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I recently sat down with 4 different attorneys to talk about their rates, fund fees, and what they would do for fund documents.
I gave them all the same information and got very different answers…
It is important to know what costs you will be paying and not just expecting or assuming what they might be.
This can get you into trouble and cost you a lot more than you think.
The regulatory parts of a fund are essential and we don’t want to mess around with them.
So let’s talk about some of these responses I got and what to look out for when searching for an attorney to do your fund documents.
Legal Costs of a Fund
Now before we get started let’s just quickly review our fund launch formula:
- Find a deal.
- Frame the deal (get your pitch deck together).
- Go and pitch investors, get soft commitments.
- Get the legal documents done!
So #4, how much is all this going to cost?
So I am currently launching a Real Estate fund with about $15 million.
I have soft commitments for this fund and I’m working on getting the legal documents,
Which is why I met with all these lawyers.
So I gave them all the same problem and information to see what they would say:
I’m looking to do a Reg D, 506c, 3c5, real estate fund.
I also told them I was looking to raise $50 million as our target.
We will also be raising this money from investors in Utah, Nevada, Arizona, and California.
So I get the first lawyer on the phone.
He was great and really nice but it was almost like pulling teeth for him to give me a price.
Finally I got them to give me a ballpark.
They told me it would be about 4 weeks and anywhere from $75K-$125K…
Which I thought was a little high, but they are apparently the best in the business so I didn’t discredit the offer.
Plus these fees can be reimbursed from out of your fund, but the downside is that your fund is immediately in the hole.
The second guy told me he does funds all the time and these were his rates:
He said it will take about 2 1/2 weeks and will cost $10k if I paid today.
That’s quite the difference!
And that was his basic package…
His most expensive package was $35k and included help and retainer for the next year.
We can already see how shopping around makes a huge difference.
So I called a 3rd lawyer and his offer was 4 weeks and $55k.
At this point I don’t know what to think because I got 3 very different offers.
So I did what any lost soul does and I called my dad.
If you have read my other articles you would know that my dad is the man when it comes to funds.
I told him my situation and he told me to keep looking and that I definitely didn’t need $100k documents for my first fund.
He said once you get really big then you’ll need more expensive docs, but for now…
You don’t.
He then gave me some other contacts to try.
When considering important parts of any business like legal documents or other services, it is always best to shop around. You can use these different rates to negotiate and get what’s best for you.
So I called one of the contacts and they offered $25K for 4 weeks.
Though, he said if I had my own templates it could be $7k – $10k cheaper because it would require less time on his end.
He also has experience in the fund niche I’m trying to launch.
So because he is a trusted referral, has experience, and I have my own document templates through my course I thought he could be a good fit.
Conclusion
Now I haven’t made a decision yet and want to call a few more people but I cannot express the importance of due dilligence and shopping around for what fits your needs.
Going with the first person you talk to may not be the best idea…
Even if they seem like the best.
You can save a whole lot of time, headaches, and money by doing your due dilligence,
Even when it comes to fees and legal docs.
What are some of the things you do to make sure a person or service is right for your fund or business?
Let me know below!
Take Care,
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
