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Old 10-23-2011, 06:16 PM
 
6 posts, read 11,407 times
Reputation: 15

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Hi guys -

Seems like a great forum you have going here and I wish I had come sooner. Like many, I am in the start-up phase of my small business creation. I wish to start showing a history and as such, before investing in commercial real estate, considering hiring, or really another other than drafting my business plan and marketing plan, I wish to retain a corporate lawyer.

The small business I wish to create is a microbrewpub under Farm and Brewery licensing in MA. I have researched heavily, produced beer, taken business management, drafted my plans, looked at commercial real estate, assembled investment (above 100k so far, plan is to reach 200k) and understand that failure can be as informative as success.

OK, with most of the qualifiers out of the way so you know that I'm not completely clueless (likely I'll now put my proverbial internet foot in my internet mouth), I want to ask you about our lawyer: I found her in the most industrial nearby town, and found her hourly rate to be lower than many at $175/hour. I looked into formation online and felt I had better start off right given the mixed reviews and that I have yet to form a small business. After a phone call and emailing, we have finally come to LLC (instead of S-Corp), to be created as member-managed by myself and my brewmaster (develops and brews our beers).

Our quote for LLC formation including operational agreements was above 3.5k. How do you forum people feel about that number as representative of the legal industry at large? I am naive to pay that much? Am I naive to question whether or not I should be paying that much? A professional consult here at Cornell has mentioned how important a lawyer will be in the future and that one young and new to practice may "grow with the company" to develop the skillset specific to our business. Note I have had limited success inquiring at the Law School. Any insight would be greatly appreciated; it does not seem like this is a frequently asked question. I will mention I think the lawyer and myself have a good rapport and want to "trust my gut" on this, but more input is also valuable.

TL;DR version: is over 3.5k for LLC formation and operational agreements too much to pay our lawyer?
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Old 10-24-2011, 05:01 AM
 
Location: The Triad
34,090 posts, read 82,716,942 times
Reputation: 43659
Quote:
Originally Posted by erw32 View Post
in the start-up phase
wish to retain a corporate lawyer.
You'll need a good CPA as well; but when choosing which of either one...
shopping for the lowest hourly rate is about the worst approach one can take.

Quote:
hourly rate to be lower than many at $175/hour.
LLC formation including operational agreements was above 3.5k.
In most areas... these rates are at the low end.

I'd suggest that you start with the firm. Find one that already works in your type of business.. which has that direct experience and even a focus on it. Then look for the individual attorney within that firm that you can believe you can trust and can get along with too.

Use your local contacts in the business and industry for referrals.

As for the cost differences... short of situations of extensive litigation the incremental ($2-4000?) annual difference between using A vs B for a years service... will seem inconsequential.

Quote:
microbrew pub under Farm and Brewery licensing in MA.
before investing in commercial real estate...
we have finally come to LLC (instead of S-Corp)
These specific choices are a whole other set of questions.

hth
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Old 10-24-2011, 10:30 AM
 
6 posts, read 11,407 times
Reputation: 15
Thanks for providing your input. Indeed regarding the decisions of my company formation or strategy I am not specifically asking for any input, just regarding lawyer rates. One question at a time right. Also my question was more about whether or not this kind of operational agreement service is often a multiple thousands kind of number for small business formation than whether or not I could find a lower rate.

Food and beverage focused lawyers don't necessarily do corporate formation (though many do); and I don't actually believe that a long-established firm would provide better service for a small business that, like the rest of them, will be unique in its structuring of member interest and investment. Maybe that statement is naive. Feel free to say so.

LLCs in any state require knowing the code and drafting specific operational agreements to legally adjust the structure within that, which I probably don't need to tell you but given that we aren't really a standard business, I would rather have a lawyer that grows with us (assuming success, of course) than one that tells us what we are doing is too wild or not their specialization. Room to experiment and fail is as important to me as success.

Other individuals I know in the industry are not local to me, but I will consult them regarding their experience in this matter regardless. Western MA has zero food and beverage specific lawyers that I could easily find. It's interesting that the sites linked through google find no one located in any cities in the western part of the state. Doesn't mean they don't exist. Many times a business my size or type is sole proprietorship or LLP (since they rarely grow). I don't know how many small pubs or bars retain lawyers regarding business formation but will look.
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Old 10-24-2011, 06:45 PM
 
225 posts, read 1,113,836 times
Reputation: 381
In 2008 I paid a lawyer AND a CPA $365 an hour combined to set up an LLC filing taxes as an "S" Corp as they advised that it was the best route to go. They did everything including setting us up to pay sales tax etc. I used the best CPA firm and Lawyer I could find, because I was doing a high profile deal and didn't want to scew up. I paid $1500.00 for the whole works. Your price sounds awfully high, but maybe it is because of your geographical area.

I did after the first year, make a change in the CPA I was using as I found out I was paying too much for their services. I think this is one area that a lot of people overlook.....CPA/Accountant. I was paying $150hr for work junior partners did and $265hr for anything the principals did. Amazingly, I paid $265hr for almost everything because our business was "complicated" as they always told me. I used to pay $100 for a stinking phone call for 10 mins of help with Quickbooks. My advice is choose your CPA/Accountant carefully. Also, if you end up making any kind of money, expect to pay $3-5k for getting your taxes prepared.
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Old 10-24-2011, 07:38 PM
 
6 posts, read 11,407 times
Reputation: 15
Thanks for the input. I was definitely looking for experiences and "gut feelings" from other small business owners. I think we often overlook our instincts. Then again providing my situation online on a forum without being too detailed may skew someone else's reaction.

Clearly experiences are quite varied. And no one who gets into or has run a business has all the resources necessary to answer a specific question like mine. Also you didn't specify work done drafting operational agreements as part of your LLC, but I can assume since you were concerned with making sure everything was set-up right your 1500 included those agreements. Since that is my quote for just the formation part of the agreement (not including operational agreements) there is clearly a big disparity!

I have contacted lawyers in the Boston area that are renowned for experience, even if they may not be local to me and thus would be difficult to take along for real estate deals involving, for example, seller financing. No word back as of yet, but that is because they probably would prefer a phone call to an email, even if neither can establish the attorney-client relationship.

I can say that my lawyer in the touristy and resorty backwoods of MA has been diligent about responding and drafting fee agreements, so even if I am getting charged more than standard I am being given good service and communication (without having paid yet!)
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Old 10-24-2011, 10:49 PM
 
Location: Conejo Valley, CA
12,460 posts, read 20,035,115 times
Reputation: 4365
$3,500 to set-up an LLC for a small business? I guess someone has to pay their student loans.... That seems extremely high... Forming the LLC is trivial, the meat is in the operating agreement but that shouldn't take them more than a few hours after speaking with you.
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