Keeping a Rein on Legal Costs

Work with your attorney on ways to streamline legal work and tailor billing practices. And above all, stay out of court if possible.

Legal fees are a necessary cost of doing business, but you don’t want them to get out of hand. Fortunately, you can trim legal costs without compromising the quality of essential legal services.

For starters, be sure you have a good handle on how your lawyer assesses fees. If you haven’t discussed fees with your lawyer recently, maybe now is the time for a heart-to-heart talk. In most instances, your lawyer will charge by the hour. What’s his or her hourly rate? What’s being charged for the time of associates, paralegals and others in the lawyer’s office? Are these rates competitive?

Price isn’t everything, or even the most important thing, in a lawyer-client relationship. But if your lawyer has the highest rates in town, you should explore the possibility that equally talented but less expensive legal help is available.

 

Alternative billing

The hourly method of billing can be modified to fit special circumstances. Your lawyer may be willing to quote a fixed fee for a particular piece of work regardless of the hours involved. For example, if you’re buying the assets of another company, your lawyer may be willing to prepare the purchase agreement and review the closing documents for a flat fee.

Or your lawyer may be willing to place a ceiling on the charges for a particular piece of business. At the very least, get an estimate of how much a given job will cost. Having given you an estimate, your lawyer will have second thoughts about exceeding the quote — or will let you know when charges are approaching the ceiling you set.

In collection cases, discuss a contingent fee arrangement. With such a fee, your lawyer gets paid only if money is actually collected from the person who owes it. He or she thus shares the risk of winning or losing.

Insist on itemized statements and try to have them sent to you monthly. If legal expenses start to rise precipitously, you’ll know early in the game when you can do something about it.

Have a clear understanding of what expenses will be passed along to you. Customarily, lawyers will bill you for some out-of-pocket expenses in addition to their services. You may be billed for long-distance phone calls, photocopies, court filing fees and depositions. If your lawyer bills you for travel, lodging and meals, be sure to set mutually agreeable ground rules in advance. You don’t need to foot the bill for first-class travel and other luxuries.

 

Litigation is costly

To the extent possible, stay out of court. Authorize lawsuits only as a last resort. And if you’re sued or threatened with a suit, explore ways to settle as quickly as possible. Lawsuits drain your company’s time and energy.

Once a dispute is in court, the costs are largely beyond your control. The course of litigation is dictated as much by the whims of the judicial system and the tactics of the opposing lawyer as by the skill of your own lawyer. If you can’t settle a dispute, consider arbitration, which is generally speedier and less expensive than a lawsuit.

Sometimes a business person starts a suit or digs in to defend one because “a principle is at stake.” But after two years of litigation and thousands of dollars of legal fees, the so-called “principle” can seem very remote. Don’t let the impulse to teach the other guy a lesson cloud your business judgment.

Business people sometimes find themselves embroiled in a court case because they “don’t want to set a precedent.” They feel that making peace with one problem customer or supplier will open the door to scores of other similar compromises.

Generally this isn’t true. No legal precedent is established when you settle on a case-by-case basis. Furthermore, it’s unlikely that others will find out about a settlement and demand equal treatment.

Save money by having your lawyer devise forms for routine legal transactions. Then consult with your lawyer, perhaps by phone, for special language in exceptional cases. Landlords have used lease forms this way for years.

It’s usually not necessary to involve your lawyer in the early stages of a business deal. Handle the negotiations yourself and work out the general outline of the deal. Then have your lawyer draft a contract.

You’ll also save money if you consult with your lawyer on several matters at one time. In a one-hour conference, you can review with your lawyer the annual updating of your corporate record book, the renewal of your lease, and drafting an employee manual.

 

More ways to save

Looking for more ways to save costs? Try handling some matters yourself. Take some cases to small claims court. After all, that’s what small claims courts are for. Your lawyer can provide behind-the-scenes coaching at a minimal cost.

Assist with the gathering of documents needed for a real estate transaction. Help line up witnesses for a trial. Try your hand at the first draft of a contract and then give your lawyer the relatively inexpensive task of reviewing and polishing the document.

It pays to read the trade journals in your field to keep up with specific legal developments that your lawyer might have missed. Send pertinent clippings to your lawyer. This can dramatically reduce legal research time. Finally, keep track of legal expenses and deduct them at tax time.



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