Hiring A Law Firm With Flat Fees VS. Hourly Rates

As a small business owner there are some tasks that you can DIY such as registering an LLC or using a template contract to send to clients, however, at times the legal help of a law firm will be the easier route. This could be registering a trademark, negotiations between you and a client, or establishing a new business plan.

Hiring legal help is always something to consider when you are facing a daunting task that may be hard to accomplish on your own. But, the largest concern for small business owners when hiring with a law firm is always…. fees and costs for services. You may immediately think “there is absolutely no way I can afford an attorney!!!” That actually is likely not the case and it depends entirely on the firm’s fee structure.

There are three primary ways that law firms take payments: hourly fees, flat fees, and retainers. The type of payment options a law firm uses should be a critical factor when you are deciding who to hire and when establishing your budget. Let’s break these payment options down to see what would work best for your business! 

Hourly Fees

Hourly fees is likely the most common response you will receive from law firms when discussing payment methods. In most cases it is hard for a law firm to determine exactly how long it will take to complete the work you need to be done. For example, say you would like your law firm to negotiate a settlement with a pesky client who is demanding a refund from you, this can be done in two hours or two days depending on the amount of back-and-forth with the opposing side. Maybe you need a custom contract, which may take two days to complete or two weeks to make sure all of the information is correct, especially if you need extensive edits to be done. 

The biggest issue TLP see’s with hiring an attorney at an hourly rate is the UNKNOWN! How much are you really supposed to budget for? And should you be prepared for the firm to send you an outrageous bill? Will they even ask you about going over a maximum number of hours to complete your project?  With the national average for lawyers’ hourly rates at $225 an hour, ranging from $100-$450, legal work can become expensive pretty quickly so you really need to evaluate what you need. For example, if you need an attorney at-hand regularly throughout the process and the work to be done fast then an hourly rate would be a great choice. But, you should be sure to speak to your attorney about how many hours you want on the project and discuss what can be done in that time frame. This provides control on how much you will be charged and you have comfort in knowing the amount of time being spent on your project (and have the ability for them to not clock more hours without your permission).

Another thing to consider with hiring an attorney at an hourly fee is the due date of payments. Typically you will receive a monthly statement for your costs and be informed how many hours were worked by the law firm. This is beneficial if you are unable to make one large-sum payment up front and need to budget attorney fees into your monthly business costs. 

Some large drawbacks to hourly fees are 1) you are not guaranteed a finished product if you stop working with the attorney, 2) the project may take longer than anticipated and cause financial hardships, and 3) the costs per month may be more than what you budgeted. For these reasons, TLP doesn’t recommend that small business owners hire an attorney at an hourly rate if you can help it. Instead, we suggest looking into firms that will charge you a flat fee or retainer fee. 

Flat Fees

Flat fees are usually the payment option that small business owners prefer. Why wouldn’t they be? One flat price for one project. This is a great option if you have one specific project for your business that you need help with and when there is not a tight time frame. Flat fees costs with law firms are going to be set by the basis of the project, the amount of time needed, and how “routine” your task is. For example, say you need help to get your business logo trademarked and need help submitting paperwork. This is a task that many experienced trademark attorneys can do in a specific amount of time. If you have a project like this then flat fee payments are going to be your best option.

However, there are some drawbacks to flat fee projects. First, it is set in a general time frame and the law firm is not obligated to complete the work anytime before those set deadlines. Second, you will likely be required to pay the flat fee upfront and in one large sum. Third, if something happens that causes your project to take longer than planned the law firm may be able to charge you additional hours for the work.. The third element is not likely to happen but it is a risk that you should consider. 

Flat fees are extremely beneficial if you want to lock in one price that is allotted and ready to be disbursed in your current budget. You should heavily research the firm you want to use before choosing which one to go with for a flat fee project as you want it done right and to be kept within your time frame. Newer firms may be less expensive but have less experience, older firms will have more experience but cost more. Consider this when choosing a firm and create a backup budget in case something happens that requires more payment! To see what the attorney will base your flat fee on and what you can expect, check out this link.

Retainer Fees

Retainer fees tend to be outside the scope of small businesses unless they want an attorney on a revolving schedule to ask questions when they come up or to keep them for future help. Retainer fees require you to pay one large sum that the attorney will pull from when they do any work for you, with some law firms requiring monthly dues for keeping you as a continued account. When the retainer you provide runs out, you will be required to pay another large sum to refill your account balance. This payment plan is used largely for bigger scale issues such as regular maintenance for your business materials, or for regular yearly uses from the specified firm. If your business has the budget to maintain a law firm by a retainer, this is a great option for a business that needs consistent help and does not want to worry about their attorney not being available when needed.

For example, if you need business management services or a law firm to oversee specific elements of your business then a law firm by retainer is a great choice. However, if you only need the law firm intermittently or for a couple projects then it is likely not the best option for you. For further information on hiring a law firm with a retainer, read more here. 

As you can see, hiring a law firm is manageable if you properly budget and evaluate what type of payment method best fits your needs. If you have a project that can likely  be done quickly without issue then look at hourly fees options. If you need a routine and long-duration project then look at a flat fee option while remembering you will likely need a large sum to hire the law firm. If your business needs an attorney at regular-to-frequent use then a retainer fee would be a great option to ensure your law firm will have space for you when needed. Oh, and one last thing: it's always a good idea to budget a little extra when hiring an attorney in case the fees come in higher than expected as a way to safeguard your business facing financial hardships. Keep in mind that if you are unsure, you can usually schedule a consultation with a law firm before officially hiring them. 

If you’re interested in getting legal work completed for your small business, TLP recommends consulting with our partner, Griffith Law, PLLC. Paige Griffith, owner and founder of The Legal Paige, is the lead attorney at Griffith Law and helps 1-on-1 clients all the time with their specific needs. You can find more information HERE about the firm’s offerings and pricing.

THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.

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