If you are contemplating a start up and are unsure of how Australian lawyers work, why some charge a fixed fee and others an hourly fee or whether now is the right time to see one about your startup, you will benefit from our startup’s guide to working with a lawyer.
First, there are some important rights that you have as a client and need to be aware of, these include:
Some lawyers charge by the hour while other lawyers may quote you a fixed fee for your legal work. Also, some lawyers may offer a free initial consultation so be sure to take advantage of this.
A fixed fee generally means for a set amount of work, you will be charged a fixed fee and not be charged by the hour.
You should ask your lawyer if your fixed fee will include third party expenses such as property searches or ASIC search fees.
Hourly fees mean that a lawyer will charge you for legal services based on how long it takes to prepare your work for example, you will be charged for how long any phone calls, emails or letters take. Hourly fees are common for litigation work because it is difficult for lawyers to estimate how long a matter will take.
So which is better?
Fixed fees provide start up’s with certainty about their costs and this can help with budgeting in those early stages. Hourly fees can sometimes be challenging for startups working with a tight budget and looking for certainty.
Before you see/speak to a lawyer, be sure to have a list of things that you would like covered such as your key concerns, goals and priorities.
Have you registered a company? terrific, bring your ASIC forms and registration paperwork to your meeting or email it to them so your lawyer can understand your company structure. Lawyers also need that information to draft your agreements if you decide to work with them.
If you haven’t registered a company or decided on your business structure, that’s fine, lawyers can advise you about what’s best for your startup.
Do you have a business plan or financial forecast? You can bring that also so your lawyer can understand your business goals, your industry and your competitors and give you more complete advice.
“Cash is king” - you may have heard this expression before. When it comes to your legal work, it’s a good idea to pay for what you need only when you need it.
Michael Law Group is an advocate of phasing your legal work wherever possible to help startups preserve cash in those early days.
If your lawyer provides you with a proposed list of 10-15 items needed for your startup and you are feeling overwhelmed, ask your lawyer to rank each item in order of priority because this will help you manage your time and cash.
Did you know that while lawyers are responsible for drafting your legal documents, they also need your instructions to customise your documents? This will inevitably take away from your other setup activities.
You can easily purchase online template contracts and some startups understandably opt for this to preserve cash.
Some things to look out for if you choose this path include who prepared your document, was it a lawyer, business consultant? (ideally your documents should be prepared by a qualified lawyer). When was the contract last updated?. And does your document cover your specific needs? You may not know the answer to the last question until you consult with a lawyer.
You should work with a lawyer that you are comfortable with, preferably someone that explains legal issues in plain language and is prepared to answer your questions rather than just expecting you to accept their advice without question. A lawyer should make launching your startup easier not more difficult.