Understanding Legal Retainers and How Lawyers Bill Clients

When you hire an attorney, there are typically two general systems for legal retainers and billing with a variety of factors that determine their rates.

You may need to hire an attorney, but all you can think about is one thing: that’s expensive.

The average hourly rate for a partner attorney is over $500 an hour. For an associate, expect to pay more than $300 an hour at a top law firm.

When you look at those numbers, you just want to run and hide. The key is understating how attorneys bill. They may use legal retainers or an hourly rate.

Read on to learn how attorneys bill their clients and what an attorney retainer is.

How Do Attorneys Bill Clients?

There are three main ways that attorneys bill their clients. They can bill through a flat rate, a legal retainer, or through an hourly rate. It all depends on the type of case you have, and your location.

Flat Rate

A flat rate is used in cases that are usually repeatable for the attorney. Bankruptcy is a great example. Most attorneys know how much time they’ll spend on a bankruptcy case, how much paperwork is required, and what to expect.

It’s also a repeatable process. Every case is different, but the paperwork and the steps involved are pretty much the same. It’s predictable, which allows the attorney to charge a flat rate. Some attorneys charge as little as $500 while others will charge more than $3000. You can expect that most attorneys will be in the middle of that range, charging between $1000 – $2000.

Forming a corporation is another example. For companies that want to start an LLC or corporation, you have to have articles of incorporation, research the business name, and file paperwork with the State of Maryland.

All of that takes time, but attorneys will know how much to charge because it’s a repeatable process.

Legal Retainers

Legal retainers are a little tricky because you have to keep a close eye on them. You’re basically paying a fee every month or every several months for the attorney to do work on your behalf.

The attorney will then subtract the work that they perform from the retainer.

This is common for large companies that have a variety of legal needs. They can pay a lump sum for the services.

Hourly Rate

Attorneys charge an hourly rate in cases that are open-ended or are short projects. You may want to have an attorney take a look at a contract before you sign it.

It’s a short term project, which would be an hourly rate. Attorneys also charge an hourly rate for longer cases like divorce or for criminal defense.

Contingency Fee

A contingency fee means that you pay the attorney when they win your case. This is common for personal injury or a car accident lawyer to bill their clients this way.

In these cases, you only pay the attorney when they get a settlement. When they take your case, you agree that if they win, you will pay them a percentage plus any additional charges like court fees.

If they don’t win your case, you don’t pay them anything. With these cases, there’s no risk to you to hire an attorney.

Combination Billing

The way an attorney bills you may be unique to your case. In certain circumstances, the attorney can decide to do a combination of any of the billing methods above.

They may decide to charge hourly billing, but only for a certain number of hours. This type of arrangement will ensure that you don’t go broke hiring an attorney.

How Do Attorneys Know How Much to Charge?

If you’ve ever been in business, you know that one of the most challenging things is pricing a product or service.

You want to make sure that it’s competitive, people are willing to pay for, and that you are profitable. Attorneys have a similar challenge.

When you’re paying for an attorney, you’re not just paying for someone to fill out and file paperwork. You’re paying for legal expertise, and for their overhead.

Attorneys have office space, equipment, paralegals, assistants, and student loans to pay for. It’s not cheap to become a lawyer.

All of those things add up, which is one of the reasons why you’re paying a premium for an attorney.

Plus, the law firm is a business. They have to be profitable, too.

Look at contingency cases as an example. You may wonder how attorneys could possibly be profitable if they don’t in cases.

You have to know that the attorney will only take your case if they’re sure that they can win some kind of settlement.

They’re not going to waste time and energy for a case that’s not winnable.

That’s a huge risk for them because they still have to pay their staff for the work performed on the case. That will turn into a major loss for the law firm.

Other Considerations that Determine How Much Attorneys Cost

There’s a lot that goes on behind the scenes of your case. There may be time for discovery, resources used for document transcription, and interviewing or prepping witnesses.

There may also be opportunity costs for the attorney. Your case could take up time and resources that could be spent on other cases that would bring in revenue for the firm.

Other factors that go into attorney billing are the experience of the attorney and where the attorney is located. An experienced attorney based in New York is going to cost more than an inexperienced attorney in Baltimore.

Understanding Attorney Fees Before You Hire an Attorney

Attorneys have a number of ways to bill clients. There are hourly rates, flat fees, contingency fees, and legal retainers.

The type of billing that your attorney will use will largely depend on your legal needs, your budget, and the location of the attorney.

Once you understand these terms, it becomes much easier to hire the right attorney.

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