How Corporate Lawyers Are Paid: 2024 Breakdown

People often ask me how lawyers like me get paid for their work. I’m a corporate lawyer with more than seven years of experience helping both small businesses and multinational corporations. Read How Corporate Lawyers Are Paid: 2024 Breakdown below.

This article goes into great detail about the most common ways for corporations to pay lawyers in 2024. It covers hourly fees, flat fees, contingency fees, and equity arrangements. In order to show how these billing methods really work, I will also use examples from my career.

It’s my goal to clear up the mystery of legal fees so that you can make smart choices about hiring and working with corporate lawyers.

Hourly Fees: The Classic Payment Model

In 2024, most business legal work is still charged by the hour. Lawyers charge an agreed-upon hourly rate that is multiplied by the number of hours they work on a case.

Hourly rates are very different depending on things like

• Level of experience of the lawyer (for example, junior associate vs. senior partner)
• Size and status of the firm
• How hard is the practice area?
• Market geography

Like, as a seventh-year associate at a national corporate law firm, my hourly rate right now is $465. Partners at my firm with 15 to 20 years of experience can charge more than $950 an hour.

And at top firms in cities like New York and Los Angeles, senior partners can charge outrageously high rates of more than $1,500 an hour.

Lawyers carefully keep track of their time, even down to the minute, so that clients get detailed bills that show what work was done. Costs can add up fast, so it’s important to be clear about the scope right away.

I once helped a startup in Silicon Valley negotiate a $25 million round of venture capital funding. The deal was complicated because it involved many people and many documents that all fit together. Our total legal costs went over $145,000, which is about 300 hours of work from 3 lawyers.

Flat Fees: Predictable Pricing for Routine Matters

Instead of billing by the hour, flat fee arrangements give you peace of mind about your costs by charging a set price upfront for handling certain legal matters. These kinds of deals are common for legal work that isn’t too complicated, like setting up a business, writing an offer letter for an employee, or going over a simple contract.

For example, my firm has a fixed-price corporate formation package for $2,500 that includes putting together and filing all the paperwork to form a Delaware company, writing up the company’s first bylaws and organizational resolutions, and giving legal advice after the paperwork is filed.

I recently helped a real estate investment firm set up its business so that it could charge flat fees. For a total of $7,500, my team set up the LLC, wrote a custom operating agreement for the founders, and gave the business ongoing advice as needed to make sure it ran smoothly.

If the scope of the work is clear, flat fees are a great way to keep track of your budget. That being said, they can be a surprise if the engagement grows or gets more complicated than planned.

Contingency Fees: Aligning Lawyer and Client Interests

Instead of being paid by the hour, lawyers are paid a percentage of the money they win in court. This is called a contingency fee model. If no money is found, the lawyer doesn’t get paid.

This way of paying lawyers encourages them to get the best results, which is in the best interest of both the client and the lawyer. It is common for lawyers to charge contingency fees in cases involving personal injury, medical malpractice, and product liability.

In the business world where I work, I’ve seen contingency fee agreements used in commercial litigation and business disputes. As an example, I helped a medical device startup get back $1.8 million that a shady contractor had taken. We set our fees at 25% of the total amount of damages recovered. This way, the startup with little money could go after justice without having to pay a lot of money up front.

Equity Compensation: Share in Future Company Growth

Some business lawyers will take equity shares or stock options from startup clients instead of cash. This way of paying lawyers lets young businesses save money and gives lawyers a chance to make more money if the business does well.

I worked as an outside general counsel for an e-commerce startup for more than two years, giving them advice on legal and business issues that came up every day. I negotiated for 0.5% of the business to be given to me as part of my pay. When the company was bought out for $240 million five years later, I got more than $1 million in stock.

This shows how equity arrangements can uniquely align the long-term interests of both the lawyer and the client. But there is a risk in betting on stocks if the company fails or stays at a low valuation.

Hybrid Fee Structures

For the most flexibility, the above billing models can be used together at different stages of an engagement. For instance, lawyers might charge a flat fee to start a project and then bill by the hour for work that needs to be done.

Firms may also charge a monthly retainer fee that covers a certain amount of legal work. If more work is needed, the client will be charged by the hour. Lawyers can be sure of making money with retainer structures, and clients can better plan their budgets with them.

I recently helped a new car company raise $50 million in venture capital. Our fees were broken down into three parts:

• $20,000 flat fee to set up a business, design an equity incentive plan, and do other preliminary work
• $25,000 per month retainer fee that covers up to 50 hours of legal help
• Hourly rates above the retainer for busy times in the deal

This hybrid model took into account the fact that closing a complicated fundraising round isn’t always easy, but it still gave some cost visibility.

Conclusion

I hope this summary has given you a clear picture of how corporate legal compensation works. If you know how lawyers charge for their services, you can make smart choices about your budget.

The ways lawyers get paid have changed over time to give clients more options and freedom than ever before. As your trusted advisor, I’d love to have an open conversation with you about how to set up fee arrangements that add value while also taking cost into account.

Now that you know the inside scoop, you’re ready to hire the best lawyers to help your business succeed in 2024 and beyond! Get in touch if you need help with anything else.