Legal Practice Advice

Equity for Legal Fees (2021 Update)

Equity for Legal Fees | Andrew Abramowitz, PLLC | New York, NY

The payment of legal fees by issuing stock or other equity to the law firm in lieu of cash became popular in the late 1990s with Silicon Valley startups and has gone in and out of fashion since then.  The appeal of the structure, particularly with startups, is obvious.  Before these companies start generating revenue, cash may be hard to come by, so if both sides are willing, the payment of service providers like attorneys, at least initially, with equity, may be an attractive alternative.  It is also possible to have hybrid structures where, for example, the law firm is granted a small piece of equity issued in exchange for the firm’s agreement to discount cash fees and/or defer their payment for a period.

Should Solo Lawyers Seek to Partner Up?

Use of Debt Financing by Law FirmsWriting in Above the Law, Jordan Rothman argues from personal experience that solo lawyers would be better off partnering in a law firm with one or more other attorneys. As someone who has operated partner-less for almost 10 years now, after Big Law partner experience (where one literally doesn’t know many of one’s partners because there are so many of them), I’ve seen different arrangements and have some thoughts on these issues. While there are some clear advantages to having partners, much of Rothman’s argument is based on an unduly restrictive assumption about how solo firms must operate.

The Role of Personal Trust in Lawyer Selection

In some ways, my law firm, Andrew Abramowitz, PLLC, is at the forefront of recent changes in the delivery of legal services. For example, the firm operates virtually, with the staff attorneys toiling away at home (or wherever – they could be doing it while hang-gliding as long as they do the job well and promptly, as far as I’m concerned). The ability to get the work done without housing everyone in an expensive Manhattan leased space gives the firm flexibility to offer more competitive rates than traditional firms.

The Challenges of Startup Legal Representation

When I am having initial discussions with potential startup clients, they often say they’re looking for a firm that understands the particular challenges of running a startup. Perhaps this can be a reference to the substantive transactional matters that startups deal with – like negotiating an agreement among founders or raising capital using methods particular to early-stage companies – that attorneys who’ve been trained by representing Fortune 500 companies may not understand. But often the subtext of the question is that startups are frequently short of cash and may not be in a position to pay legal bills on a regular basis. The challenge for the attorney is to secure these sorts of clients and still manage to make a living after doing so.

Division of Labor Between Law Firms and Corporate Services Companies

Attorney Productivity | Andrew AbramowitzWhen I am estimating costs for a project for prospective clients, particularly those new to the formation of business entities and deal-doing, a common source of confusion is why there needs to be a fee paid to my law firm as well as to a corporate service company like CT Corporation or CSC. So, I thought it would be useful to briefly outline the different roles that each of us plays in the creation and maintenance of entities.

Early Payment Discounts for Law Firms

So, the good news for the law firm of Andrew Abramowitz, PLLC is that business has increased steadily over the past few years. The bad news is that there has been somewhat of a greater tendency among clients to be slow in paying invoices. There is a hassle factor associated with this, as it requires frequent follow-up, but the real issue, as anyone who runs a small business will know, is that lumpy income creates financial challenges. My firm has regular expenses that can’t be contingent on the timing of my clients’ payments, and the owner of the firm (yours truly) has personal expenses that are equally not capable of being deferred while I wait for payment. (All of this sounds very self-pitying, but I’ll get to the point soon. I’ve been very fortunate in life and cannot complain.)

Recognizing and Combatting Strategic Umbrage in Negotiations

Recognizing and Combatting Strategic Umbrage in NegotiationsIn a recent transaction that I worked on – obviously, I can’t give too much detail to protect client confidentiality – I noticed a weird dynamic. In a typical negotiation, when the lawyers from each side are speaking without the principals present, there is some degree of emotional detachment from the ultimate outcome, even though each attorney knows his or her role is to represent the client’s interest. Lawyers will say, for example, that it’s not worth continuing to argue about a particular bone of contention because it is a “business issue” that needs to be worked out by the principals. However, in this transaction, the other attorney, though he was unfailingly polite and even-keeled, would make fairly routine requests from our side seem thoroughly unreasonable, putting me on the defensive.

Small Firms: Don’t Use Your Smallness as an Excuse

Small Firms: Don't Use Your Smallness as an ExcuseCarolyn Elefant, writing in Above the Law, takes to task those solo lawyers who, to use her phrase, “play the solo card” by using their firm’s smallness as an excuse for sub-standard service. I don’t know enough to weigh in on the specific case that triggered her piece, a solo attorney who tried to excuse a late filing by citing Microsoft Word technical issues. There certainly have been large firms that have tried to make excuses as a result of their network crashing or the like. However, I completely agree with Elefant’s overarching point that small firms should not assume that their clients and others will accept second-class service just because of the size of the firm.

Why I Need to Rely on Legal Specialists

Corporate Transactional Law Practice | Andrew Abramowitz, PLLCWhen I am assisting a client on a matter, and the help of a legal specialist is needed (tax, above all else, but many other areas as well), the client will often be reluctant to loop in the other attorneys and will urge me to handle it. While I’d like to think that this is a reflection of the client’s respect for my abilities, I’m sure it’s in part based on a fear that bringing on another attorney will drive up legal costs. I don’t think this is necessarily the case, and in any event, scrimping on getting the right advice can create substantive issues that cost far more in the long run.

Charging Fees for Initial Legal Consultations

Start Up Valuations | Andrew Abramowitz, PLLCWhen I start a new client relationship, the referral source introduces me to the potential client, usually by email, and then I have an initial call or meeting with the potential client. I don’t require that a fee be paid before I agree to proceed with this background consultation. It’s only after the meeting where we make engagement arrangements if there is a need to do so. Many attorneys, however, feel strongly that this is a bad policy and insist that even the initial meeting is on the clock. Of course, attorneys can feel free to set whatever ground rules they want, as long as they’re properly communicated in advance. There may be practice areas where immediate charging makes sense, but for what I do, I think this sort of policy reveals a mindset about the attorney that I try to avoid.