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Entrepreneurs are understandably cautious about the cost of legal advice.  Beyond expense, there is a lot of justified criticism about unresponsiveness, over lawyering and a general deal-killing attitude.  Large traditional large law firms are designed to deal with large traditional businesses and are not well adapted to the lean and changeable start-up world.  Legal DIY can be worse, though.  The small businessperson who buys a form from an online service and fills it out to create a corporation or a non-competition agreement may be in for some very expensive surprises. Acting as your own business attorney can also land you in jail.  What’s the solution?  Choosing a law firm that is  invested in a long-term attorney-client relationship can make the difference.

Legal DIY Focuses on the Paper, Not the Plan

The perils of do-it-yourself wills and divorces are well-known,  The same is true, however, of business legal issues.  If you choose a business structure that fails to limit your personal liability, you could end up losing those assets in a business dispute.  If you fail to protect your business identity through trademark registration or by registering a fictitious business name, you could lose years of work spent to create reputation and good will. The alarming scenarios go on.  Lawyers produce a lot of paper, but what savvy clients buy is a plan that covers personal liability, tax liability, business identity protection and succession planning, at a minimum.  That is probably far more legal DIY than you are prepared to do, since you have a business to run.

Clients should interview a number of firms carefully to insure that they are also buying quick access to advice.  No one should ever have to feel grateful just because the lawyer returned a call.

Pricing Strategy

The problem is that start-ups are most in need of this kind of comprehensive planning when they are least able to afford it.  You should be aware of several possible fee structures.  

  • An hourly fee is good if you are double-parked.  Run in with the question, run out with the answer. On the other hand, hourly fees can be unpredictable and tend to create ill-will, since the incentive on both sides is about time, rather than the long-term value of the advice given.
  • Project based fees are a little longer-term than hourly, but the collaboration ends when the incorporation or the licensing agreement is done.  This is where most start-ups get stuck.
  • The third alternative is a flat-fee structure.   This shifts the incentive to where we, at Pasha Law, believe it properly belongs.  It enlists your lawyer figuratively as a long-term investor in your success.
  • Remember that the strategy can change over time.  Your business may start out on a flat-fee basis and move to a project based fee structure as it matures.

Your Lawyer as an Investor in Your Success

Let's assume that you've gone for the third alternative.  Involve your lawyer in the big plan and, since this is not an hourly deal, you have all the time you need to explain and outline your business model.  With a flat-fee structure, there is no incentive to do something you are probably not really good at, which is practice law.  This is your best strategy for avoiding the all-too-common horror stories that usually begin with a cheap legal DIY form.  An attorney who is interested in your long-term success is far more likely to solve problems with you rather than just run up the hours.   

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Legally Sound | Smart Business covers the top business stories with a legal twist. Hosted by attorneys Nasir N. Pasha and Matt Staub of Pasha Law, Legally Sound | Smart Business is a podcast geared towards small business owners.

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