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Legal Fees to Consider for Your Startup

In Short

  • Legal fees are an important part of startup costs, covering key areas like business structure, branding, and insurance.

  • Lawyers may charge hourly rates or fixed fees, with hourly rates varying widely depending on complexity.

  • Common fixed fees include company incorporation, drafting letters of demand, and reviewing commercial leases.

Tips for Businesses

Plan your legal budget carefully, focusing on essential services to protect your business early on. Engage a lawyer at the start to prevent costly errors later. Consider fixed-fee arrangements for clarity on costs, and make sure all legal documents are customised to suit your business needs.


Table of Contents

When you start a new business, you will need to set up a range of legal services. From having a lawyer review your commercial contracts to ensuring that you adequately protect your business’ intellectual property, small business owners have a lot of legal services to consider. However, legal services can be expensive, especially in addition to general business startup costs. Therefore, when forecasting your business’s budgets, you should consider what legal fees you might have to pay to get your startup on the right path. This article outlines three key areas where lawyers typically help startups, followed by a breakdown of how law firms generally charge legal costs.

Small businesses can retain legal services for a vast range of legal areas. However, small business owners typically focus on the following:

Intellectual Property 

Branding is an essential element of any startup. As a business just beginning to emerge in the market, your business name and logo allow customers to identify your business and its associated reputation. When it comes to intellectual property, you may seek out various forms of protection, such as

  • registering a trade mark to gain the rights to use your business name, logo and slogan to the exclusion of all other businesses;
  • registering a patent to gain the exclusive right to use, license and sell a device, method or process such as an inventive step in operations management; and
  • copyright protection for any written, artistic, visual or lyrical materials that comprise your brand.

The steps and processes required to protect each of the above forms of intellectual property vary, and in some cases, they can be complex. Therefore, it is essential to obtain appropriate legal advice before proceeding.

Branding

Branding is an essential element of any startup. As a business just beginning to emerge in the market, your business name and logo allow customers to identify your business and its associated reputation. When it comes to branding, you may seek out various intellectual property protections such as:

  • registering a trade mark to gain the rights to use your business name, logo and slogan to the exclusion of all other businesses
  • registering a patent to gain the exclusive right to use, licence and sell a device, method or process such as an inventive step in operations management; and
  • copyright protection for any written, artistic, visual or lyrical materials that comprise your brand.

Additionally, you will also need to consider other processes set out by ASIC if you want to register or change your business name. In any event, retaining legal services to protect your startup’s brand is crucial to establishing your visibility in the market.

Business Structure

Whether you set up a limited liability company, a partnership, a public company or wish to operate as a sole trader, your business structure has vast implications for how you operate your business and the subsequent business taxes you have to pay. To decide on a structure, a lawyer can advise you on what legal structure best suits your proposed business model and provide the advantages and disadvantages of each legal structure.

Insurance

Across many industries, you may need to meet specific insurance requirements to operate your business. More broadly, certain insurance policies can help minimise risk to your startup, which can be necessary for laying sturdy foundations for your startup. For this reason, insurance can be an essential area of concern for small business owners.

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Law firms typically charge clients for their services on:

  • an hourly rate; or
  • fixed fee.

Hourly Rates

Depending on which firm you retain for legal work, they may charge you an hourly rate for your work. Although hourly rates widely vary between firms, a general guide of hourly rates includes:

  • $300 – $350 per hour for a junior lawyer;
  • $350 – $600 per hour for a senior lawyer; and
  • $600 – $1,500 per hour for a practice leader or a partner.

If a firm charges you an hourly fee, you may be able to request an itemised bill. An itemised bill provides you with a more precise breakdown of costs for legal services, ranging from the time a lawyer spent drafting documents for your matter to the time spent negotiating with other parties. If you disagree with the items listed in the bill, you should speak with your lawyer directly and negotiate the bill. If you cannot negotiate a lower price for your bill, you may be able to file a complaint with the Legal Services Commission.

Fixed Fees

Rather than charging you on a time-and-cost basis, most firms now charge based on a fixed-fee model. A fixed-fee service can provide certainty when retaining legal services, as you can estimate the bulk of the legal costs before engaging a firm for its services.

The cost of a fixed-fee service depends on the type of legal work you assign to a firm. For example, some everyday fixed-fee matters and their prices are set out below.

Legal MatterFixed Fee
Incorporating Your Company$600 + GST
Drafting a Letter of Demand$1500 + GST 
Reviewing Your Commercial Lease$2500 + GST

You should note that if your startup’s legal matter is complex or likely to be ongoing, it is less likely that a firm will charge you a fixed fee.

No matter what, it is wise to call ahead and see which firms can provide you with a fixed fee quote for the legal services you have in mind.

Cost-Saving Strategies and Alternatives

In any case, managing legal expenses effectively is crucial for startups, and there are several strategies to consider. For example:

  • you should begin by prioritising your most critical legal needs, focusing on essential areas like intellectual property protection and proper business structure before addressing less urgent matters;
  • try to maximise the value of your legal consultations by thoroughly preparing beforehand, organising all relevant documents and questions to reduce billable hours, and consider legal subscription services, like those offered by LegalVision, which can provide cost-effective ongoing legal support for a fixed monthly fee; and
  • lastly, you should view preventative legal work as an investment; while it may seem expensive initially, solid legal foundations can save you from costly disputes in the future.

By implementing these strategies, startups can ensure they receive necessary legal protection without overstretching their budget, striking a balance between cost-saving and quality legal coverage.

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Key Takeaways

When forecasting your business startup costs, consider potential legal expenses. Startups generally retain legal services to protect their intellectual property, help establish their business’s legal structure, and ensure that proper insurance policies are in place. When retaining legal services, firms can charge an hourly rate or a flat fee. Legal fees will vary depending on which firm you retain and the nature of the work you provide the firm with.

If you need help with your startup, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

Can I dispute the legal fees that a firm has charged me? 

If you believe that the fees charged are not fair and reasonable, you may be able to dispute the costs with the Legal Services Commissioner. You have 60 days from the date you must pay the fee to file a complaint. However, if you requested an itemised bill from the firm, you have thirty days to file a complaint from the date that the firm provides you with the bill.

Do all law firms charge a fee for the initial consultation?

While some firms may charge an initial consultation fee, LegalVision offers free consultations and free fixed-fee quotes.

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Ericsson Yu

Ericsson Yu

Lawyer | View profile

Ericsson is a Lawyer in LegalVision’s Corporate Transactions team. He primarily assists in advising investors, venture capitalists, startups, and privately owned corporations of all sizes on a broad range of complex transactions.

Qualifications: Ericsson holds a Juris Doctor from the Australian National University and a Bachelor’s degree in Commerce (majors in Economics and Business Law) from the University of Western Australia. He completed his PLT with Bond University.

Read all articles by Ericsson

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