Estimating the Costs of Hiring a Business Attorney

What Affects the Fees of a Business Attorney?

As you would probably expect, geographic location can play a big role in the level of fees charged by a business attorney. Legal fees are typically higher in cities and other densely populated areas. But there are several factors that can significantly affect the fees charged. First, professionals in the same region laws similar fees. There may be some variation based on specialization, type of legal work performed and size of the firm. But there can be a great deal of difference in the fees charged for business attorneys from one part of the country to the next. For example, where you live can make a great difference in the level of fees experienced in the same city. Employment lawyers in Manhattan charge a much higher rate than their counterparts in Albany County, NY.
One factor that is commonly overlooked and forgotten by everyone except the business attorney (mostly not done by the client , but also not considered by attorneys) is time. An experienced attorney who focuses on a specific area may be able to address many issues in a very short period of time because they have handled hundreds of similar matters. A less experienced attorney may take much longer to finish the same matter because of the time it takes to research, draft a contract, grievance, memorandum, letter or other document, or to figure out which court to file, and to become familiar with the law in that area of practice. An experienced attorney can complete the same matter in one hour while an less-experienced attorney may take four or more hours, or more, to complete the same matter.
There is also the possibility of a arrangement that makes it more economical for the client. More and more clients are requesting alternative fee arrangements such as fixed fees, monthly retainer fees (a plan that provides a certain amount of service for a flat monthly fee), or flat hourly fees with the chance for a refund if the total amount of the fees paid exceeds the amount of "room" for the work in the project. These arrangements can be beneficial to both the business attorney and the client. But they must make sense for both sides.

Business Attorneys Have Several Fee Options

There are a number of ways a business attorney might charge you for services. It all depends on what kind of matter it is and what both parties have agreed to.
Hourly Rates
Hourly rates are probably the most common way attorneys charge. This is generally agreed upon in advance by each party and will be based on how many senior attorneys are working on a case and their hourly costs, how many junior associates are working on a case and their hourly costs, and whether paralegals are contributing to the work and their hourly rates. There are several factors that can affect how high or low an hourly rate is and this is something you will want to extensively discuss with your attorney so you don’t have sticker shock later. In general, the cost of living has a great deal to do with the actual rate. Obviously, the cost of hiring a top tier attorney in New York City is going to differ greatly from a top tier attorney in a small town or rural area. If you are on your first merger and acquisition deal you are likely looking at hiring a senior, experienced attorney at the firm to help you work through the transaction and you can expect to pay around $950 per hour, even if the attorney is in a small town. If you are on your third or fourth transaction, you may be able to negotiate a 20-25 percent discount, but you must have substantial leverage. Remember, big law firms have their hands in many different pots. If you have been hiring them for a while for various other legal projects, you may have some leverage. Also keep in mind that a firm cannot charge you a lower rate for certain types of legal matters and a higher rate for others, but it can charge lower rates to some clients, as long as you are not a competitor. This is completely up to the attorney. In many cases, it may be worth paying a little more for an experienced attorney to get the job done right, rather than risk an inexperienced attorney botching the whole deal, even if he or she is cheaper.
Flat Fees
Fairly common with routine matters, flat fees are charged to clients who have a very specific legal need that is routine. Examples are adopting a child or drafting a will. Flat fees are billed up front before the project begins. You and your attorney will determine the scope of the project, such as how many wills your attorney needs to draft for you and what those wills will state based on a template, and the attorney agrees to it in advance. An attorney will not charge a flat fee for cases or projects that are unpredictable in length, such as a lawsuit that might drag out for months or years on end.
Retainers
Retainers are a type of flat fee, but they are billed every month. This is generally for legal matters that require the attorney’s assistance throughout the month. The client must keep track of the amount of work and the flat fee that is charged each month so he or she does not exceed the retainer. If the case begins to require more work than the retainer allows, the client can either pay another retainer, or the attorney can begin billing the client hourly while working through the rest of the retainer. Retainers are often used for individuals and smaller businesses. Larger businesses often use a similar monthly subscription fee model, but both parties have to agree to it in advance.
Contingency
Contingency fees are generally used for litigation matters. They are probably the most beneficial to you because you only have to pay if your attorney wins the case. If you are represented by a contingency lawyer, you won’t have to come out of pocket for anything unless you win your case. If your attorney gets you $250,000 in damages, your attorney will take a percentage of the winnings as payment. That percentage will be negotiated prior to beginning litigation and the attorney should keep you up to date on how the case is going throughout.

Common Types of Work and the Cost for Common Tasks

Contracts are a business function that all, except the very smallest businesses, will need to utilize. A contract review for any kind of contract costs around $200.00 plus tax per hour or a flat rate likely from $1,000.00 to $1,500.00. After all, you are asking an attorney to review the contract and give you legal advice on the contract. That will take time and you will have to pay for that time. An attorney is not going to work on your contract for free.
If you want a standard form contract, that will also run anywhere from $1,500.00 to $2,500.00. If you have a standard form that you want them to look at and help you review and revise, that will be anywhere from $750.00 to $1,500.00.
A business formation is going to cost around $2,000.00 to $3,500.00, but could be much higher or lower depending on the complexity of what you are trying to do.
If the business formation requires funding, like a real estate deal or raising hundreds of thousands or millions of dollars, it can climb to 10-20%. The amount charged varies greatly and depends on the type of business, the costs involved in starting it, the funding required, the types of document preparation required, and the applicable tax advice.
The most common legal need is business litigation. You can expect to pay around $400.00 per hour or more for the firm and $150 per hour for the paralegal. How long will that take? It depends. There is no way to estimate litigation costs, it really does depend. A non-compete case might cost anywhere from $2,500 to $10,000 plus. A non-compete case requires that the lawyer get involved only when there is a breach and only on an as needed basis. There has to be some emergency involving a company’s accountant before they will get that involved.
A discovery motion hearing is going to be around $900.00 plus $300.00 an hour. There has to be some amount of discovery documentation that has to be reviewed at least for the state courts. That means if they are filing a discovery response for the federal court then they don’t have to review anything.

Price Considerations When Hiring a Business Attorney

To cut the cost of hiring a business attorney, have a positive and direct conversation with him or her on the very first visit. Explain you’re concerned about costs and ask for attorney fees and how he or she bills. Does the lawyer bill by the hour or is there another system? Are you going to be paying for a big retainer every month or will you pay as you go? How much (if any) of the work will you be responsible for completing? If you agree to do some work yourself, how do you expect the lawyer to train or advise you? You might be surprised to learn there are many tasks your lawyer can delegate to junior attorneys or paralegals – people who aren’t quite as expensive.
Getting your legal needs in hand early means you aren’t spending unnecessary money. You might find a different payment or fee schedule fits into your budget – or you could be pleasantly surprised to find the lawyer you’re talking with doesn’t charge as much as you expected.
If you want to save money on a business lawyer, make sure the attack plan includes reviewing company documents. Hint: Your lawyer doesn’t have to go over every contract you receive and write a separate document for every time you need a non-disclosure agreement. You can sign a boilerplate version and a lawyer can keep a copy on file in which any details can be inserted as needed.
If you have a line of credit and regularly plan to use and reuse the same contracts and other documents, such as a non-compete agreement or consulting agreement, this can save you from spending money on every single contract created.
You will save a lot of money on legal fees if you’ve managed to read all "legalize" wording in a document and have made the changes you see fit before you hand it over to any hired help. Your lawyer (or prospective lawyer) will save some time if they don’t have to spend hours on a vanilla form to rewrite it into a useful contract. Ask your lawyer if the language in the document makes sense to them. If you say you’re okay with simple language and suggest the use of templates at the outset, they can tell you that as well.
Ask lawyers you meet with to walk through the costs in suing and/or defending against a lawsuit. You can also ask them to address the fees of the other side, which can be staggering. When you know what to expect, it’s less likely that you’ll spend more than you can afford. You can also ask how much they expect your case to cost. A solid business lawyer will tell you honestly if the price is reasonable or simply out of your reach.
Lawyers sometimes agree to a flat fee. If you have a limited budget, ask lawyers about it. You can also ask about payment plans, if they tend to deliver their invoices periodically, etc.

Striking the Right Balance Between Cost and Quality

When considering how much to pay for legal services, as important as it is to understand and evaluate the cost is to determine the quality of the services for that price. Oftentimes "cheap" legal services cost more in the end, because the services rendered aren’t close to what you need or expect. In this regard it is important to scrutinize the attorney, firm or service you will be using.
In assessing the relative value of what you are being offered, you should first have a clear understanding of what you need, then analyze what you’re being offered for the price. If the person you are speaking with does not go through this process with you , they probably are not a good fit. A competent attorney should be willing to analyze your particular situation with you, discuss your objectives, and offer solutions that are reasonably cost-sensitive, yet serve your particular needs at a level of quality that will be expected down the road. While there may be occasions when you can get away with shortcuts, generally speaking, the more competent, valuable and effective legal services are available at a premium. Understanding the balance between quality and cost is essential to getting comfortable enough with your decision to obtain the right level of service at a reasonable cost to your business.

Questions to Pose to a Business Attorney About Fees

When hiring a business attorney, it is important to ask questions so that you understand how the attorney will bill for their services, and that you do not receive unexpected costs.

• What is your hourly fee for different types of work (i.e. litigation vs. corporate)?
• Do you have other billing methods, such as retainer fees or flat fees?
• How much of your work is handed off to a paralegal or junior associate?
• Is there a charge for phone calls, or can they be taken into consideration when you are being charged as well?
• What other additional costs should I expect on top of your hourly fee? (i.e. filing fees, court costs, etc. in addition to the hourly fee)
• Is there a charge for your firm’s time spent traveling and/or other travel costs?
• Can I receive a written estimate for services?
• How much time do you expect we will need to complete this project or case?

Conclusion

In this article, we have explored the various factors that affect the cost of hiring a business attorney, from the lawyer’s experience and expertise to the complexities of the particular issue being addressed. We have discussed the importance of transparency in legal billing and the options available to businesses when it comes to structuring attorney fees. While the notion of hiring an attorney may seem daunting and expensive, the costs can be significantly reduced when businesses take the time to do their homework, gather as much information as possible, and ask the right questions during their initial consultations, and after hiring an attorney.
Ultimately , the most important factor in how much hiring an attorney will cost is choosing the right attorney for your specific needs and unique situation. Because there are so many variables to consider, it is imperative that business owners spend time understanding what they need from a legal professional, and then speak with several attorneys to determine not only which one has a comfortable fee structure, but also which one makes the greatest effort to ensure that their pricing and expected costs are clear and explicitly stated up front. As with any decision of great importance, seeking counsel from more than one source will serve to provide you with additional perspective, help to manage expectations, and ensure that you are getting the best possible value for your investment.