January 14, 2018

A startup's guide to working with a lawyer

A startup’s guide to working with an Australian lawyer

Updated: 8 December 2019

Not all lawyers will charge their fees in the same way and not all Australian lawyer's work the same way. Here's what you should know in our startup's guide to working with an Australian lawyer. 

Short on time? check out our 35 second summary video below.

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.  

1. You have rights

First, there are some important rights that you have as a client and need to be aware of, these include:

  • The costs agreement: you have the right to negotiate your legal fees. Importantly, if you are handed a complex cost agreement, you can and should ask questions to make sure that you understand what you are signing.
  • Itemised bill: you also have a right to receive a bill before you pay for legal work.
  • Changes: you have the right to be notified of changes to your estimated legal costs.
  • Reports: you can request a written progress report for your matter.
  • Disputes: attempt resolution with your lawyer first, failing that you have the option of mediation, costs assessment and you can make an application to a costs assessor to have the whole or part of your costs agreement set aside.

You can also contact the Office of the Legal Services Commissioner or the Law Society of NSW for further guidance on your rights.

2. Fixed fee versus hourly fee

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. 

3. Arrive prepared

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.

4. Prioritise

“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 and only when you need it.

Michael Law Group is an advocate of phasing 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 so that's another good reason to prioritise your legal work.

5. Bootstrap online contracts versus custom lawyer build contracts

You can easily purchase online template contracts and some startups understandably opt for this to preserve cash.

Should you?

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). Also, 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. 

6. Lawyer's work style

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.

Key points

Below are the key points to keep in mind when working with a startup lawyer:

  • Work arrangement - understand the work arrangement well and ask questions
  • Fees - determine if fixed fee or hourly fees are better for your startup
  • Arrive prepared - give your lawyer the background information they will need to serve you best
  • Prioritise work you need from a lawyer to preserve cash flow
  • Templates - strapped for cash? decide if templates are best for your startup. 

Do you have any questions or comments about working with a lawyer? Be sure to leave them below. 

I wish you success in your ventures!

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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