How Much Will You Pay Your Deal Lawyer?
What are you buying when you engage an attorney? You are buying his experience, expertise, education, abilities, effectiveness, efforts, talents, and time. How do you put a value on those characteristics? Attorneys value their contribution to your project by charging an hourly rate for their time. The hourly rate should reflect the value of the attorney's intangibles, adjusted by what the going rates are in the local market. For example, in the Norfolk, Virginia metropolitan area, business attorneys may charge anywhere between $250 and up per hour, with attorneys at larger law firms charging much more than attorneys at smaller law firms (hey, they have to cover all that overhead for their nice offices, etc.). Attorneys at smaller law firms in this area likely are charging an hourly rate in the range of $250-$350. My current hourly rate is $300.
Knowing an attorney's hourly rate is just the start. How much time will the attorney need to do a good job on your project? Many attorneys are reluctant to estimate how much time it will take for a project because each project is unique. In addition, many factors outside of the attorney's control might increase the amount of time the attorney needs. While all of this is true, seasoned attorneys who have worked on many similar projects should be able to estimate a range of legal fees for your project.
For example, I charge a flat fee of $500 (plus filing fees) to form a limited liability company or a corporation. I have formed so many LLCs and corporations that (1) I have a system in place for efficiently and quickly forming them, and (2) I know about how much time it will take.
I also can tell you that drafting and negotiating a contract (e.g., a license agreement, consulting agreement, etc.) will probably cost about $600 to $900, with additional fees for each round of negotiation and revision. Likewise, the fees for reviewing and suggesting changes to a lease might will fall in the same range, with additional fees for each round of negotiation and revision.
Purchase and sales of businesses or real estate require a lot more legal work. My experience is that legal fees roughly equate to about 1% to 1.5% of the purchase price (e.g., a $1,000,000 purchase might incur legal fees of $10,000 to $15,000). Those fees might be slightly less if my client is not getting a loan to finance the deal. Note, however, that this estimate has a floor to it. All deals require a certain amount of legal work, regardless of their purchase price. So, for example, a $100,000 deal still might need about $2,500 of legal work.
When you are evaluating an attorney for help with your deal, you need to ask about estimated fees during your first meeting or phone call so that you can include that estimate in your cost of doing the deal.