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A Business Owner's Guide to Preventive Law

Look at several attorneys and law firms. The first step is to gather a list of names. Ask business colleagues for referrals, making sure to find out how they know the lawyer. Someone who has handled transactions for them would be preferable over a golf buddy. Many law firms now have Web sites that enable you to research their qualifications.

Do not limit yourself. A sole practitioner may be perfect for you. Over time, sole practitioners can become very familiar with your business, and usually their rates are lower than those of a partner in a larger firm with the same amount of expertise and experience. A larger firm, on the other hand, can give you more lawyers to work with, which may be necessary if you have varied legal needs.

Interview prospective counsel. Ask the same questions that you would ask a potential employee. Find out the lawyers' backgrounds and whether they have handled clients or matters similar to yours. Ask what they think they can do for you. If you're speaking with a larger firm, find out which people will be working on your matters and what their experiences and expertise are. Ask about items that are important to you. Example: If you want to be able to talk to your lawyers at 7 a.m., make sure they will be available at that hour. Ask for and check references.

Discuss fees and billing arrangements up front. Find out hourly fees, minimum charges, and whether there are any discounts for early payment. Ask for an estimate of the initial work and whether a flat fee or an hourly fee is more appropriate. Flat fees prevent surprises but have to take into account the worst-case scenarios and may, in fact, cost more than hourly fees.

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Manny Miyar, president of American Logistics Services, a $1.5-million distribution company in Northlake, Ill., ran into a legal nightmare. "A landlord misrepresented a building we leased," recalls Miyar. His $250-an-hour lawyers told him to drop the case. Instead, Miyar switched representation, to Small Business Advocate, a Chicago law firm that offers a new twist on controlling legal costs. "We charge companies an annual premium, similar to a medical-insurance premium," explains vice-president Erika Smith Dreger. "For a start-up or a company with no history of protracted legal problems, that's $575. Then we discount our hourly billing rate of $135." For most legal services, participants pay 20%, or $27 an hour; on more complicated matters, such as Miyar's case, clients pay $67.50 hourly. There are no limits on annual usage. Miyar eventually won a $75,000 settlement from his landlord--and intends to stay with Small Business Advocate. "Since my legal fees are discounted, I now ask questions in advance." --Jill Andresky Fraser, from the November 1995 issue of Inc.

How to realize the savings of preventive law:

Continue to discuss fees throughout the relationship. Many business owners diligently ask questions at the initial meeting about what anticipated work will cost, but never bring up money again. Each project should be approached with the same care used in that initial meeting.

Keep in touch. Your attorney is not a mind reader. He or she doesn't know that you've just gotten a call from Hong Kong with an offer too good to refuse and a contract coming in over the fax machine. A call to your legal advisor may at least alert you to the risks and issues of taking on a Hong Kong partnership.

Do some of the work yourself--with guidance. Do-it-yourself kits can be risky, but you can take on much of the work for your company under your attorney's guidance. Most business owners can negotiate a deal without their attorney sitting in the room, and many can draft the letter of intent and send it on to the attorney for final review. An attorney, though, should draft final contracts.

Even litigation work can be done by a business owner. Examples: Owners can and should organize documents and develop the factual background of a case. A friend rather than a process server can serve an initial summons and complaint.

Ask your attorney what you can do to keep legal costs down. Some clients want an attorney who handles even the smallest details. For instance, I would never say to a client, "Why are you asking me to do this?" However, I might suggest more cost-effective means. Your attorney may know cheaper ways of handling certain actions. You do, however, have to ask.

Justene M. Adamec is a litigation partner at Pumilia & Adamec in Pasadena, Calif. The firm specializes in representing small- and medium-size businesses. E-mail her at justene@worldnet.att.net or visit the firm's Web site at http://png.org/pa.