Stepping out and starting a small law firm is both exhilarating and terrifying. Regardless of whether you’re leaving BigLaw or you’ve decided to take the leap and open your own practice as soon as you pass the bar, you must understand more than the law. You must also understand the basics involved in running a business. You must also understand fee agreements and how your small law firm should use them!
All Matters Need a Signed Fee Agreement
We recognize that it may seem like you could do better things with your time than draft a fee agreement for every single matter that comes into your small law firm. However, it really is a small step that can save you from a lot of potential trouble.
A fee agreement (or a retainer agreement that addresses fees) helps clarify and document what you will do for the client and the cost for your services. Although some jurisdictions do not require the use of such an agreement for small matters, it can help protect you from an ethics complaint by clearly explaining what you agreed to do. Once the fee agreement is signed by the client, provide them with a copy of it. You should keep the original copy in the matter file.
The signed agreement acts as an outline for you. It’s much faster and easier for you to review the fee agreement than to page through all of your notes and try to remember exactly what you told the client you would do for them. In the event of an ethics complaint, this document can help you create an effective defense.
Creating a fee agreement for every matter doesn’t have to be time consuming. Using templates or the proper legal tech, it shouldn’t take you more than a few minutes to fill in the blanks. It really is time well spent.
Using a Flat Fee Agreement as a Small Law Firm
Matters billed at an hourly rate are used by small law firms when it comes to the creation of a fee agreement. Flat fee agreements should not be ignored. In some jurisdictions, including California, they are required. In California, the flat fee agreement must include:
- The required disclosures;
- A detailed explanation about how and when the flat fee is earned.
California small law firms must also open a trust account if they don’t already have one. You may also need to provide a partial refund of the flat fee (even if it is marked as “earned upon receipt”) if you do not see the matter through to completion.
Even if you’re operating a small law firm in a jurisdiction that doesn’t require you to use a flat fee agreement, creating and using one can be beneficial. Just like we mentioned in the previous section, it is a very small investment in time to create a valuable record of what you promised the client.
Protect Your Small Law Firm
Your small law firm could be devastated by an ethics complaint. You can take small steps, such as using a fee agreement, to help protect it. To learn more, make sure that you sign up for our newsletter. The sign up box can be found at the bottom of our homepage.