When you hire a lawyer, have a clear understanding about how fees will be computed. And as new jobs are brought to the lawyer, ask specifically about charges for each. Many lawyers initiate fee discussions, but others forget or are shy about doing so. Bring up the subject yourself. Insist that the ground rules be clearly established. In California, all fee agreements between lawyers and clients must be in writing if the expected fee is $1,000 or more, or is contingent on the outcome of a lawsuit. Perhaps this will be common everywhere soon.

How Lawyers Charge

There are four basic ways that lawyers charge. The first is by the hour. In most parts of the United States, you can get competent services for your small business for $150 to $250 an hour.

Sometimes a lawyer quotes a flat fee for a specific job. For example, the lawyer may offer to draw up a real estate purchase agreement for $300. Or to represent you before a state licensing board for $3,000. You pay the same amount regardless of how much time the lawyer spends.

In some cases, a lawyer may charge a contingent fee. This is a percentage (such as 33 1/3%) of the amount the lawyer obtains for you in a negotiated settlement or through a trial. If the lawyer recovers nothing for you, there?s no fee. However, the lawyer does generally expect reimbursement for out-of-pocket expenses, such as filing fees, long distance phone calls and transcripts of testimony. Contingent fees are common in personal injury lawsuits but relatively unusual in small business cases.

Finally, you may be able to hire a lawyer for a flat annual fee (retainer) to handle all of your routine legal business. You?ll usually pay in equal monthly installments and, normally, the lawyer will bill you an additional amount for extraordinary services?such as representing you in a major lawsuit. Obviously, the key to making this arrangement work is to have a written agreement clearly defining what?s routine and what?s extraordinary.

Comparison shopping among lawyers will help you avoid overpaying. But the cheapest hourly rate isn?t necessarily the best. A novice who charges only $80 an hour may take three hours to review a consultant?s work-for-hire contract. A more experienced lawyer who charges $200 an hour may do the same job in half an hour and make better suggestions. Take into account the lawyer?s knowledge in your field, his or her reputation and personal rapport.

Excerpted from the "Legal Guide for Starting and Running a Small Business" by Fred S. Steingold
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