Do I actually need a business lawyer? It's one of the most common questions I get when I work with small business owners...

If you're asking the question, you probably do need a business lawyer. For years I've met with small business clients who have set up a business and things are running great. Their marketing is going great. Their sales are going great, but they've never taken the time to do their legal documents. They haven't set up an operating or shareholder agreement. Sometimes they haven't even filed documents with the state to become a formalized business.

These owners always get to the point where they have to ask themselves a question: Do they need a business lawyer?

When they come to me, they often think they need a lawyer but they're not sure what kind. There are two different kinds of lawyers that work with businesses.

Transactional Lawyers

The first is a transactional lawyer. A transactional lawyer is usually someone who works on documents to be "filed" somewhere (with the government, in your files, etc.). For example, they'll set up your business, they'll draft and review documents and contracts. They'll prepare your business for a merger or an acquisition. And if you have intellectual property like copyrights, and trademarks and patents, they'll help you register that. These lawyers don't normally go to court. You're not going to see them in front of the Supreme Court arguing some big case and they're not going to be at your local courthouse.

Litigation Lawyers

The other type of lawyers are called litigation lawyers. You hire them when you need to defend your company against the lawsuit or you need to sue somebody. If there's a dissolution proceeding in court and we have to have a lawyer represent the company or if you're appealing some kind of a decision, you likely need a litigator. One key thing to remember is your business cannot represent itself in court. So unless you're a lawyer, if your business has been sued, you need to have a lawyer represent you. I've sat through many court appearances over the years where a business owner shows up. They've been aggrieved and they're suing on behalf of their business or they're being sued for something they did, and they can't believe it. The judge stops the proceedings, and says "we're not going any further, your business needs a lawyer." In extreme cases, I've been in court where the business owner refuses time after time to get a lawyer and the judge has to finally say "if you don't get a lawyer, I'm going to dismiss your case" or "I'm going to default you and the other side wins." This isn't something that you want to play around with. So you need to remember if you're in a lawsuit, your business needs to have an attorney.

Both Lawyers in One Package

You should also know that a lawyer can do both types of business law. They can be transactional, they can do litigation. In my practice, I am often on both sides of that coin. We set up businesses and we can also represent them in lawsuits. The next question that naturally flows from all of this to my clients is: How can I afford a lawyer? They're expensive. How much is this gonna cost me?

Lawyer Billing Options

There are four main ways that you can be billed by your lawyer, and you should consider and actually discuss it with them to figure out what's best for you.

  • Hourly billing ~ This is the traditional way of billing clients. The lawyer is going to keep track of his time or her time and you get a bill at the end of the month listing out all the things they did all the time they spent and the cost for each.
  • Flat Fees ~ I prefer to work with my business clients this way when I can. You work out a scope of the work with the lawyer. You agree on a fee and you pay them a flat fee. If it takes more time or less time, it doesn't matter. You're paying that one fee.
  • Contingency Fee ~ If you're suing somebody else, let's say you're suing a competitor for $1 million, and the lawyer agrees to take a percentage of what they recover. So if they win a million dollars, or they settle the case for a million dollars, and they collect that money, they get 20% of it so they get $200,000, you get the other $800,000.
  • Hybrid Approach ~ You combine two (or all three) of the above methods. For example, you pay hourly up to a certain point, and then pay contingency after that, or you do flat fees for certain parts of litigation and hourly for other parts.

There is a myriad of ways you can set this up. But it all comes down to a dialogue between you and your attorney to determine what services you need and how you're going to pay.

Next Steps

If you've been sued, you can't represent your company in court unless you're a lawyer. So you'll need to work with a lawyer who can help you if you've been sued or you need to sue somebody. If you need help on the transactional side, there's a lot of services out there that can help you with setting up your business or registering IP. But remember, it doesn't hurt to have a professional look it over, you can pay for some time with an attorney to make sure you're doing it right. You want to make sure everything is filed correctly and your business is protected. So if you want to work with a lawyer, whether the transactional or litigation side of your business, let's set up a complimentary Legal Strategy Session to look at what your business needs from a lawyer and whether we'd be a good fit to work together.

Andrew Ayers
Connect with me
I work with business and estate planning clients to craft legal solutions to protect their legacies.