Generally, attorneys most often bill by the hour or work for a flat fee. While some attorneys bill on a contingent fee–meaning they collect a percentage of what you win in a case, if you win–those cases seem to more often involve personal injury, class action cases, and other similar disputes.
Flat fees. Flat fees are a simple rate for all work done, regardless of how long it takes to complete the work. For example, a firm may charge a set amount for a corporate formation. The flat fee likely entails very specific work, such as preparing Articles of Incorporation, Bylaws, and applying for a tax identification number (EIN). Usually, attorneys set flat fees where the work is carefully defined and predictable, and where value is being given that might be hard to quantify at an hourly rate (see below). Many attorneys spend long hours updating common agreements for use in future legal work. Once those agreements are prepared, it is common to charge a flat fee for simpler transactions to reflect the on-going work.
The benefit of flat fees is knowing exactly what something will cost you upfront. Neither the client nor the attorney like surprises in billing! If the attorney spends more time on the matter than anticipated, your cost remains the same. That means it’s easier for you to budget and there will be no surprises. The disadvantage to the flat fee arrangement is that if it takes the attorney significantly less time to conclude your matter, you don’t reap any savings. The cost is the same.
Billing by the hour. This is the most common billing arrangement. Attorneys track their time carefully, then bill the client only for the time spent. They bill for time spent drafting documents, but also calling opposing attorneys, emailing the client, reviewing documents, etc… Most attorneys bill by tenth-of-hour increments (.1 hours). The smaller the billing increment, the more accurate the measurement of time the attorney actually spent on the work being billed. For example, under a tenth-of-the-hour billing arrangement, a five minute phone call would round to .1 hours (which is six minutes). Under a quarter-hour arrangement, used in some professions and by some attorneys, a five minute phone call would round up to .25 hours (15 minutes). The smaller the time increment, the more accurate the billing.
Billing by the hour can create some unpredictability. It is not uncommon for an attorney to begin a new matter and have no idea how much time s/he will have to spend. By way of example, in a lawsuit involving a breach of contract, the other party may file a lot of requests for documents, to conduct depositions, and file a motion with the court. Your attorney may not know what types of motions or requests are coming until they have been made. That makes it hard to predict costs. If that attorney ends up spending 30 hours that month on the case, the bill might seem surprisingly high. We favor flat fees wherever possible to avoid that kind of surprise, but in, say, business litigation, a flat fee is rare–the course of the case is usually too hard to predict. But even with the uncertainty of not knowing ahead of time what your bill will be, you do know that you are paying your attorney for actual time worked–not a penny more or less.
We encourage clients to ask their attorney up front if they can check in periodically on the total amounts billed that month, and to ask without being charged for it. For us, a surprised client creates unpleasantness for both sides. We welcome clients asking us as often as daily to know what has been billed recently in their matter. When you receive your invoice, there will be a line item accounting of all time spent on your matter that details how long the attorney spent on each task.
Due to the nature of hourly billing, unscrupulous or sloppy lawyers can easily overcharge and the client may not know it’s happening. It’s critical to find an attorney you feel you can trust, who carefully and conscientiously track their time spent on a case.
Other Costs. Beyond billing attorney time, clients are typically responsible for costs associated with representation, which can include things like filing fees, photocopies, postage, etc. For the vast majority of the matters we handle, those costs are small compared to the attorney fees, but they can add up.
Lawyers commonly require a “fee advance” (sometimes called a retainer) to cover anticipated attorney fees and costs for the up-coming billing cycle. That money is held in a trust account on your behalf. After the attorney has earned that money, they are paid from that account. Any amounts not used are refunded to you when the matter is closed.
Hiring a lawyer can be expensive. When you hire one, you should be aware that you’re purchasing their expertise, experience, education, overhead, and malpractice coverage. It can add up. Practicing law is not cheap. But you can read about how to keep costs low here .
The information contained on this page and website is provided for educational purposes and to provide you with general legal information, but does not constitute specific legal advice for you or your situation. By reading or using this page and website, you understand and acknowledge that there is no attorney-client relationship between you and the owners of the website, except as may exist through a formal agreement. The information contained on this page and website should not be relied upon as legal advice and should not serve as a substitute for seeking competent legal advice from an attorney licensed to practice law in your state.