Many small businesses owners will need an attorney at some point in the life of their business. It may be for a routine matter such as drawing up partnership papers or incorporating the business, or it may be for something more serious such as a lawsuit.
Some small business legal matters can be handled by their owners, particularly if the owners have owned or managed small businesses before. Newbie business owners may need an attorney from the get-go to iron out partnership terms and to help file other paperwork necessary to get a small business off the ground.
Business Legal Needs
There are also a variety of other business needs an attorney may be necessary for, such as:
- Contracts: Contracts with other businesses or clients can be complicated. Having an attorney look over a contract before you sign it can help you avoid a minefield of potential liability.
- Intellectual property: If you plan to register a trademark or file a patent on a business invention or process, you’ll need the help of an experienced intellectual property attorney. These attorneys will know the best way to help you protect the image, inventions and other intellectual property of your small business.
- Real estate: Leasing and real estate purchases among businesses can be complicated affairs. Having an attorney file the appropriate paperwork and examine the agreement can be very beneficial for small business owners.
- Litigation: Lawsuits cost small businesses millions each year. If your business becomes involved in a legal action, you will definitely need an attorney versed in the area of law pertinent to the suit (product liability, personal injury, labor law, etc.).
- Taxes and licensing: Your accountant will handle your tax returns, but you man need an attorney to help you with registering your business for state and federal tax ID numbers and you may also need advice in how to transact business to minimize your tax liability. If you run into tax problems, an attorney can also help resolve them in a favorable manner.
- Incorporation: If you choose to set up your business as an LLC or other type of corporation, you’ll need an attorney to help guide you through this legal process and file the appropriate legal documentation. Getting it wrong can be quite costly in terms of tax and legal liability.
What to Look For In An Attorney
Hiring an attorney can be a tough call, as it’s hard to judge an attorney’s competence from just a telephone conversation or an ad you saw on television. There are a few steps you can take and attributes you can look for to get a feel for whether an attorney you’re considering has the skills you need and will be able to work with you.
Google is your friend - When considering an attorney or firm, do a simple Google search of the firm or attorney’s name. Look at news or legal journal stories about cases they’ve tried and the outcome of those cases. If your research gives rise to questions, don’t be afraid to ask them.
Also search for potential disciplinary action by the state bar association or ethics violations to ensure you’re getting an above-board attorney.
Experience in the appropriate field – Hiring an experienced real estate attorney to represent you in a product liability suit isn’t likely to help your cause. When hiring an attorney, make sure he or she has experience in litigating cases in the area of law your suit relates to.
Communication – When hiring an attorney, make sure you hire one who is willing to sit down and explain your legal issues to you in regular terms. This allows you to make better-informed decisions and prevents your attorney from baffling you with legalese.
References – As with any other hire, you should ask your attorney for references. Your attorney should have a good track record of satisfied clients and partners with whom you can speak to get a feel for your attorney’s ability.
Fees – Get a good idea of what your potential attorney’s fees will be up front before you make a decision to hire. Talk about retainer fees, hourly rates, expenses, payment options, etc.
How Much It Costs
The cost of an attorney can vary based on your geographic location, the complexity of the case you’re involved in, the experience of your attorney, etc. A good guide for judging the reasonableness of attorneys’ hourly rates is the Laffey Matrix, a set of rates published by the U.S. Attorney’s Office for Washington, D.C. that is updated yearly.
For example, under the Laffey Matrix, an attorney with 8-10 years experience could be expected to charge about $540 per hour in 2012. Of course, this rate may vary in different areas or as market conditions dictate.
Small business lawsuits typically cost anywhere from between $3,000 to $150,000, with about a third of these suits costing less than $10,000. This figure should be a reminder to small businesses of the need to insure against possible claims they may be liable for in court.
Controlling Legal Costs
There are a number of methods you can use to help control legal costs for your small business. The first is understanding how attorneys bill.
The majority of attorneys bill on an hourly or per diem rate, however, for some routine matters, attorneys may charge a flat fee for some services. If you expect to have several regular but routine legal needs, you may pay an attorney a monthly retainer.
If you’re suing another business, your attorney may work for you on a contingency basis. Under a contingency agreement, your attorney gets a portion of the proceeds of the lawsuit if it’s successful, if not, he or she gets only out-of-pocket expenses.
When hiring an attorney, make sure you get an engagement letter that spells out the billing method. This can help keep you from paying a senior attorney’s fee for work done by a lower ranking associate. This can also help you prevent being hit for charges such as copies, meals, postage, etc.
Be sure to understand what increments of time law firms use to bill. For example, will your attorney charge you a full hour’s billing for a 15-minute phone call? Require your attorney to spell this out in your engagement letter.
You can also manage costs by requiring your attorney to submit a monthly itemized bill and by requesting that your authorization be required before your attorney hires an expert or makes other big purchases.
Getting the Best Value From Your Lawyer
We’ve all heard horror stories from small businesses who have paid thousands in attorneys’ fees and gotten little service for their trouble. There are some proactive steps you can take to ensure that you get value for your legal dollar, however.
You should communicate on a regular basis with your attorney. Schedule regular meetings or phone calls to talk about your case, or the ongoing legal needs of your business. Don’t overdo it, but communicate regularly enough to let the attorney know that you’re staying on top of your legal affairs and expect results.
If you’ve hired your attorney on a retainer basis, be sure to ask him or her to come visit your business and get acquainted with it. The more your attorney knows your business, the better he or she will be able to represent its interests.
If you’ve hired an attorney on a retainer basis, a good way of judging whether they’re earning their keep is by whether the number of legal issues your business faces decrease. A good attorney should be able to foresee potential legal problems and give you advice to help head them off.
Insurers and Attorneys
If your business is sued and the plaintiff’s cause for claim is covered by an insurance policy held by your business, your insurer may chose your attorney for you. When purchasing insurance for your business, be sure to read and understand what the policy has to say about attorneys, as an insurer-picked attorney may choose to settle a case that you may want to litigate.