Definition: A person who's been formally trained in the law, especially one
whose profession is advising others in matters of law or
representing them in lawsuits
A business attorney can be a critical part of your advisory
team, no matter what stage your business is in. When do you need a
lawyer? Although the answer depends on your business and your
particular circumstances, it's generally worthwhile to consult one
before making any decision that could have legal ramifications.
These include setting up a partnership or corporation, checking for
compliance with regulations, negotiating loans, obtaining
trademarks or patents, preparing buy-sell agreements, assisting
with tax planning, drawing up pension plans, reviewing business
forms, negotiating and drawing up documents to buy or sell real
estate, reviewing employee contracts, exporting or selling products
in other states, and collecting bad debts. If something goes wrong,
you may need an attorney to stand up for your trademark rights, go
to court on an employee dispute or defend you in a product
liability lawsuit. Some entrepreneurs wait until something goes
wrong to consult an attorney, but in today's litigious society,
that isn't the smartest idea.
In a crisis situation--such as a lawsuit or trademark
wrangle--you may not have time to thoroughly research different
legal options. More likely, you'll end up flipping through the
Yellow Pages in haste...and getting stuck with a second-rate
lawyer. Better to start off on the right foot from the beginning by
doing the proper research and choosing a good lawyer now. Many
entrepreneurs say their relationship with a lawyer is like a
marriage--it takes time to develop. That's why it's important to
lay the groundwork for a good partnership early.
How do you find the right attorney? Ask for recommendations from
business owners in your industry or from professionals you trust,
such as bankers or accountants. Don't just get names; ask them for
the specific strengths and weaknesses of the attorneys they
recommend. Then take the process one step further: Ask your
business associates' attorneys whom they recommend and why.
(Attorneys are more likely to be helpful if you phrase the request
as "If for some reason I couldn't use you, who would you recommend
and why?") If you still need more prospects, contact your local Bar
Association; many of them have referral services.
Next, set up an interview with the top five attorneys you're
considering. Tell them you're interested in building a long-term
relationship, and find out which ones are willing to meet with you
for an initial consultation without charging a fee.
At this initial conference, be ready to describe your business
and its legal needs. Take note of what the attorney says and does,
and look for the following qualities:
- Experience. Although it's not essential to
find an expert in your particular field, it makes sense to look for
someone who specializes in small-business problems as opposed to,
say, maritime law. Make sure the lawyer is willing to take on small
problems; if you're trying to collect on a small invoice, will the
lawyer think it's worth his or her time?
- Understanding. Be sure the attorney is
willing to learn about your business's goals. You're looking for
someone who will be a long-term partner in your business's growth.
Does the lawyer understand where you want to be tomorrow and share
your vision for the future?
- Ability to communicate. If the lawyer
speaks in legalese and doesn't bother to explain the terms he or
she uses, you should look for someone else.
- Availability. Will the attorney be
available for conferences at your convenience, not his or hers? How
quickly can you expect emergency phone calls to be returned?
- Rapport. Is this someone you can get along
with? You'll be discussing matters close to your heart, so make
sure you feel comfortable doing so. Good chemistry will ensure a
better relationship and more positive results for your
business.
- Reasonable fees. Attorneys charge anywhere
from $90 to $300 or more per hour, depending on the location, size
and prestige of the firm as well as the lawyer's reputation. Shop
around and get quotes from several firms before making your
decision. However, beware of comparing one attorney with another on
the basis of fees alone. The lowest hourly fees may not indicate
the best value in legal work because an inexperienced attorney may
take twice as long to complete a project as an experienced one
will.
- References. Don't be afraid to ask for
references. Ask what types of businesses or cases the attorney has
worked with or on in the past. Get a list of clients or other
attorneys you can contact to discuss this attorney's competence,
service and fees.
For many entrepreneurs, the idea of consulting a lawyer conjures
up frightening visions of skyrocketing legal bills. While there's
no denying that lawyers are expensive, the good news is, there are
more ways than ever to keep a lid on costs. Start by learning about
the various ways lawyers bill their time:
- Hourly or per diem rate. Most attorneys
bill by the hour. If travel is involved, they may bill by the
day.
- Flat fee. Some attorneys suggest a flat fee
for certain routine matters, such as reviewing a contract or
closing a loan.
- Monthly retainer. If you anticipate a lot
of routine questions, one option is a monthly fee that entitles you
to all the routine legal advice you need.
- Contingent fee. For lawsuits and other
complex matters, lawyers often work on a contingency basis. This
means that if they succeed, they receive a percentage of the
proceeds--usually between 25 and 40 percent. If they fail, they
receive only out-of-pocket expenses.
- Value billing. Some law firms bill at a
higher rate on business matters if the attorneys obtain a favorable
result, such as negotiating a contract that saves the client
thousands of dollars. Try to avoid lawyers who use this method,
which is also sometimes called "partial contingency."
If you think one method will work better for you than another,
don't hesitate to bring it up with the attorney; many will offer
flexible arrangements to meet your needs.
When you hire an attorney, draw up an agreement (called an
"engagement letter") detailing the billing method. If more than one
attorney works on your file, make sure you specify the hourly rate
for each individual so you aren't charged $200 an hour for legal
work done by an associate who only charges $75 an hour.
This agreement should also specify what expenses you're expected
to reimburse. Some attorneys expect to be reimbursed for meals,
secretarial overtime, postage and photocopies, which many people
consider the costs of doing business. If an unexpected charge comes
up, will your attorney call you for authorization? Agree to
reimburse only reasonable and necessary out-of-pocket expenses. No
matter what methods your attorney uses, here are steps you can take
to control legal costs:
- Have the attorney estimate the cost of each matter in
writing, so you can decide whether it's worth pursuing. If the
bill comes in over the estimate, ask why. Some attorneys also offer
"caps," guaranteeing in writing the maximum cost of a particular
service. This helps you budget and gives you more certainty than
just getting an estimate.
- Learn what increments of time the firm uses to calculate its
bill. Attorneys keep track of their time in increments as short
as six minutes or as long as half an hour. Will a five-minute phone
call cost you $50?
- Request monthly, itemized bills. Some lawyers wait until
a bill gets large before sending an invoice. Ask for monthly
invoices and review them. The most obvious red flag is excessive
fees; this means that too many people--or the wrong people--are
working on your file. It's also possible you may be mistakenly
billed for work done for another client, so review your invoices
carefully.
- See if you can negotiate prompt-payment discounts.
Request that your bill be discounted if you pay within 30 days of
your invoice date. A 5-percent discount can add thousands of
dollars to your yearly bottom line.
- Be prepared. Before you meet with or call your lawyer,
have the necessary documents with you and know exactly what you
want to discuss. Fax needed documents ahead of time so your
attorney doesn't have to read them during the conference and can
instead get right down to business. And refrain from calling your
attorney 100 times a day.
- Meet with your lawyer regularly. At first glance, this
may not seem like a good way to keep costs down, but you'll be
amazed at how much it reduces the endless rounds of phone tag that
plague busy entrepreneurs and attorneys. More important, a monthly
five- or 10-minute meeting (even by phone) can save you substantial
sums by nipping small legal problems in the bud before they even
get a chance to grow.
- Using paralegals as part of your legal team. Certain
legal tasks--preparing a simple document, for instance--are
straightforward enough that a paralegal, instead of a higher-priced
lawyer, may be able to handle them. Don't assume your lawyer will
suggest this option; ask him or her about it. And always make sure
the paralegal is supervised by a business lawyer.