A quick primer on how Courts Treat Corporations versus Individuals.

One of my clients an I were having discussion about fees. and the gist of the question was a price breakdown for retainer or partial retainer for filing an Answer. for a Corporation And it got me realizing that people don’t get the differing obligations of being a litigation attorney for a Corporation )(or Limited Liability Company and being an individual.

So the context is a situation where an Individual essentially runs some aspect of their business through a small closely held corporation of limited liability company. In those kind of situations, when something goes wrong, its not uncommon to tag both the Officer/Owner as an individual and the Corporate Entity. (As when and if that is appropriate, I will leave that for a different blog post.) The point is that the Client and the Corporate Entity they allegedly control are being hit simultaneously for the same alleged wrongdoing.

So, in the legal system, when that happens you have to understand that from the point of view of the Courts, there are two defendants the individual, and the Corporation. And that’s what you the defendant generally want. And what you really want as the individual defendant is for the Court to hold the Corporation Liable and not the individual.

You the individual can go into court by yourself and represent yourself. When you do it, you are referred to as being in “Pro Per” or “Pro Se” depending on geography and other nuances not important to this conversation. You the Individual can be your own lawyer, even though its usually a bad idea.

The Corporation is legally a separate entity, but because it is a legal fiction it can’t represent itself in Court. And since only Attorneys can legally represent someone else Court, it can only be represented in Court by an Attorney.

Why is this important? Well sometimes, poorer defendants decide that they can’t pay for an attorney and just sort of just show up with out an Attorney. When they do this as Individuals, the Court lets them. When the non-attorney individual also tries to speak for the Corporation, the Judge generally tells them, sorry but no. IIf they are sympathetic, they will usually continue (delay) the matter to give you time to hire an attorney for the Corporation.

This has created market for what lawyers call “unbundled services when they do it, and “unauthorized practice of law” when non-lawyers do it. (Or as the non-lawyers call it “Document Preparation Services”)

And the key thing here, is that service provider can basically ghostwrite and never show there face or name to the Court and provide partial and segregated legal services to the client. And the economic reason for this, is that you can ask for LESS money upfront, and limit your obligation on the back end if the client stops paying you.

Now, the practical problem, and its the money problem, is that for you as an Individual since you can represent yourself, me and hundreds of other people can take small amount of money and basically ghostwrite for you in bits and pieces a la carte. Like you have already experienced. You can pay as you go.

Unfortunately, the Corporation requires the Attorney to be in. The Corporation is either represented or its not. The Attorney is either in or he is out.

As an Attorney, if I’m in, I have responsibilities that I can’t shirk just because the client hasn’t paid me. Which means I go to the work, and then hope you pay me. As you might guess that’s not a good position to be in. And my only options if I’m not getting paid is to either quit or be your creditor and bank, and none of those are great options.

So typically, in the representing a corporation context, the Attorneys will estimate how much work they have to do in the next few months (or sometimes just weeks) and ask for a retainer that covers that. Then we send a bill usually monthly telling you what we did, how much it cost, and asking you to send us more money.

Different Lawyers have different Strategies but that is the quick and dirty.

So when your Corporation has an Answer due, and the Lawyer says give me $5000 (or $10,000, or whatever), he isn’t charging you $5000 for the Answer, he’s saying that he wants that money to take on the responsibility of being on the hook for the Corporation in the Court Proceedings.

For example, if I ask for $5000 to represent the Corporation, I may estimate, about $1000 will go into learning more about the case and filing an Answer. I suspect I might have to do some research and analysis of the law and case law. I expect the people suing you to immediately call me, and start to ask what your settlement position is. I expect that they will send “discovery” which is basically a bunch of questions that are designed to get information from the Corporation, but essentially from you, because you are the only known officer. The questions will have to be answered in detail, and in away that can’t be used against you. They might even ask to take your deposition, to make you explain in person and on the record what happened. And so on.

Because becoming Attorney of Record for the Corporation is not just filing the Answer, its being responsible for all that.

Now, if I take less money, all that means is that I become your Corporation’s creditor very quickly. And then I either quit, or I have to be your bank. And I don’t want to be the bank, and I don’t really want to be a creditor. And you don’t want me to be your creditor, because it makes me not like you, and that hurts our relationship, which is kind of important, between an Attorney and Client. And honestly, being my Debtor makes you not like me.

Now, do we sometimes do payments plans, carry receivables and other things to work with the Client. Yes. All the time. Its just not how we want to start. If you’ve paid me $100k and owe m $5k, meh. If you’ve paid me $5K and owe me $100K, then Houston, we got a problem. And somewhere in between every Lawyer has a tipping point.

So, a couple of 3 things to remember. 1) You can represent yourself, and everyone will offer you cheap “unbundled” or documentation preparation services, because you pay up front, and not one is giving you any credit and becoming your creditor. 2) Lawyers can’t do that with Corporations, we can’t unbundle corporate litigation. 3) Because we can’t unbundle we require more money upfront then someone who just ghostwrites from the shadows.

So, probably not a great place for a marketing burb, but what the heck.

As an Attorney (Thomas Hrouda Attorney at Law) I I represent Individuals and Corporations, in Civil Litigation of various sorts. I provide both full-service and unbundled services.

if you need civil litigation services in California, reach out to me for a confidential consultation. I am available to guide you through the legal system.

Don’t let uncertainties dictate the fate of your legacy – act now, and let us help you build a future that reflects your values and protects what matters most. Contact Thomas Hrouda, Attorney at Law at (951) 212-5163 and embark on a journey towards a more secure and well-planned tomorrow.