What to Know When Hiring a Lawyer

There are two professionals every business will need early on, an accountant and a lawyer. The reason for hiring a business attorney may not, however, be so apparent. A good business lawyer will provide vital assistance in almost every aspect of your business.

It goes without saying that there will be legal considerations with starting a company, but many entrepreneurs vastly underestimate how much help they’ll need from a lawyer. It starts at the very beginning and only escalates as their start-up grows and moves towards an exit.

A lot of folks tend to compromise on engaging with a lawyer at the earliest stages of their ventures, and rely on available resources and handymen who are able to incorporate a company and somewhat operationalise an entity. Unfortunately, there is more to the law than merely setting up shop and commencing work. The nature of the entity you choose for your business, how you structure its legal form, how conducive you make it to receive funding, compliance with statutes from the outset, are all vital parameters that a good lawyer can lend you his experience with.

If you are being sued, it’s too late.

Most small businesses put off hiring a lawyer until the sheriff is standing at the door serving them with a summons. Bad mistake. The time to hook up with a good business lawyer is before you are sued. Once you have been served with a summons and complaint, it’s too late–the problem has already occurred, and it’s just a question of how much you will have to pay (in court costs, attorneys’ fees, settlements and other expenses) to get the problem resolved.

The judicial system is a lot like a Roach Motel–it’s easy to get into court, but very difficult to get out once you’ve been “trapped.” Most lawyers agree that while nobody likes to pay attorneys’ fees for anything (heck, let’s let our hair down–nobody likes paying or dealing with lawyers, period), but the fee a lawyer will charge to keep you out of trouble is only a small fraction of the fee a lawyer will charge to get you out of trouble once it’s happened.

What should you be looking for?

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I wish I could say—find yourself someone with “experience”. That’s a no-brainer! Sure, experience is of paramount importance, but it isn’t the only thing you should be looking for in a lawyer. You might not know it just yet, but what you’re doing is in fact selecting a Partner for your business. In the same way that your chartered accountant and family doctors are keepers, a good lawyer will serve you well in time to come. Like doctors, lawyers are specialized. Someone who does mostly wills, divorce and other “non-business” matters is probably not a good fit for your business.

Once you’re here, you’re looking for some of the following filters to aid you in funneling the flow further:

Attitude: Someone who talks the talk should also walk the walk, correct? Do you connect with the guy? Is he someone who understands your business and the fact that you’ve taken a leap of faith towards producing a new born?

Domain Experts: It might all seem very intimidating at first, but pick the right lawyer for the right field of law you need him for. A General Corporate/M&A lawyer will not have domain expertise on Intellectual Property who may not have expertise on Private Equity deals who might not know anything about representing you in court as a Litigator, who in turn might not know much about General Corporate/M&A. It’s a bit like going to the right doctor for an ailment. Sure, you could sometimes get by with a general practitioner, but invariably you need a specialist.

Money matters: NOBODY works for free. The first few times are all hunky dory with conceptual level advice, but come time to hit the ground running, you will need to pay up. And because this is a big deal, figuratively and sometimes quite literally, I’ve tried to put down a few parameters you could use in money matters with your counsel.

Contracts: You will need a lawyer who can understand your business quickly; prepare the standard form contracts you will need with customers, clients and suppliers; and help you respond to contracts that other people will want you to sign.

Business organizations: You will need a lawyer who can help you decide which is the better way to organize your business, and prepare the necessary paperwork.

Real estate: Leases of commercial space–such as offices and retail stores–are highly complex and are always drafted to benefit the landlord. Because they tend to be “printed form” documents, you may be tempted to think they are not negotiable. Not so. Your attorney should have provisions that benefit you, that can be added to the printed form lease document.

Intellectual property: If you are in a media, design or other creative-type business, it is certainly a “plus” if your lawyer can help you register your products and services for trademark and copyright protection. Generally, though, these tasks are performed by specialists who do nothing but “intellectual property” legal work. If your lawyer says he or she “specializes in small businesses,” then he or she should have a close working relationship with one or more intellectual property specialist.

What to Ask Your Lawyer

Are you experienced? Don’t be afraid to ask direct questions about a lawyer’s experience. If you know you want to incorporate your business, for example, ask if he or she has ever handled an incorporation.

Are you well-connected? Your business attorney should be something of a legal “internist”–one who can diagnose your problem, perform any “minor surgery” that may be needed, and refer you to local specialists for “major surgery” if needed. No lawyer can possibly know everything about every area of law. If your business has specialized legal needs (a graphic designer, for example, may need someone who is familiar with copyright laws), your attorney should either be familiar with that special area or have a working relationship with someone who is. You shouldn’t have to go scrounging for a new lawyer each time a different type of legal problem comes up.

Are you a good teacher? Your attorney should be willing to take the time to educate you and your staff about the legal environment of your business. He or she should tell you what the law says and explain how it affects the way you do business so that you can spot problems well in advance.

Are you a finder, a minder or a grinder? Nearly every law firm has three types of lawyer. The “finder” scouts for business and brings in new clients; the “minder” takes on new clients and makes sure existing ones are happy; the “grinder” does the clients’ work. Your attorney should be a combination of a “minder” and a “grinder.” If you sense that the lawyer you are talking to is not the one who will actually be doing your work, ask to meet the “grinder,” and be sure you are comfortable with him or her.

Talking the 3 letter word “Fee”

Lawyers usually have ‘targets’ (pre-determined revenue/billing goals set by the firm they work at) to attain in a year. So don’t hold it against your lawyer if he brings up the subject in your conversations. That said, if you feel it is something that is coming up a little too frequently, you might well have a situation coming up where you’re worrying more about how to pay him than what you’re getting from him. So how do you tackle this? Here are a few pointers

Fee structure: by agreeing on a fixed fee instead of hourly billing (where you’re effectively billed by the hour), you will be hedging uncapped legal bills. It’s best to have a conversation with your lawyer and ask him if it makes sense to go in for a fixed fee structure or if he envisages a discounted hourly billing rate might work out cheaper. If you have a genuine partner at hand, not only will he advise you correctly, you might be able to structure the fee in a manner that could be a hybrid of lump sum fixed fee and hourly billing.

Nature of compensation: ever thought of proposing equity to your lawyer? It’s a long shot, especially since you’re a startup, but there are some folks out there who understand the nature of disproportionate returns that can be made. The additional advantage is that you will probably appreciate your lawyer’s skin in the game and by default have a domain expert on board. This might even be a shrewd way to virtually ensure you’re insulated from legal issues in the long run.