Unfortunately, businesses fail. 20% fail within the first year. Within 10 years, 70% of small businesses fail.
While the reasons vary, it’s often ignorance that leads to failure. Business owners can’t overcome what they aren’t aware of.
Having the right team helps ensure a business succeeds in the long-term. One essential part of that team is having a lawyer on retainer.
But money is also a reason why businesses fail. Many small business owners may be reluctant to keep a lawyer on retainer because of the fees.
If you’re wondering how much a retainer fee is and why you should keep a lawyer on retainer, keep reading. We’re sharing with you everything you need to know about attorney retainer fees.
What a Retainer Fee Is
What is a retainer fee? It’s a down-payment you make to obtain an attorney’s services.
Lawyers often advise businesses to keep them on retainer to ensure that he or she will be paid for their legal advice and services. It may be related to a specific case or for ongoing work.
What is a retainer? It’s a certain amount of money an attorney requests from a client to pay for services that will be rendered over time. A lawyer retainer ranges depending on the lawyer, the business, and the nature of the work.
Fees may be as low as $500 but can also go as high as $5,000 or more. Some lawyers base their retainer fee on the number of hours they feel they need to finish working on your case.
Retainer Fees Are Often Used as a Down Payment
Most often, a retainer does not cover the entire cost of a specific case. Instead, it’s used as an upfront payment and if an attorney needs more money, you’ll be billed again.
However, if the attorney doesn’t use all of the money in the retainer, you will often get the remainder returned to you.
Reasons to Keep a Lawyer on Retainer
If you think your business doesn’t need to keep a lawyer on retainer, think again. There are many reasons why you need a lawyer retainer such as:
1. Incorporating Your Business
You have choices when it comes to structuring your business. But each one carries with it a certain amount of risk.
There are also legal and tax issues you must comply with. And they’re not simple to navigate without a competent attorney guiding you through the process.
Also, as your business grows, you may wish to change which structure you’re using for legal or tax purposes. A good attorney will know when the time is right to make that change and advise you on which structure is best.
2. Agreements With Employees and Partners
While an informal agreement between you and your business partner or employee may sound like a good idea because you like and trust one another, things can turn sour quickly.
Avoid expensive and complicated situations and potential lawsuits by keeping a lawyer on retainer to draw up contracts.
3. Vendor Contracts
Always read a contract before you sign it. But it’s not always easy to understand all the legalese.
Before you sign any contract, make sure your attorney goes over the terms of the purchase agreement. You’ll avoid expensive complications in the future and maintain good relationships with your vendors this way.
4. Protect Your Name and Trade Secrets
Whether you’re a small business or a large corporation, your brand is your business. Protecting it by trademarking it and ensuring your website domain name is up-to-date and not taken is extremely important.
And so are your trade secrets. Make sure your competition, a thief or an employee can’t walk away with your intellectual property or other IP-like trade secrets. While you can obtain a patent and trademark on your own, the process is lengthy and complicated.
Keeping a law office on retainer means you have the time to focus on building your business rather than worrying someone will take it all away.
5. Collecting Data
Too many businesses are clueless about cybersecurity and data protection laws. And what you don’t know can cost you a lot in fines, especially if you do business in Europe.
A lawyer retainer also means you won’t violate FTC (federal trade commission) guidelines.
6. Property Agreements
Before you sign a lease or purchase property for your business, make sure you’re making the right decision.
Too many businesses end up signing a lease that traps them into an agreement they can’t pay for.
7. Environmental Issues
As new environmental laws are made, the compliance standards may affect your business.
Failure to comply with past, current, and future regulations means you’ll face a possible lawsuit or federal complaint.
8. Buying and Selling a Business
Buying and/or selling a business is a lot more complex than buying a car. You need a reliable attorney on retainer to help you with the following:
- Valuing the business
- Writing acquisition and purchasing agreements
- Transferring permits and licenses
This isn’t an area where you can afford to make a mistake.
What’s Included in a Retainer Agreement
Most typical retainer agreements include the amount of the initial retainer fee. It may or may not be refundable depending on the situation and may appear on your agreement for as “earned when paid”.
You’ll also find the billing frequency and terms listed. Like most businesses, you may get a monthly bill that shows the costs for the previous month and how much of your lawyer retainer fee is left. If the retainer fee is used up, you’ll get an additional bill that’s due upon receipt.
1. Billing Rates Vary
Billing rates are also listed on your agreement. The rate differs depending on which employee is working on your case.
An attorney rate is higher than a paralegal. The rate is based on their years of experience, education level, and specialized expertise.
2. Court and Discovery Costs
You may also see other costs included in your agreement, especially if the attorney is working on a court case for you such as costs that are associated with the discovery process such as:
- Travel expenses
- Long-distance phone charges
Court costs are also considered additional expenses not generally covered by your retainer fee.
Stay in the Know
Whether or not you decide hiring a lawyer and paying a retainer fee is a smart idea for your business is up to you. But at the very least you should always stay up-to-date on the latest business laws.
The more you know, the fewer costly mistakes you’ll make. We can help. Keep coming back to learn what the latest news in business is.