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Differences between In House V. Outside Counsel

The decision to engage legal counsel is a critical choice for businesses, and options extend beyond the binary choice of in-house counsel and outside general counsel. In-house counsel refers to legal professionals employed directly by a company, offering dedicated legal support and an intimate understanding of the organization’s inner workings. Conversely, outside general counsel entails retaining legal services from external law firms. Each of these models has its own advantages and drawbacks.

The benefits of in-house counsel include:

  • Deep Understanding of the Company: In-house counsel works directly for the company, allowing them to have an in-depth understanding of the company’s operations, culture, and goals. This can lead to more tailored and strategic legal advice.
  • Cost Predictability: The company typically pays a fixed salary to in-house counsel, providing more predictable legal costs compared to hourly rates charged by outside counsel.
  • Immediate Access: In-house counsel is readily available to address legal issues as they arise. There’s no need to wait for an appointment or explanation of the company’s background, saving time in urgent situations.
  • Integration with Business Teams: In-house counsel can work closely with various business units, offering legal insights at the early stages of decision-making, potentially preventing legal issues before they arise.

The drawbacks of in-house counsel may include:

  • Limited Specialization: In-house counsel may not have the same level of specialization as outside counsel who deal with various legal matters for multiple clients.
  • Workload Challenges: In-house legal teams may face challenges in handling heavy workloads, especially in large organizations with diverse legal needs.
  • Potential for Bias: There may be instances where in-house counsel becomes overly aligned with the company’s objectives, potentially compromising their objectivity.
  • Built in Cost: The company must pay the in-house salary even when the in-house attorney may not have a full workload.

The benefits of outside general counsel include:

  • Specialized Expertise: Multiple attorneys may be utilized as outside counsel to bring specialized expertise and experience from working with multiple clients across various industries. This can be particularly valuable for complex legal matters.
  • Cost Efficiency for Smaller Companies: Smaller companies may find it more cost-effective to hire outside counsel on an as-needed basis rather than maintaining a full in-house legal team.
  • Objectivity: Being external to the company, outside counsel can provide more impartial and objective legal advice without being influenced by internal dynamics.
  • Scalability: Outside counsel can be easily scaled up or down based on the company’s changing legal needs, providing flexibility in managing legal costs.

The drawbacks of outside general counsel may include:

  • Cost Variability: Outside counsel typically charges hourly rates, which can result in unpredictable legal costs. This can be a disadvantage for companies looking for cost predictability.
  • Limited Company Knowledge: Outside counsel may not have an in-depth understanding of the company’s day-to-day operations, culture, or long-term objectives, which can impact the contextualization of legal advice.
  • Response Time: The response time from outside counsel may be slower compared to in-house counsel, especially in urgent situations, due to the need to schedule appointments and get up to speed on the company’s specifics.

Ultimately, the decision between in-house and outside general counsel depends on the size of the company, its legal needs, and its strategic objectives. Some companies may benefit from a combination of both, using in-house counsel for day-to-day operations and outside counsel for specialized matters. Other companies may benefit from utilizing outside general counsel through a subscription model. The benefits of such an arrangement may include:

  • Specialized Expertise with Cost Predictability: Law firms offering outside general counsel services through a subscription model often have attorneys with diverse specialties. This provides companies with access to specialized expertise while maintaining cost predictability through a subscription-based fee structure.
  • Cost Efficiency for Varied Legal Needs: Companies can benefit from the flexibility of engaging attorneys with specific expertise when needed, avoiding the fixed costs associated with maintaining a full in-house legal team. This is particularly advantageous for smaller companies with diverse legal needs.
  • Objective and Contextualized Advice: External attorneys within a subscription model maintain a level of objectivity while also working to understand the unique aspects of the client’s business. This combination allows for tailored, context-specific legal advice.
  • Scalability and Responsiveness: The subscription model allows companies to scale legal services based on their evolving needs. Additionally, law firms with a subscription model often prioritize responsiveness, offering timely legal assistance when required.
  • Holistic Legal Support: Having access to a team of attorneys with different specialties enables companies to receive comprehensive legal support, covering a wide range of issues without sacrificing expertise in specific areas.

In many cases, leveraging outside general legal counsel through a subscription model can offer a hybrid solution that combines the strengths of both in-house and traditional outside counsel while mitigating their respective drawbacks. This approach provides companies with flexibility, specialized expertise, and cost predictability, making it an attractive option for addressing diverse legal challenges. Companies should assess their specific needs, the frequency of legal issues, and budget considerations when deciding on the most suitable legal support model.

As you consider the best legal support model for your business, remember the unique blend of expertise, cost predictability, and tailored advice that comes with outside general counsel, especially through a subscription model. Attorney Kelly Swartz provides comprehensive, specialized legal services to businesses of all sizes.

Kelly Swartz is board certified in intellectual property law and practices in the areas of intellectual property, including patents, trademarks, copyrights and trade secrets. In addition to protecting the intellectual property for individuals and businesses, Kelly also advises them on the optimal tax treatment for each agreement, transaction, and planning opportunity that might affect them. She has been serving as outside general counsel to small to medium-sized businesses advising them on day to day legal issues for 15 years. Contact Kelly to explore how her expertise can align with your company’s legal needs, ensuring you make the most informed and strategic decision for your business’s future.