How Much Should You Budget for Legal Fees When Starting a Business?

Starting a business comes with a steep learning curve, and many key considerations—like budgeting for legal fees—are often overlooked. While keeping overhead costs low is important for any business, planning ahead and investing in the right consultants can save you money in the long run.

Entrepreneurs commonly ask us, “How much should I budget for legal fees related to my startup?” And while we’d love to provide a simple figure, the truth is it varies widely. 

Why? Because each business is as unique as the vision behind it, and various factors come into play: the type of company, size, industry, scope of operations, location, and the specific legal needs that each business faces.

This is especially important to consider when evaluating options for legal assistance. Many entrepreneurs don’t realize that while online services like LegalZoom may seem like a budget-friendly option, they can leave your business exposed to significant risks. 

These platforms provide one-size-fits-all forms that lack the customization and legal insight needed to fully protect your business. Without the ability to anticipate specific challenges or adapt to complex situations, you could face costly mistakes, legal disputes, or compliance issues that might have been easily avoided. 

An experienced business lawyer, on the other hand, offers personalized legal advice, identifies potential risks, and ensures your documents are structured to safeguard your business from the start.

At The Geller Law Group, our business attorneys help entrepreneurs navigate the complex legal landscape of starting and running a business. Here are key situations where having a lawyer on your side is especially valuable.

1. Choosing the Legal Structure

Deciding whether to establish the business as a sole proprietorship, partnership, LLC (Limited Liability Company), S-Corp, or C-Corp has far-reaching legal and tax implications. An experienced business lawyer can explain the differences and help you choose the structure that best suits your business goals while minimizing risk and personal liability.

2. Licensing and Permits

Every business requires specific licenses and permits to operate legally, which can vary significantly based on your industry and location. Navigating this territory can be challenging, especially if you haven’t gone through the process before. A business lawyer can help you understand the exact licenses and permits needed for your business at the city, county, state, and federal levels. They will guide you through the application process and ensure you meet all compliance requirements. This support can help you avoid costly fines or legal issues.

3. Drafting Partnership, Operating, or Shareholder Agreements

These agreements are the foundations of any business relationship, delineating the responsibilities, profits, losses, and protocol for decision-making among founders. Expert legal guidance is vital to avoid potential disputes or misunderstandings down the road, like if one business partner wants to leave or if there’s a disagreement over business direction.

4. Registering Trademarks, Patents, or Copyrights

Every business has various types of intellectual property (IP) and can benefit from IP protection. For many small service-based or retail businesses, the primary IP might be the business or brand name, logo, or tagline, as well as any content or materials that you produce. Protecting these assets is essential for long-term success.

A lawyer can help protect your IP by registering:

• Trademarks – for business or brand names, logos, and slogans
• Patents – for unique inventions or processes
• Copyrights – for original works, like written materials, designs, or software

Working with a lawyer also ensures that your application meets U.S. Patent and Trademark Office (USPTO) or Copyright Office requirements, increasing the likelihood of approval.

5. Drafting Contracts

Every business deals with contracts, including those with clients, suppliers, employees, and partners. A lawyer can draft clear, enforceable contracts that protect your business from misunderstandings or disputes. They can also review contracts offered to you by others to ensure your interests are safeguarded.

6. Complying with Employment Law

Hiring employees or independent contractors requires compliance with federal and state labor laws. A lawyer will ensure that your business complies with minimum wage laws, non-discrimination policies, workplace safety, overtime regulations, and other laws governing employment. A business attorney can also help you determine whether you should hire an individual as an employee or an independent contractor, ensuring you meet IRS and DOL guidelines and avoid costly misclassification penalties.

7. Handling Investor or Shareholder Agreements

If your business involves raising funds from investors or has shareholders, it’s necessary to have legally sound shareholder agreements or investment agreements. These agreements cover voting rights, profit distribution, and exit strategies for investors. For example, a business lawyer can draft an agreement specifying what percentage of the company investors own, the voting rights attached to those shares, and conditions for future fundraising rounds.

8. Buying or Leasing Commercial Property

If you’re buying or leasing a space for your business, a lawyer can review and negotiate the terms of a commercial lease or purchase agreement. Real estate contracts can be hundreds of pages long and complex. Drawing from past client experiences, a lawyer experienced in commercial property contracts can identify key clauses that might lead to costly issues later and help negotiate better terms.

9. Preparing for Business Sales or Acquisitions

Selling your business or acquiring another company involves a complex process that requires careful navigation. A lawyer can guide you through each step, conducting due diligence and reviewing the legal, financial, and operational aspects of the transaction. For example, if you’re selling your business, they will help negotiate the terms so you receive the best deal while ensuring the buyer assumes any liabilities and debts.

Planning Ahead for Startup Legal Costs

While legal fees may appear as just another startup expense, they are, in fact, an investment in your business’s long-term health. Cutting corners on legal support can lead to costly redos, fines, and lawsuits. 

The best strategy is to allocate a portion of your startup budget for legal fees tailored to your specific needs. Collaborating with an experienced business law team can provide you with a clear understanding of these costs upfront, allowing you to focus on growing your business with confidence.

Although the question of “how much should I budget for legal fees” may yield varying answers, our commitment to providing clear, customized legal advice remains constant. We know that straightforward conversations about legal costs are essential for equipping entrepreneurs for success.  

When you’re ready, our Business Law team is here to guide you every step of the way through your entrepreneurial journey. Contact us today for a consultation.