What Does a Small Business Lawyer Cost and Do I Need One?

There’s a saying that if something doesn’t have a price tag, you probably can’t afford it. While there’s truth to it in some circumstances, that’s not necessarily the case with attorneys. The reason many don’t advertise a single price is that cost is largely based on needs, and those vary on a case-by-case basis. However, just as there are large corporations and small startups, the same is true of law firms.

“If you’re working with a small business, you have to be reasonable and understand the business and the owners to work out a plan or strategy that works with their budget, their timeline, and their type of business,” says Niloufar Park, a business attorney at Opsera Law in Seattle.

Why Does a Small Business Need a Lawyer?

A small business needs an attorney because the law can be complicated. Laws are constantly changing and evolving, making it difficult for entrepreneurs to keep up with applicable laws. To make matters more complicated, almost every business decision has legal consequences. Handshake agreements may be the old-school method of doing business. However, they aren’t always legally enforceable. Trying to make things more formal with written contracts has its own pitfalls. A small business attorney will help a business owner form enforceable contracts while protecting the business from liability.

“I think small businesses still do a lot of their relationship-building and their arrangements based on handshakes,” Park adds. “So, at the outset, you need to have a solid agreement with your vendors, with your clients, and review your commercial leases. Those big ones immediately pop to mind.”

Park also recommends revisiting those documents every year or two. “Relationships change. Behaviors of your vendors and clients change. Maybe it takes them six months to pay you. Maybe they are not fulfilling your orders in time, and they’re always behind delivering, or they provide you with damaged products or services.”

An attorney can help you manage those relationships. “People forget that those contracts are rather powerful,” Park says, “and when you have a savvy attorney who’s experienced, they can really provide advice on how to have the other party behave by enforcing or not enforcing the contract.”

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Common Legal Tasks for Small Businesses

A small business lawyer will perform several legal services. Legal advice and guidance are crucial from the beginning. They help a new business entity choose the right business structure during business formation and drafting operating agreements. An experienced attorney will draft, review, and negotiate contracts for vendors, employment agreements, independent contractor agreements, and client service contracts. The attorney will ensure the small business stays in compliance with local, state, and federal regulatory requirements. As the small business grows and begins hiring employees, a lawyer can provide legal guidance on drafting an employee handbook and other company policies. If the business produces intellectual property, a lawyer can help protect it by filing for trademark or copyright protection.

How Do Business Lawyers Charge for Their Services?

Business attorneys commonly charge by the hour, meaning that however much work a task requires, that’s how much it will cost. However, others, Park included, have adopted a more flexible fee structure.

“Certain things I do on a flat fee — things like drafting contracts for a startup or a health check-up assessment, which is something I do with clients that have been in operation for a few years,” she says. “All of those can be done on a set fee, and I’ll discuss it with the client upfront so they can budget for it.”

More reactionary needs, she adds, such as a disgruntled employee filing a lawsuit or breaking a restrictive covenant, are typically done on an hourly rate. But, even then, she tries to provide her client with an estimate of legal fees up front.

“The beauty of my law practice is that we’re a small firm,” she continues. “My partner and I both came from big law firms, and we’ve seen how it works. So we try to cater to the needs of our small business clients because we understand that they don’t have the big budget of a corporation.”

Understanding Hourly Rates, Flat Fees, and Retainers

Business lawyers use several different charging methods for their services. A common method is to charge an hourly fee. The hourly fee can vary significantly from $100 to well over $500 per hour. The rate charged is based on the law firm’s location, experience, success rate, reputation, case complexity, and situational urgency. For simple one-off tasks, a lawyer may charge a one-off fee. Common examples of this would be a flat rate for entity formation, contract review, and policy drafting. Another common fee structure is to charge a retainer fee. This is an upfront deposit for future and ongoing services.

What Is the Average Cost of a Small Business Lawyer?

The national average cost of a small business lawyer ranges between $150–$400 per hour. The average flat fee ranges between $500 and $3,000, depending on the service and location. However, these attorney fees are vague when budgeting for your small business legal costs. Location, firm size, and experience impact a lawyer’s cost. Firms in more urban areas tend to charge more than rural firms. Larger firms tend to charge more than small firms, but this isn’t always the case. Some very large firms charge low fees to make money on volume. It’s helpful to speak with several small business lawyers in your area. Ask for an explanation of their fee structure. This will give you an idea of the average cost in your area. You can then use these quotes to budget for legal costs. Another smart approach is to speak with other small business owners. Ask them for a referral to a lawyer who has handled legal issues for them. This can help you find a lawyer who specializes in a specific niche of business law. For example, they could have extensive experience in contract drafting, dispute resolution, mergers, or employment law. Focus on finding a lawyer who can help with the legal needs of the business.

Can I Handle Legal Matters Myself?

Yes, a small business owner can handle legal matters themselves. Many tasks are simple, such as filing a business license application. However, other tasks are more complicated or come with serious consequences. For example, business contract templates are available online. However, these are generic and come with pitfalls. A business owner could miss critical legal language. They could agree to terms that they don’t intend to or leave out critical terms that should be in the contract. This leads to overlooking potential legal liability exposure.

Many business owners fall into the trap of thinking they can save money by not hiring an attorney. However, this is a false economy. Saving on legal costs in the short term can lead to steep legal expenses later on. A small business could face lawsuits, fines, or invalid contracts due to DIY legal missteps.

Finding the Right Lawyer for Your Business Needs

While cost is an important factor in choosing an attorney, it should never be the only factor considered. Clients will need to work closely with their attorney, so personality and working style are also important. Look for a lawyer with a personality and communication style that you mesh well with. The lawyer should also have experience with the business and industry. Ask about past clients, legal strategy, and approach during a consultation. Keep an eye out for red flags that signal a potential lawyer is not a good fit. A lack of transparency, overly vague billing, or dismissive answers are not good signs.

“Fees are always a major concern. You have a budget, and there are limitations,” Park says. “But the second thing is personality — the human touch.” Some have likened finding the right attorney to dating, and finding the right fit can sometimes take a while. Park suggests a better analogy: “You can go buy cheap shoes, but if it doesn’t fit, then you just wasted your time and money.”

Take, for example, an attorney tasked with drafting a business agreement. Although reputable attorneys know the law and how to apply it, it’s often not that cut-and-dry.

“You need to probe and ask the right questions,” Park says. “You can put an agreement in front of me and I can edit it all I want, but I have to take the time to understand the relationship of the party, the owner, the business; what are the most important things in this relationship; what are the most important terms of this contract that need to be negotiated; is there an alternate way we can provide the draft or the information or present it to the other party that’s not offensive if we want to change it drastically. There’s a lot of human touch that goes into it.”