line with your business needs.