Small Business Lawyer Cost: Everything You Need to Know
The cost for a small business lawyer can range from $150 per hour for junior lawyers to over $1,000 per hour for senior partners at large firms in major cities.9 min read
2. Do Startups Need a Business Lawyer?
3. What Issues Are Not Worth the Small Business Lawyer Cost?
4. How to Pay the Cost of a Small Business Lawyer
5. How Do Hourly Fees Work?
6. How Do Flat Fees Work?
7. Signs You Should Spend More on the Cost of a Small Business Lawyer
9. Common Mistakes
10. How to Prevent Legal Issues
11. Why Do You Need to Get in Touch With a Business Attorney Before You Need One?
12. What Should New Entrepreneurs Look for When Hiring a Lawyer?
Updated June 19, 2020:
The small business lawyer cost can range from $150 per hour for junior lawyers to over $1,000 per hour for senior partners at large firms in major cities.
You will also need to consider that sometimes there will be a group of lawyers working and not just one per case.
What Issues Are Worth the Small Business Lawyer Cost?
Some small business owners hesitate in hiring lawyers. This is because they believe the high cost is not worth it, especially when they're just starting out.
For larger, more complex issues, it's best to find a small business lawyer. If you're nervous about liability issues or don't have time to spend on other business-related matters, you might want to keep a business lawyer. Some examples of when hiring a lawyer would be helpful include when:
- Employees sue you for discrimination about hiring, firing, or working in an unfriendly environment.
- Environmental issues happen and involve your company.
- Government units file complaints or investigate your business for possible law violations.
- You want to discuss either selling your company or buying another company or its assets.
- You are determining exit strategies and succession for cofounders.
Do Startups Need a Business Lawyer?
There are many worries entrepreneurs have when they're beginning a business or are already running a small company. One of these is if a business lawyer is necessary. They may think they can't afford the high prices attorneys charge, since most small companies don't have additional capital to pay lawyers with. Due to this, many business owners only hire a lawyer who has experience with business matters if they're in the middle of a legal problem that's serious, such as a customer suing them.
Legal help is something you should consider from the start, since it'll end up saving you money and helping the business in the end. An attorney isn't needed for each step of the business, but it's better to have one you can call if there's an issue than none at all.
What Issues Are Not Worth the Small Business Lawyer Cost?
When starting a small business, you want to keep all extra costs at a minimum. There are many matters you can take on yourself. Arm yourself with self-help resources, available either online or in print format, and save yourself the cost of hiring a small business lawyer. Some of these tasks include:
- Applying for an Employer Identification Number (EIN)
- Creating a business plan
- Applying for licenses and permits
- Establishing a buy-sell agreement
- Interviewing and hiring employees
- Hiring independent contractors
How to Pay the Cost of a Small Business Lawyer
Most small business lawyers charge hourly fees. Once you decide what you need the lawyer for, check to see how much time the lawyer needs to complete your task. Lawyers want to form strong relationships with their clients. They might be flexible on fees and a payment schedule. Some might even offer alternative fee arrangements (AFAs) or do work on a commission. Occasionally, lawyers may give free consultations to small business owners. This is a time to ask questions and get a strong understanding of what advice the attorneys would give.
Try not to make cost the main goal in hiring a small business lawyer. Often, the cheapest lawyers have the least experience. It may seem appealing to hire the cheapest option. However, you may find that you pay more in the long run. You either end up paying more an hour because they don't have the experience, or you end up hiring more qualified attorneys to fix the unresolved issues.
Before hiring the attorney, be clear about your budget and overall expectations. Work out the fees, and then complete the standard fee agreement with the lawyer. This document states that you fill the attorney's retainer, which you should negotiate. Retainers are an agreement where the small business owner pays an advance for money done today or anytime in the future. Lawyers can pull from this fund while working on tasks for you.
Another option is a fixed price payment. Some lawyers charge a flat fee, no matter how long the task might take to finish.
Monthly retainers are another choice. This option is common for small businesses that want to use an experienced attorney to work closely with them for a time. That way, one attorney knows every part of the small business and can fix any issue that arises. After six months to a year has passed, you and the lawyer should meet and see what completed work occurred. That way both parties can renegotiate a monthly retainer.
How Do Hourly Fees Work?
As mentioned, the most common fee for small business lawyers is an hourly fee. Most attorneys charge from $150 to $325 an hour. Remember that this number can change, depending on the location and the lawyer's experience. Larger cities, such as San Francisco and New York, may charge upwards of $1,000 per hour. Lawyers who have more years of experience can charge a higher hourly fee.
Should you need litigation work if your issue goes to trial, you may end up paying higher rates. The same goes for acquisitions or mergers.
How Do Flat Fees Work?
Flat fees allow you to know exactly how much to set aside for lawyer fees. Flat fees can range anywhere from $500 to $2,000, again depending on the task and place. Some flat-fee documents involve reviewing business contracts and forming a limited liability company (LLC).
Flat fee arrangements usually do not include fees for third parties. You must pay those costs separately. For instance, if you pay your lawyer to create an incorporation, you still owe the state fee.
Signs You Should Spend More on the Cost of a Small Business Lawyer
After calculating your small business's needs, you may find you should spend more money in certain areas. Some tips on finding out if you need to spend more on a small business lawyer include:
- Number of founders. If your small business has more than one person who created the company, you must increase your legal fees. This is important for startup companies because the founders must have an established and documented relationship. Even if the co-founders are relatives or close friends, you should have everything documented.
- Raising capital. If you're using a third party to help raise capital, you should increase your legal fees.
- Public company. If your small business has a public presence, you may need to spend more on legal fees to combat third parties. You may need to protect your company against these infringers for breaking trademarks or stealing your ideas.
- Not hiring a local lawyer: Bigger, more experienced firms might seem like a better option because they have worked longer in the law industry. However, smaller, local firms tend to work better with small businesses. They usually respond more quickly and have strong communication with their clients. A solo practitioner who used to work at a large firm allows you to pay for solo practitioner rates but for a larger-firm experience. Local lawyers have connections that can help with funding and can introduce you to other local businesses at events. This can help you network and spread information about your business.
- Hiring an unlicensed/inactive/suspended attorney: Check on your attorney's current license status by doing a simple Google search. Type "attorney search" followed by the state's name, just like this: Search the Florida Bar attorney directory.
- Employing an unresponsive attorney: It's okay to get your attorney's voicemail every once in a while. But if it becomes a pattern, you may want to re-evaluate your contract. Communication is very important to have a strong lawyer-client relationship.
- Giving you false promises: Once you hire the attorney, make sure you have everything in writing. This can include recording conversations with your attorney. But make sure he or she knows you are recording it. You can also follow up the phone calls with an email so you have written proof. The documents can help you if your lawyer says something but does not follow through.
- Offering poorly written work: If the contract you receive has many grammatical errors and misspellings, this attorney is not a good fit. To weed out the poor spellers and writers, have the attorney give you a sample contract. If there are typos or other mistakes, you should find a different attorney.
How to Prevent Legal Issues
While an attorney is needed for serious issues, you should also strive to prevent certain occurrences from happening. You don't need a lawyer to prevent an issue, but having one won't hurt. Once you've been sued, the damage that was preventable has already been done. You'll then need to figure out how much you'll be paying in:
- Court fees
- Attorney fees
As an example, once a potential employee files a lawsuit where he or she says gender discrimination occurred based on the questions asked during an interview, the only thing you can do is hire an attorney to help defend the lawsuit. However, if you'd done your research beforehand on anti-discrimination laws or decided to talk to an attorney first, you would have known not to ask if the applicant was currently pregnant or planned on getting pregnant in the future, or what religion the applicant practices.
This is a small effort that ends up saving you a ton of time and money later. To avoid attorney costs that aren't necessary when your company starts, as well as high costs once a lawsuit has been filed, you should consider having a consulting arrangement with a local attorney first.
Having this arrangement would mean you'd do most of the research while your attorney would give you legal guidance or review. For instance, you might use online resources to form a contract with a potential vendor, and then ask the attorney to review it and give his or her suggestions. You could also make a list of potential interview questions and have your lawyer check over it first before you start the interview process. This avoids possible headaches later on, and your cost is minimal since the attorney is simply reviewing the research you did.
Why Do You Need to Get in Touch With a Business Attorney Before You Need One?
It's not necessary to have a lawyer for each legal problem that occurs in your company. However, when you do, you'll want to know where to find the appropriate one. You also probably won't need legal help until you're in trouble. Therefore, having a lawyer will make sure you're compliant with the law and stop any possible legal problems early on.
What Should New Entrepreneurs Look for When Hiring a Lawyer?
There are several questions to ask yourself when hiring a lawyer:
1. What should new entrepreneurs look for when hiring a lawyer?
First, look for someone that fits. This means you get along with and trust each other. Your lawyer should seem interested in what you're doing, can relate to you, and is generally enjoyable. Referrals are another great place to look. At the same time, you want someone who is responsive, competent, and experienced with the legal issues you need help with. For example, there are different factors to consider when it comes to starting a software company compared to opening a restaurant.
You'll also want the lawyer to have the correct seniority for the task. You shouldn't have a senior partner getting documents ready for an incorporation, and you don't want a third-year lawyer to be in charge of negotiating with a venture capitalist who is seasoned. Last, you should think about how important this matter is to your company. It's better to spend a little more money than you're comfortable with to protect essential assets.
2. What are some common situations you would want to involve a lawyer?
Startup companies will want lawyers to help them deal with several different groups. This includes the government, as it's crucial not to violate any laws and know what you're doing with your business. You don't want to end up in hot water and deal with tax liability issues. Lawyers also help companies, the public, and third parties. Reasonable steps should be taken to control any risk factors with how you interact with:
- The public in general
Lawyers help people in a company dealing with one another. It's important to establish any expectations and the rights of the founders from the start, in case any disagreements happen later.
If you need help with determining the cost for using a small business lawyer, post your question or concern on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience. They have worked with or for companies such as Google, Airbnb, and Menlo Ventures.