Flat-Fee Formation Is Not the Margin Leak

A lawyer doing flat-fee LLC formation posted that his margins are getting destroyed. His diagnosis was the flat fee.

His own description says otherwise:

"The actual business formation part is easy. The agreement drafting is where the time disappears. A 2 hour job suddenly becomes a week of emails and revisions."

The flat fee is fine. He priced one scope and is delivering a different one.

Formation is a fixed, repeatable process. An operating agreement between multiple members is an open-ended negotiation with other people's lawyers in it. Those are two products. He sold them as one and quoted the price of the predictable half.

Two ways out, and only one of them is pricing.

Split the SKU. Formation stays flat. The operating agreement becomes its own engagement with a stated number of revision rounds, and round three is billed.

Or cap it inside the flat fee. Two rounds, a 5 business day response window from the client, then the file closes and reopening it is a new matter. Written into the engagement letter, said out loud on the intake call.

Most firms skip that second half and hope the client is reasonable. The revisions are not the leak. The absence of a stated stopping point is.

Going hourly on the drafting fixes his margin. It also hands the client an open meter on the part of the job they already find stressful. He would win the invoice and lose the referral.

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