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.
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. Plus, they can be a great resource for any legal questions you have or legal services you require—whether for drafting agreements, raising money, or handling employment issues, including lawsuits.
After all, 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 good news is that hiring a business attorney doesn’t have to break your budget, but it can help protect you from costly legal trouble down the road. All of this being said, let’s discuss how to know when you need a business attorney, how to find and choose the best one, as well as explore top tips on conserving costs.
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 consider retaining a business attorney:
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.”
Therefore, although you may not need to hire a business attorney right when you start your business, it may be worth looking into different local small business lawyers anyway—so that in the case you do decide you need one, you’ll have an individual (or a few) in mind.
This being said, many business attorneys focus on a specific practice area, whereas others are “generalists” who can help you with a range of legal concerns. There are pros and cons to both of these options (as we’ll discuss in more detail below)—and the kind of small business lawyer you need will ultimately depend on the specifics of your company.
Whether you decide to find a small business attorney before you need one or you’re looking for legal advice for a certain situation, there are a few best practices you can follow to find the lawyer that’s right for your business.
This being said, hiring a small 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 attorneys and then choosing the individual that’s the right fit for your business.
One of the best ways 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. You might also consider asking for a recommendation from a business professional you already work with—like your bookkeeper or accountant.
Doug Bradley, Owner of Inland Empire Lawyers, gives this advice:
“One of my main rules to vet a small business lawyer is to get a referral. It may sound old school, but a personal referral from another business owner can speed up finding the right lawyer for your case. Chances are good that the person who referred you was going through similar circumstances in their business, and they probably did a lot of the groundwork for you.”
Additionally, you might use online legal directories to 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). Moreover, U.S. News and Best Lawyers also have curated attorney listings, though these attorneys typically work at large, expensive corporate law firms.
To find a local attorney with a business speciality, Nance L. Schick, of The Law Studio of Nance L. Schick, recommends turning to “the Small Business Administration and other small business organizations, such as New York City Business Solutions, your local chamber of commerce, and SCORE, [who] often have relationships with attorneys who have experience working with small businesses.”
On the other hand, you might find that legal help sites like Avvo, Rocket Lawyer, and LegalZoom are particularly useful resources for finding a business attorney. These sites have a broader set of attorney listings, coupled with attorney reviews. Although it’s important to perform your due diligence to vet any small business lawyer you find, you also want to be wary of putting too much stock into online 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.
Therefore, on top of reading reviews on any business attorney you find online, you can also perform some additional research—verify that the lawyer is indeed licensed in your state, check their website and LinkedIn profile (if available) and see what other pertinent information comes up by performing a simple Google search.
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 small business lawyer is a good fit without committing.
Whenever possible, you’ll want to 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. Plus, by meeting with a potential attorney in person, you’ll be able to get a better sense of that individual’s personality to determine if you think you’ll work well together.
During the consultation, you can ask the following questions to help you find the best business attorney for your company:
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.”
Next, you’ll want to ask a small business 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. In fact, hiring a lawyer for multiple services might actually save you time and money. On the other hand, however, if you’re looking for a business attorney for a very specific purpose—like to deal with litigation—you’ll want to be sure that the lawyer you choose has prior experience directly related to litigation.
Most good business attorneys pride themselves on having a big network and will be able to refer you to another small business 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. You’ll want to make sure you know where your attorney stands on this. After all, most businesses need help with a range of legal issues over the long run.
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 your small business lawyer to do all of your work, having multiple people on your case can actually work in your favor, says Danielle Garson, an attorney with 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.”
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 small 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.
Different lawyers have different communication preferences. Some old-school 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, you’ll want to make sure the lawyer understands this and that you have a way to communicate urgent matters.
Abigail Salisbury, J.D., MPPM, of Salisbury Legal, LLC, says:
“Never be afraid to ask lawyers any questions you may have about their availability, experience, hours, or whatever may be most important to you, and always remember that lawyers work for you. If anyone ever makes you feel uncomfortable or unimportant, leave their office and do not return.”
This is probably one of the most important questions that you’ll ask of a prospective small business lawyer. You’ll want to keep in mind, however, that less expensive doesn’t necessarily equate to better—the opposite could be true—more experienced, successful lawyers often charge higher rates. This being said, small businesses need to work within a budget. We’ll cover fees in more detail in the next section.
As a small business owner with a budget, fees are likely one of your top concerns when looking for a business attorney. Generally, 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. With this in mind, it’s important to get all the details of your fee agreement in writing—so that you know exactly how much you’ll be paying for your small business attorney’s services.
This being said, here are some of the budget-friendly fee arrangements business attorneys sometimes offer for small businesses:
Depending on what type of legal work you need help with, an 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.” Small business 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 business 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, however, 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.
According to Thomas Simeone, an attorney and CPA based in Washington, D.C.,
“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.”
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 a small business lawyer 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 or 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 on-boarding 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.”
Essentially, the main benefit of having a business attorney on retainer is that you can proactively address legal issues before they start to negatively impact your business.
Ultimately, whatever fee structure you decide, you’ll want to be sure it’s clear, established in writing, and of course, fits within the budget of your small business.
In most cases, if you think you need a lawyer’s advice, you’re probably right. 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:
In most cases, you should be able to handle the tasks above on your own—or, in the case of balancing your books, for example—with the assistance of a business professional that does not need to be a lawyer.
This being said, however, a complicated situation might require a business 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.
Not sure if you should hire a business attorney for something? As we mentioned earlier, 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, however, you’ll want to be watchful of a few things. First, 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, therefore, it’s best to consult a small business lawyer about laws that are specific to your industry or state.
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.
As we’ve discussed, you can find good small business attorneys through multiple channels, and most are happy to work out a fee arrangement that fits within your budget. This being said, whether you find a lawyer through a referral, legal directory, or legal help site, you should have an open conversation with them and make sure they’re the right fit for your business, both now and in the future.
Plus, don’t forget that when it comes to working with a small business lawyer, you’re the client. You can talk to as many attorneys as you need to before choosing the right one for your business—and if at any time you’re unsatisfied with the business lawyer you choose, you always have the option to discontinue your relationship and start your search anew.
Priyanka Prakash is a senior contributing writer at Fundera.
Priyanka specializes in small business finance, credit, law, and insurance, helping businesses owners navigate complicated concepts and decisions. Since earning her law degree from the University of Washington, Priyanka has spent half a decade writing on small business financial and legal concerns. Prior to joining Fundera, Priyanka was managing editor at a small business resource site and in-house counsel at a Y Combinator tech startup.