Choosing A Legal Advisor
Choosing the right team of business advisors is essential for any company to succeed. Yet all too often, business owners don't put the same effort into finding a legal advisor as they do into finding their accountant, insurance broker, or website designer.
For many small business owners, lawyers are at best a "necessary evil" or an added expense that they don't want or need. The truth is, it can be more expensive for companies not to get legal advice as they can pay dearly in costly litigation or income lost through poorly-drafted contracts or intellectual property theft. With the proper legal advice, these financial losses can be avoided. An attorney can be an invaluable strategic partner by providing business owners guidance on legal issues that can direct affect business decisions.
In many cases, business owners simply don't understand how an attorney can benefit their company, or they mistakenly assume that the advice from "do-it-yourself" legal websites is sufficient for their needs. And often, the entrepreneurial zeal for "simple" 1-page agreements can result in problems that business owners could never anticipate, let alone prepare for.
Just as the wrong attorney can have severe legal and financial consequences, hiring the right attorney can make all the difference in developing the legal foundation needed for a company to become established, grow, and prosper. However, finding the right attorney can be a nerve-wracking and intimidating experience, and often business owners are confused on how to begin their search.
But they needn't be.
We've put together the key criteria that business owners should look for when choosing an attorney, as well as suggestions for keeping legal costs manageable once one has been hired.
What to Look For
When choosing an attorney, as with any business advisor, there are certain criteria to look for. Wise Counsel Press's FREE 40-minute podcast, "Getting the Best–Instead of the Worst–from Working with Attorneys" provides more details on this topic, including the 20 central questions to ask in screening a lawyer. We've summarized the key points of the presentation below:
- Qualifications:
- Verify the attorney's educational and legal background and the type of law they practice.
- Ask about their representative client base to determine if there are potential conflicts of interest.
- Field of Expertise:
- Make sure the attorney is knowledgeable in the specific area of the law for which you seek advice.
- Hiring an attorney with the wrong expertise can lead to poor business decisions and costly litigation. (See our example of a company that went through bitter and costly litigation because their shareholder agreement was drafted by an immigration lawyer with no experience in partnership matters.)
- Proactive Approach
- Pricing
- While it's important to keep within budget, hiring the least expensive attorney can be a "penny wise but pound foolish" decision.
- Lawyer fees saved upfront could be lost (and then some) in expensive litigation due to unsound or insufficient legal advice.
- Determine exactly the services that the attorney will and will not be providing.
- Ask for an itemized list and the costs of items such as photocopies, phone calls, delivery/messenger service, court filing fees and processing fees.
- Determine if the attorney has the skills and experience to identify situations before there is a crisis, so that problems can be resolved or avoided all together.
- Ask for examples of recent cases and results.
Controlling Legal Costs
There are several simple steps that business owners can take to help contain their legal costs. Wise Counsel Press's FREE 40-minute audio class, "Getting the Best–Instead of the Worst–from Working with Attorneys" provides more details on this topic, including the 10 big secrets to keeping billings manageable once an attorney has been hired. We've summarized the key points of the presentation below:
- Make sure the legal counsel is qualified before you hire them. Don't pay to educate an inexperienced attorney.
- Prepare what you want to discuss before each phone call or meeting as attorneys charge for their time.
- Find out if the attorney can set a ceiling on fees or offer a flat rate for a given project or transaction.
- Establish who within your company can communicate with the attorney and for what purpose to avoid costly duplication of effort.
- Review all invoices carefully and monitor administrative and incidental expenses.
- Most important is to have an attorney engagement letter that clearly spells out in writing:
- The work that will be done
- Charges for the services rendered
- Use of initial retainer or contingency fees
- Itemized list of reimbursable expenses
- Conditions for withdrawal of counsel or termination of the relationship
Getting a Legal Check-up
Business owners should periodically assess the legal health of their business, the same way they would their own physical health. Sometimes legal agreements need to be adjusted as the company grows, diversifies, or changes its focus. During this "legal check-up," the business owner and attorney should:
- Discuss if/how strategic plans have changed since the business started.
- Identify current and projected legal needs that reflect the growth of the business.
- Review key legal documents such as:
- Company structure
- Partnership agreements
- Contracts, employment manuals and policies
- Proper recordkeeping of board and financial decisions
- Real estate assets, deeds and leases
- Franchising and license agreements
- Insurance (business interruption, personnel, D&O, etc.)
- Intellectual property (creation, protection, avoiding misuse)
Hiring the right attorney can greatly benefit a business by setting a solid legal foundation for it to succeed and by avoiding costly litigation due to oversight or improper legal advice.
For more information, Wise Counsel Press offers a FREE 40-minute podcast, "Getting the Best–Instead of the Worst–from Working with Attorneys." This MP3 file can be heard via streaming audio on the website or downloaded to a computer or personal MP3 player.