Starting a Small or Home Based Business? Tips for Finding a Good Lawyer
It is important to find a good lawyer when starting a home based business. Although finances may be tight in the initial stages of a startup, being aware of and following the legal requirements for beginning your particular new business will help prevent nasty and avoidable surprises in the future. When it comes to legal issues, it is best to prevent rather than fix and therefore well worth the expense of legal advice up front.
Having said this, it is not always easy to find a lawyer who fits your needs and personality. Be aware that this is a necessary process not a matter of opening the yellow pages and looking for the first name under ‘A’. Making a checklist is an easy way to organize your thoughts and requirements into a manageable means of finding the person who will become a valuable asset to your company’s future.
It goes without saying that you must understand something of the nature of the business you will be starting. For instance, if you have decided to start a cupcake business there will be health code issues to be addressed, more than likely you will need to have one or more employees and you probably will not want to run your company as a sole proprietor. If you want to start a graphic design company, however, the state of your kitchen is inconsequential and you could very possibly run your business as a sole proprietor. Unless you have an unlimited budget, it is best to be as educated as possible about your new venture before looking for a lawyer. With this in mind, the following are some items to consider as you go through your search.
You have found, through references from trusted friends, a legal referral service or a search through the yellow pages, several lawyers in whom you may be interested and you are ready to make your initial contact. When making this first call consider the following:
Does the person answering the phone sound professional?
— If the person answering the phone does not handle the call in a professional manner, do you really want to meet the lawyer?
If you leave a message for the lawyer, does the person return your call the same day?
— If the lawyer does not have the professionalism to return your call the same day or apologize for calling a day or two later, what does that say about how they will treat you in the future?
INITIAL QUESTIONS TO ASK
During the initial call to your possible future lawyer you may or may not have time to ask the following questions:
How many years have you been practicing business law?
— Although you will pay for a lawyer’s years of experience, the experience will bring knowledge and speed – definitely something worth paying for.
If you work in other areas of law, what are they and what percentage of your work is with business owners?
— You do not want to hire a lawyer who works primarily with bankruptcy cases and dabbles once or twice a year with small business issues. You want someone who is very familiar with the legal requirements and problems that will arise in your small business.
How many of your clients are small business owners (versus large companies)?
— Again, your company is a small business and has a separate set of issues from large companies. However, if your company has the potential to grow into a large company, then a law firm that handles many small businesses as well as large companies might be a good idea.
Do you have any clients who have the same type of business that I do?
— Depending upon your type of business, this could be very important. A small interior design business will have a unique set of requirements and legal issues that will differ from what a new fast food franchise owner will face.
Will I be working directly with you?
— Or are you going to be passed off to his paralegals? Depending on cost, you may want to be passed off to his paralegals or, depending on the complexity of your business, you may want to meet only with the lawyer.
Do you charge for the initial visit?
— If the initial call has gone well so far and you are interested in this lawyer, do not be put off by being charged for the initial visit. Some lawyers do not charge at all for this, some will charge half price for an hour and others may only charge for a half hour visit.
How much do you charge for a regular appointment with you?
— The cost for an appointment will vary depending on the size of the firm and the lawyer’s experience. A likely minimum will be about $125.00 per hour. Remember, paying a large fee does not always guarantee good advice.
How much do you charge for an appointment with one of your assistants?
— The charge for an appointment with an assistant will more than likely be much less, but don’t forget that their experience will not compare to that of a lawyer who has been in the business for years. An assistant’s time is an option when handling routine matters.
How do you charge?
— There are various ways for a lawyer to charge you:
Hourly. The most common way for a lawyer to charge is per hour of their time. It is important to ask if time is billed strictly by the hour or by 15 minute or even five minute increments and if out-of-pocket expenses will be included in this rate.
Fixed or Flat fee. Lawyers will usually charge a flat fee to handle specific types of procedures. In fact, many lawyers will quote a flat fee for setting up your business - which could include filing the required paperwork with the proper government agencies, creating your Operating Agreement, etc. Be sure to understand exactly what the flat fee does and does not cover, including whether out-of-pocket expenses are extra.
Retainer. Although this type of fee structure is probably not the option you will need when first setting up your business, it might become very useful to you further down the road. The following are different types of retainers:
- One type of retainer involves paying a lawyer a sum of money that is to be used as a credit against future appointments.
- Another type of retainer is a monthly or annual service fee that is paid to a lawyer for his required routine services.
- A third type of retainer can be a flat fee for representation in a certain matter. This fee does not vary by how much time or effort is involved and pays for the services required in a case from start to finish.
- Yet another type of retainer is the fee required to retain a particular lawyer whether or not services are provided. High profile lawyers are usually the only ones who can demand these types of retainers.
Contingency. This fee arrangement will not be a method you will utilize when setting up your new business and may never need as it’s only useful to someone who is already facing a legal dilemma. In this situation, a lawyer does not require a client to pay for services unless a case is won, upon which a lawyer will take either a predetermined flat fee or percentage of the recovery – after being paid for his costs.
And, sometimes, a lawyer’s fees will be a combination of a couple of these different ways of charging. Starting a small business could very possibly require a combination of hourly and flat fees.
Can I bring in rough drafts of documents (such as contracts) for you to review to cut down on costs?
— Being aware of what your business will entail should enable you to create rough drafts of the documents your business will need. Bringing those documents to your lawyer to review will help cut down on your legal costs.
Other lawyers, however, might insist they start from scratch. In this case, be knowledgeable enough about your business to be aware of what must be included in those documents – unless your lawyer is extremely experienced in your type of business, he will probably question you about certain aspects.
Throughout the initial call, consider whether the person sounds knowledgeable, interested in your questions and helpful with his answers.
If you like the sound of your contact and would like to follow up with an initial visit, consider the following when doing so:
Is the office located within a 25 mile radius of your business?
— You may or may not consider it feasible to travel farther than 25 miles to reach your lawyer. If your particular business requires fairly numerous meetings, a 50 mile trip each way to your lawyer is going to take up a fair amount of time. On the other hand, if that particular lawyer is extremely good or specialized in an area you need, finding a lawyer who is closer to your business may not be an option.
Does the office appear professional?
— If it doesn’t, what does that say?
Does the person make you wait for more than 10 minutes and then not apologize or provide an excuse?
— This should really say something about how you will be treated in the future.
Do you like the person you meet? Do your personalities mesh?
— Very important. Some things to think about when meeting with this person:
- Some lawyers are very good at clarifying legalities whereas others simply want you to “trust them” and not ask any questions. Your lawyer should be good at explaining complex issues in a way that you can understand because it is important that you do.
- Do you feel that your business is important to your prospective lawyer or that you are wasting their time? Is he rushed and therefore rushes you?
- Is she arrogant? Does she make you feel stupid?
- Bottom line: do you like this person? If you run into trouble, this is the person you will need to trust to get you out of it. Do you feel comfortable with that? Go with your gut.
How big is the firm?
— Hiring a large legal firm to represent you has its benefits and drawbacks. A large firm will have numerous lawyers on its staff with a wide variety of experience – a one stop shop. A large firm might also have an excellent reputation, and if your business needs the type of representation that will scare opponents, than maybe that is the route you should take.
On the other hand, being a small business, you might easily become lost in the maze of a large law firm. The firm may represent huge corporations which are money makers for them and you become inconsequential.
ADDITIONAL QUESTIONS TO CONSIDER
Are there areas of small business law in which you do not have experience?
— A good lawyer should admit that there probably are areas in which she cannot help you but . . .
If so, will you be able to recommend someone who can assist me in those areas if necessary?
— She should be readily able to refer you to associates who can.
Would you be willing to provide references?
— Typically, no one will ever provide a bad reference for themselves. But talking directly with references can still give you insight as to what your future relationship with your possible lawyer might be like.
Again, realize that finding a good lawyer for your small business is an important process. It is a good idea to call and interview several lawyers as this will enable you to compare. It will and should take some time – be prepared for this and reap the benefits.
Author’s note: the above is based mostly upon author’s experience. Comments regarding readers’ personal experiences on the subject are encouraged!
Disclaimer: the author wrote this article for informational purposes only based mostly upon personal experience. This article is not a substitute for professional legal, tax or financial advice.
Photo Credit: Emily Shu, flickr, flickr portfolio