Like doctors, lawyers are becoming increasingly specialized. Someone who does mostly wills, house closings and other "non-business" matters is probably not a good fit for your business. At the very least, you will need the following sets of skills. The more skills reside in the same human being, the better!
1. Contracts. You will need a lawyer who can understand your business quickly; prepare the standard form contracts you will need with customers, clients and suppliers; and help you respond to contracts that other people will want you to sign.
2. Business organizations. You will need a lawyer who can help you decide whether a corporation or limited liability company (LLC) is the better way to organize your business, and prepare the necessary paperwork.
3. Real estate. Leases of commercial space--such as offices and retail stores--are highly complex and are always drafted to benefit the landlord. Because they tend to be "printed form" documents, you may be tempted to think they are not negotiable. Not so. Your attorney should have a standard "tenant's addendum," containing provisions that benefit you, that can be added to the printed form lease document.
4. Taxes and licenses. Although your accountant will prepare and file your business tax returns each year, your lawyer should know how to register your business for federal and state tax identification numbers, and understand the tax consequences of the more basic business transactions in which your business will engage.
5. Intellectual property. If you are in a media, design or other creative-type business, it is certainly a "plus" if your lawyer can help you register your products and services for federal trademark and copyright protection. Generally, though, these tasks are performed by specialists who do nothing but "intellectual property" legal work. If your lawyer says he or she "specializes in small businesses," then he or she should have a close working relationship with one or more intellectual property specialist.
What to Ask When Interviewing Attorneys
Interviewing potential attorneys is a crucial part of the selection process. This is where you'll find out if they're a good match for your business. Here are some questions you should ask:
- Are you experienced? Don't be afraid to ask direct questions about a lawyer's experience. If you know you want to incorporate your business, for example, ask if he or she has ever handled an incorporation.
- Are you well-connected? Your business attorney should be something of a legal "internist"--one who can diagnose your problem, perform any "minor surgery" that may be needed, and refer you to local specialists for "major surgery" if needed. No lawyer can possibly know everything about every area of law. If your business has specialized legal needs (a graphic designer, for example, may need someone who is familiar with copyright laws), your attorney should either be familiar with that special area or have a working relationship with someone who is. You shouldn't have to go scrounging for a new lawyer each time a different type of legal problem comes up.
- Do you have other clients in my industry? Your attorney should be somewhat familiar with your industry and its legal environment. If not, he or she should be willing to learn the ins and outs of it. Scan your candidate's bookshelf or magazine rack for copies of the same journals and professional literature that you read. Be wary, however, of attorneys who represent one or more of your competitors. While the legal code of ethics (yes, there is one, believe it or not) requires that your lawyer keep everything you tell him or her strictly confidential, you do not want to risk an accidental leak of sensitive information to a competitor.
- Are you a good teacher? Your attorney should be willing to take the time to educate you and your staff about the legal environment of your business. He or she should tell you what the law says and explain how it affects the way you do business so that you can spot problems well in advance. The right lawyer will distribute such freebies as newsletters or memoranda that describe recent developments in the law affecting your business.
- Are you a finder, a minder or a grinder? Nearly every law firm has three types of lawyer. The "finder" scouts for business and brings in new clients; the "minder" takes on new clients and makes sure existing ones are happy; the "grinder" does the clients' work. Your attorney should be a combination of a "minder" and a "grinder." If you sense that the lawyer you are talking to is not the one who will actually be doing your work, ask to meet the "grinder," and be sure you are comfortable with him or her.
- Will you be flexible in your billing? Because there is currently a "glut" of lawyers, with far too many practicing in most geographic locales, lawyers are in a position to have to negotiate their fees as never before, and it is definitely a "buyer's market." Still, there are limits--unlike the personal injury lawyers who advertise on TV, business lawyers almost always will not work for a "contingency fee," payable only if your legal work is completed to your satisfaction.
Most lawyers will charge a flat one-time fee for routine matters, such as forming a corporation or LLC, but will not volunteer a flat fee unless you ask for it. Be sure to ask if the flat fee includes disbursements (the lawyer's out-of-pocket expenses, such as filing fees and overnight courier charges), and when the flat fee is expected to be paid. Many attorneys require payment of a flat fee upfront, so that they can cover their out-of-pocket expenses. You should always ask to "hold back" 10 to 20 percent of a flat fee, though, in the event the lawyer doesn't do the job well.
Lawyers will be reluctant to quote flat fees if the matter involves litigation or negotiations with third parties. The reason for this is bluntly stated by a lawyer friend of mine: "Even though it's a transaction I've done dozens of times, if the other side's lawyer turns out to be a blithering idiot who wants to fight over every comma and semicolon in the contracts, then I can't control the amount of time I will be putting into the matter, and will end up losing money if I quote a flat fee." In such situations, you will have to pay the lawyer's hourly rate. You should always ask for a written estimate of the amount of time involved, and advance notice if circumstances occur that will cause the lawyer to exceed his or her estimate.
If a lawyer asks you for a retainer or deposit against future fees, make sure the money will be used and not held indefinitely in escrow, and that the lawyer commits to return any unused portion of the retainer if the deal fails to close for any reason. You should be suspicious of any lawyer who offers to take an ownership interest in your business in lieu of a fee.
Cliff Ennico is a syndicated columnist and author of several books on small business, including Small Business Survival Guide and The eBay Business Answer Book. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state.