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What Start-ups Should Know About Hiring a Lawyer

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Re: What Start-ups Should Know About Hiring a Lawyer

#41
post #12

Earlier quoted context omitted.

Somewhere, some lawyer is probably wondering why it costs $1000/hour to develop what she believes is just a simple website.

Do you actually know a web firm anywhere that will charge $1000/hour? Such a rate is unheard of in software consulting as far as I know. Maybe someone like EDS who has huge public companies in their pockets will charge these rates, but I personally have never encountered it and I don't know anyone who charges it. The most expensive software consulting I've seen in the wild is $350/hr, and that was for a very specific…

You're comparing apples and oranges. A lawyer working with small clients doesn't have nearly the ability to bill hours as a software consultant. Our specialized software consultants would bill 50 hours a week for months at a stretch. 50 hours might be all the legal work a lawyer does for a client in a whole year. The price of that fact is baked into the hourly rate.

Re: What Start-ups Should Know About Hiring a Lawyer

#42

For a non-Valley, non-VC, non-swing-for-the-fences (Sand Hill Road cookie cutter) startup, think about where your risks really lie (who is going to sue you; when; why; and for how much). If you have partners, then having someone walk you through all the 'what if things go wrong' stuff may be useful. If it's just you, then you can even postpone incorporation. As for tax - that's a nice problem to have, but it's not on…

If it's just you, then you can even postpone incorporation.

Or you could just form an S-Corporation, which is intended precisely for small companies, convert to a (classic) C-Corporation if and when necessary.

As for tax - that's a nice problem to have, but it's not one that's going to loom large on day one (or even year one).

Taxes will loom largely from the very first quarter, especially for unincorporated individuals. Income and business taxes are owed at least quarterly; sales taxes or VAT are owed biweekly, monthly, or quarterly depending on the jurisdiction. In this regard, incorporating is definitely a benefit, since any penalties for failure to timely pay taxes will accrue to the corporation and not to the individual owners.

When you do hire a lawyer, get an estimate up front, make clear that you want to know in advance if the bill is getting anywhere near the estimate, and require monthly interim billing if there is something ongoing.

Or just hire a lawyer that provides services for a fixed fee, as most startup laywers and small business lawyers already do. Monthly billing is standard practice; indeed, many malpractice insurers actually require lawyers to invoice clients monthly for risk management reasons.

If you can fit in some scornful laughter at the idea of billing for photocopying and phone calls, that would be good, too.

If you are paying hourly rates, this is a legitimate issue...unless you are the one initiating most of the phone calls. If you are paying a fixed fee, this is a non-starter.

Many lawyers pay lip-service to the idea of fixed fees for defined projects: think about calling their bluff.

If you sign an engagement letter providing for a fixed-fee, that is not a bluff. That is a binding legal contract, and a lawyer who violates that contract can get disbarred. If you mean that the lawyers market fixed fees but instead try to negotiate hourly fees, I suggest you call your local bar association and report them. Deceptive marketing is serious ethical breach in nearly every state, and can even result in disbarrment.

This will be like pulling teeth, because lawyers are pretty terrible at everything in business except (if you are lucky) the legal stuff.

Your lawyer is a businessman himself. Think about it: he runs his own (legal) consulting business. You are his client. He acquired you either through marketing, networking, or referral--in other words, the 3 primary means that any service provider acquires a customer. He handles his own costs, taxes, staff, everything. Unless he's brand-spanking new, he's almost certainly a better businessman than you, and will probably remain so for the foreseeable future. He's already making a profit. (In the real world, success is measured by profit, not eyeballs or signups.) But the economics of legal practice are different from those of a startup, so make sure he understands your economic concerns and can tailor his services to meet your needs.

Re: What Start-ups Should Know About Hiring a Lawyer

#43
post #29

Earlier quoted context omitted.

> Such a rate is unheard of in software consulting as far as I know. $1000 is not unheard of at all. Yes, you're right, the likes of EDS, IBM, Accenture, etc. are easily charging the upwards of $1k/day. But any decently sized firm (50+ employees) is going to charge roughly that amount. You'd be shocked to hear some of the price tags on corporate website development... I think this is the overall point. Go for a small…

>Yes, you're right, the likes of EDS, IBM, Accenture, etc. are easily charging the upwards of $1k/day. I said $1k PER HOUR, not per day. I'd like to know of software consultancies that charge that much money per hour, excepting the typical fleecing when your deals are built on backroom backscratches like you'd find with the public companies served by EDS et al. Percona has over fifty employees and they charge $350/hr…

First of all, that $1k per hour was pulled out of my ass. That was my piss-poor attempt at using humour to point out that people tend to underestimate someone else's value just because we don't understand their profession. I'm pretty sure a lawyer's work involves more than "blame-shifting".

Secondly, $1000/hour works out to about $240,000 per month. It's a high figure, but I have worked on a 3-month project that cost the client $1,000,000 before. Granted it wasn't a 1-man job, and God only knows I didn't get to see much of that money, but still, that was how much the client was billed for.

Re: What Start-ups Should Know About Hiring a Lawyer

#44
post #21

For a non-Valley, non-VC, non-swing-for-the-fences (Sand Hill Road cookie cutter) startup, think about where your risks really lie (who is going to sue you; when; why; and for how much). If you have partners, then having someone walk you through all the 'what if things go wrong' stuff may be useful. If it's just you, then you can even postpone incorporation. As for tax - that's a nice problem to have, but it's not on…

I'm not so sure about the trademark thing. I've just started that process with my partners non-tech new business. Here (in Australia) you can do a bunch of searches online, and enter a trademark application on a government website for $120, and if it;s approved you pay $300 for 10 years trademark protection. Once you've got all your domain name / twitter handle / social media accounts and pages lined up, a few hundre…

Yep, trademarks are fairly self-service in Australia. Generally you can leave the lawyer out of it unless and until a dispute arises.

That being said, some lawyers only charge a pretty minimal amount over and above the underlying IP Australia fee and it can nice to delegate the paperwork to them.

It really depends on what your time is worth.

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