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Fee-dom of Choice

Do you know your legal service billing alternatives?

Long ago, lawyers mailed bills on letterhead, stating only "Legal services rendered" and a figure. Now, we get much more.

If you'll be billed hourly, ask about time increments. Some firms bill in six-minute increments, while others bill no less than a half-hour, making a five-minute call $50.

But paying hourly is not the only option. Many lawyers are willing to use alternative billing, including these possibilities:

  • Contingent fee: Most often used for plaintiff's lawsuits, this arrangement means the lawyer gets nothing if he or she loses but collects 25 to 40 percent of the judgment if he or she wins.
  • Dollar cap: For fairly predictable projects, you might agree on a cap--you'll be billed hourly up to the cap.
  • Flat fee: Your lawyer might charge a set price for routine matters such as reviewing a contract.
  • Retainer: This is like legal insurance for businesses without in-house counsel. Your monthly retainer entitles you to call for advice or other basic legal services. It's good for preventive law, since it won't cost extra to check with counsel.
  • Value billing: Here, the lawyer agrees to a lower-than-usual hourly fee. However, there's a bonus for positive results--such as avoiding litigation or obtaining a favorable settlement. This bonus would be negotiated in advance.

Remember, it's up to you to ask about your options.

Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.

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This article was originally published in the April 2005 print edition of Entrepreneur with the headline: Fee-dom of Choice.

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