If you run a small business, one of your biggest fears is probably getting sued. No matter how carefully you conduct business, hiring the wrong individual or a business deal gone wrong can come back to haunt you. I need a lawyer.
There are approximately 20 million civil cases filed every year in American courts. More than half of those cases are contract disputes or employment disputes targeted at businesses. Defending a lawsuit can cost several thousands of dollars, enough to cripple a small business. The best way to hedge your bets against legal problems in the future is to invest time and resources now in finding a small business attorney.
A good business attorney is like a partner to your business and can see you through some of the most challenging times for your company. And the good news is that hiring a business attorney doesn’t have to break your budget. Learn how to find and choose the best business attorney, plus tips on conserving costs.
Step 1: Determine Why You Need a Small Business Attorney
The best time to hire a business lawyer is before you need one. That said, here are some common situations where startups and small businesses should retain a business attorney:
Choosing a business entity: Your choice of business entity impacts your ability to grow your company in the future. For instance, if you plan to raise venture capital, then a C-corp is the best choice. Your lawyer will be able to walk you through the pros and cons of different business entities.
Raising money: When raising venture capital and selling equity to investors, it’s wise to have a business lawyer to help you draft up term sheets and navigate securities laws.
Drafting founder agreements: If you’re going into business with partners, then outlining each partner’s rights and responsibilities now can prevent disagreements down the line. A business attorney can help you draft partnership agreements and corporate bylaws.
Contract review: Businesses grow by forming contracts with other companies or clients. A business attorney can help you negotiate favorable contracts and ensure you understand all the fine print.
Handling employment issues: As a business’s workforce grows larger, business attorneys often step in to help with labor law compliance and to resolve wrongful termination lawsuits.
Obtaining IP protection: For businesses in the tech, health, or research sectors, obtaining a trademark or patent can be important to the business’s future. Business attorneys who specialize in IP can help you protect your business’s creations.
Along with these more common issues, sometimes an event that happened before you started the business can come back to bite you. This is what Zach Hendrix, the co-founder of GreenPal, experienced.
“I remember the day very clearly. It was a Monday when we received a package of documents in the mail. The cofounder of my business was being sued for violation of a noncompete agreement that he signed … before he started our company. Over the course of the year, he battled the situation and sadly had to end up selling his shares of the company. One lesson I learned from that ordeal is to hire a lawyer before you get sued. As a small business owner, it is not a matter of if but when you’ll get sued.”
Many business attorneys focus on a specific practice area, whereas others are “generalists” who can help you with a range of legal concerns. We’ll cover the pros and cons of both options in more detail below.
Step 2: Source Business Attorneys Near You Through Your Network or Legal Directories
Hiring a business lawyer is, in some ways, similar to searching for a business lender, accountant, or your next employee. It’s wise to have multiple options to compare. We suggest meeting with a few different business attorneys and then choosing the best fit for your business.
The best way to source potential business attorneys near you is through your own personal or professional network. A recommendation from a trusted friend or family member, or from a business owner in the same industry can be very valuable, especially if they’re facing the same legal concerns as you are.
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Online legal directories also let you find business attorneys near you. In many states, lawyer bar associations maintain an up-to-date list of licensed attorneys in the area, sortable by the lawyer’s area of focus (example from Washington shown above). U.S. News and Best Lawyers also have curated attorney listings, though these attorneys typically work at large, expensive corporate law firms.
A better resource for small business owners are legal help sites like Avvo, Rocket Lawyer, and LegalZoom. These sites have a broader set of attorney listings, coupled with attorney reviews. Just be wary of putting too much stock into reviews. Not all of these sites require reviews to come from verified clients, and there’s often no context provided about the legal issue that the client was facing.
Step 3: Compare Attorneys by Asking the Right Questions
The next step after sourcing a handful of business attorneys is to meet with all of them. Most lawyers offer free half-hour or one-hour consultations to meet with potential clients. A consultation is a good way to see if a lawyer is a good fit without committing.
Whenever possible, try to arrange for an in-person consultation. An in-person meeting signals that the lawyer places importance on building client relationships and is willing to make time for you.
During the consultation, ask the following questions to help you find a great business attorney for your company:
What is your experience working with small businesses?
A business attorney’s experience working with small businesses is important from a cost standpoint. A lawyer who usually works with Fortune 500 clients will probably charge an hourly rate to match. They might also prefer more litigious means of resolving a case, as opposed to more cost-effective methods of dispute resolution.
For privacy reasons, lawyers can’t discuss past clients in detail with you, but they should be able to say something like “25% of my clients are businesses with fewer than 20 employees.”
What is your experience on my particular legal issue?
Next, ask the lawyer how much experience they have with your legal issue. In most cases, it’s best to hire a business attorney who focuses on the specific area that you need help in. However, if you have multiple issues related to launching your business, a generalist lawyer could be just what you need.
For instance, a startup lawyer can help you choose the best structure for your business, develop term sheets for investors, and negotiate your first few contracts. Hiring a lawyer for multiple services might actually save you time and money.
Can you refer me to other lawyers as needed?
Most good business attorneys pride themselves on having a big network and will be able to refer you to another lawyer if you need help with something that doesn’t fall within their area of expertise. The not-so-good attorneys will avoid providing referrals because they don’t want to lose business. Make sure you know where you attorney stands on this. After all, most businesses need help with a range of legal issues over the long run.
Will anyone else be working with you on my business’s issues?
Attorneys work with multiple people, such as associates, paralegals, and law clerks. A lawyer’s time is limited, so they often outsource some work to more junior level staff. Although you might want the lawyer to do all of your work, having multiple people on your case can actually work in your favor, says Attorney Danielle Garson of McCarthy, Lebit, Crystal & Liffman Co., LPA.
“It may be the case, especially with a startup or a small business, that the attorney you hire tries to save you legal costs by using a law student, paralegal, or an associate with a lower hourly billing rate to do the assignment. They will review the work of that person, but if you want a specific person to do your work, you need to expressly state that in your initial conversations with your attorney. After the work is complete, you will receive a bill, which should reflect the name of the person who spent time working on your matter.”
Do you have any conflicts of interest with my business?
This is an important question to ask, particularly if a business attorney works closely with multiple businesses in the same community. For example, say you have a contract dispute with a local supplier. If the business lawyer has previously represented that supplier (even if it was a different case), they might not be able to represent you without creating a conflict of interest.
How will you communicate with me?
Different lawyers have different communication preferences. Some old-school business attorneys prefer in-person meetings and phone calls for quick questions. Others prefer email and use e-signature software to store and sign documents. If you’re a small business owner with a busy daytime schedule, make sure the lawyer understands this and that you have a way to communicate urgent matters.
What’s your fee structure?
This is probably one of the most important questions that you’ll ask of a prospective lawyer. But keep in mind that less expensive doesn’t necessarily equate to better. It could be the opposite. More experienced, successful lawyers often charge higher rates. That said, small businesses need to work within a budget. We cover fees in more detail in the next section.
Step 4: Work out a Fee Arrangement That Fits Your Budget
Hourly billing rates for business attorneys range anywhere from $150 per hour for a junior attorney in a small city to $1,000 or more per hour for a top attorney at a big-city law firm. It’s important to get all the details of your fee agreement in writing.
Business attorneys sometimes offer these types of budget-friendly fee arrangements for small businesses:
Depending on what type of legal work you need help with, a business attorney might charge you a flat fee instead of an hourly rate. This can save you a lot of money, especially on straightforward matters that attorneys handle on a regular basis. Plus, if you’re engaging the same attorney for multiple services, they might offer you a discount or “package deal.” Attorneys do this because they know happy clients will come back to them in the future if they need a lawyer again.
Zachary Strebeck, an attorney and founder of Strebeck Law, customarily does this:
“I often bill clients with flat fee pricing structures, and when bundling services together, give a discount. Look for attorneys who offer the same—it helps to avoid runaway hourly billing and the need for costly up-front retainers. Many services can be handled with flat fees, such as business formation, general advice and counseling sessions, contract drafting, and others.”
If your case involves litigation, then the attorney might work out a contingent fee arrangement with you. A contingent fee is when the attorney receives payment only if they win the case on your behalf. There are multiple ethical reasons why an attorney might avoid a contingent fee arrangement. For instance, an attorney who is fired midway through a case by their client might find it difficult to recoup compensation if a contingent fee arrangement is in place.
“Contingency fee retainers avoid the client having to pay a legal fee up front or as the case progresses. It also gives the client and attorney the same financial interests—they both want to obtain as much as possible as soon as possible. These are best suited to when there is a specific amount to be recovered in the future, such as the sale of property, from which an attorney’s fee can be paid.”
Equity in Business
Business attorneys sometimes will take a portion of equity in your business in exchange for providing legal help. This happens very rarely because small businesses have high failure rates, so there’s no guarantee that the attorney will receive payment. However, this might be something you’re able to work out with the attorney if you have a fast-growing startup.
For small businesses that are likely to have a lot of legal work, having a business attorney on retainer can be helpful. An attorney on retainer is basically “on call” to respond to whatever legal needs come up for your business. To hire an attorney on retainer, you typically have to pay a small amount of money each month, which covers a specific number of hours of legal work. For projects that exceed that time, you pay an hourly rate or flat fee.
Attorney Dan Nguyen says that small businesses should consider hiring a business attorney on retainer:
“There is certainly value of having a business attorney on retainer. For example, I have several clients on a monthly retainer because they need/want to communicate with me more frequently for ongoing legal and business needs, and would like to pay to have me available rather than try to go find another attorney and start the onboarding process all over again.
For these clients, they can call or email me regarding their legal or business questions, and I can respond to them on a timely basis. Without a retainer, you are at the mercy of the attorney’s caseload, and response times may vary.”
The main benefit of having an attorney on retainer is that you can proactively address legal issues before they start to negatively impact your business.
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Step 5: Know When to Skip a Lawyer to Save Money
In most cases, if you think you need a lawyer’s advice, you’re probably right. Small business attorneys can provide guidance to a growing small business on a range of issues. However, billing costs can add up quickly, and one of the best ways to contain costs is by knowing when and when not to contact a lawyer.
The following types of tasks typically don’t require the help of a business attorney:
Filing business formation papers
Hiring employees and setting up payroll
In most cases, you should be able to handle the tasks above on your own. However, a complicated situation might require an attorney’s assistance. For instance, if the city that your business is located in has complicated zoning laws or just rezoned, then it might be beneficial to retain an attorney when you apply for a business license.
Legal Help Sites
Not sure if you should hire a business attorney for something? Legal help sites can provide some guidance. You might already have heard of sites like LegalZoom or Rocket Lawyer for the assistance they provide to consumers. These sites also offer business legal services, usually at low flat fees designed to fit small business budgets.
For example, you can incorporate a business on LegalZoom for under $150. These sites also offer access to standard legal forms. Many also have an “attorney on call” service. In exchange for around $30 per month on LegalZoom, you can get phone advice from attorneys on anything from contract law to trademarks.
When using legal help sites, be watchful of a few things. Some forms can be out of date, or you might be charged for a form that you can access for free on a government website. Plus, generic forms might not hold up in court. When in doubt, it’s best to consult a lawyer about laws that are specific to your industry or state.
Hiring a Small Business Attorney Now Can Save You Money and Time Later
The main reason to hire a business attorney now is to save yourself money and time down the line. The savviest small business owners are proactive about accessing legal help before they need it.
You can find good business attorneys through multiple channels, and most are happy to work out a fee arrangement that fits within your budget. Whether you find a lawyer through a referral, legal directory, or legal help site, have an open conversation with them and make sure they’re the right fit for your business, both now and in the future.