Most new companies seek outside legal help in their early stages, but all businesses that grow to a certain size will one day have to consider whether to hire an in-house attorney or continue to rely on contractual legal advice.

Knowing if and when to hire an attorney can be tricky. While there’s no shortage of advice for entrepreneurs seeking legal help, this one requires some insider knowledge.

The Advantages of In-House Counsel

An in-house attorney has some clear benefits over outside counsel, of course. Having a lawyer on staff lightens the legal load on the founders, especially if a significant portion of your time is being consumed by correspondence and routine legal work.

A lawyer on staff will know your company and its legal issues well and be in a better position to offer specific legal advice, often pertaining to issues you may never have thought to bring to your outside counsel. Having an in-house attorney present during the initial planning stages of projects can minimize risks because he or she will notice and alert you to issues as they arise.

Companies that are most likely to benefit from having an attorney on staff include:

  • Companies in highly regulated industries such as healthcare, tobacco, food, or energy.
  • Companies in the process of going public.
  • Businesses that need legal help in their daily operations (and see this need growing).
  • Companies with legal issues they have been avoiding.
If you have transaction-specific needs or see your needs decreasing over time, you may not need an in-house attorney. The decision ultimately comes down to balancing your needs against the costs.

The Costs of In-House Counsel

Most companies think hiring in-house counsel will shrink their legal bills, but it’s not that simple. While an on-staff lawyer saves you money on outside counsel, the costs of a salary and benefits—and the additional legal issues your attorney may uncover—can add up quickly.

Of course, not all in-house attorneys cost the same. If you’re simply looking for someone to review contracts, a younger attorney with limited experience will be a less expensive hire. If you need someone to manage legal projects independently and give strategic advice on complex issues, you’ll want someone with more experience.

A lawyer with seven years of experience in corporate law will expect a base salary of $165,000 or more per year, plus bonuses, benefits, and equity compensation. Your current monthly legal bill would have to be more than $15,000 for this hire to make sense.

Keep in mind that having an attorney on staff will not necessarily eliminate your need to bring in outside counsel. Think of your staff attorney as a quarterback: He may feel comfortable calling some plays on his own. Some he may not.  

Finding the Perfect Match for Your Company

If you decide to hire an attorney, you’ll need to carefully evaluate candidates’ ability to fulfill your company’s needs. Here are a few things to look for to make the right choice:

  • Experience: Look for someone who has experience in your industry, including working in-house at a small company. You’ll want someone with a broad range of experience in different areas of law, but you shouldn’t discount nontraditional expertise such as a technical degree if your company relies on patents or professional experience in your field.
  • Business sense: Your attorney should be familiar with the workings of a small company in an entrepreneurial environment, including the need to stay within a budget and prioritize. 
  • A people person: Your new hire must be able to communicate and get along well with your company’s founders, employees, stockholders, and investors because legal issues often affect employees at every level.
Although the decision to hire in-house counsel is usually a financial one, consider the other benefits an in-house attorney can provide, such as advice on upcoming projects and alerting you to early warning signs of a potential legal issue.

If you decide to hire an attorney, take the time to find someone who will complement your company and be a valuable addition to your team.

Does your business have an attorney on staff? What other issues did you consider when deciding to hire an in-house attorney?