Outside general counsel is an outside lawyer your company keeps on an ongoing basis to handle its routine legal work, instead of hiring a new lawyer for each problem. No Minnesota statute defines the arrangement. It is a contract between your company and the lawyer, and the Minnesota Rules of Professional Conduct set its limits on fees, conflicts, and files. For a company of 10 to 250 employees, the practical choice is among five shapes: project work, a monthly flat fee, an hourly on-call relationship, a fractional general counsel, or an in-house hire. In the business inquiries I receive, a growing company asking for an ongoing attorney comes up more often than any other single subject. The arrangement sits within Minnesota company control and governance law, because the company, acting through the people its documents authorize, is the client.

What does outside general counsel do for a Minnesota company?

Outside general counsel handles a company’s continuing legal work: contracts, employment questions, governance records, disputes before they become lawsuits, and planning for larger events such as a sale. The client is the company itself. Under Minn. R. Prof. Conduct 1.13(a), “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.”

The value of the arrangement is the knowledge the lawyer builds up. A lawyer who already knows your contracts, owners, and people can answer a new question without rebuilding the background first. One company I serve as ongoing outside counsel, a Minnesota manufacturer with operations in two states, has brought me employment claims and policies, vendor and nondisclosure agreements, product warranties and labeling, workplace-safety matters, a real estate acquisition, and litigation.

The lawyer advises, and the company ordinarily decides. Comment [3] to Rule 1.13 says that when the company’s people make decisions for it, “the decisions ordinarily must be accepted by the lawyer even if their utility or prudence is doubtful,” and that “Decisions concerning policy and operations, including ones entailing serious risk, are not as such in the lawyer’s province.” A good outside general counsel names the legal risk in a business decision and ordinarily leaves the decision with the people who run the company. Rule 1.13(b) sets the limit: when the lawyer knows that someone at the company is acting in a way “that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization,” the lawyer “shall proceed as is reasonably necessary in the best interest of the organization,” which usually means the lawyer “shall refer the matter to higher authority in the organization.”

Which growth points move a company from project work to an ongoing lawyer?

An ongoing lawyer starts to pay for itself when legal questions arrive steadily instead of occasionally, so the time a new lawyer would spend learning the company would otherwise repeat on each matter. Four growth points can create that steady flow:

  1. Contract volume. When the company signs customer, vendor, and lease agreements each month, a lawyer who knows its standard terms can analyze a counterparty’s draft against them quickly.
  2. The first hires and a growing workforce. Each hire brings an offer letter, pay practices, handbook policies, and eventually a separation, and those documents should match one another.
  3. A dispute. A demand letter or a lawsuit moves faster when the lawyer already holds the contracts and correspondence behind it.
  4. A sale or a new owner on the horizon. A buyer’s due diligence tests years of records at once, and a gap found then has to be fixed on the buyer’s timeline.

Minnesota’s fee rule treats the relationship as one factor in a fee’s reasonableness. Minn. R. Prof. Conduct 1.5(a) lists “the nature and length of the professional relationship with the client” among “The factors to be considered in determining the reasonableness of a fee.” None of these growth points requires an ongoing arrangement. They mark the point at which comparing one against project work becomes worth the time.

How do the usual outside counsel arrangements compare?

Growing Minnesota companies choose among five arrangements, and each one prices the lawyer’s time differently. The right fit depends on how much legal work arrives, how predictable it is, and whether the company values a fixed budget or prefers to pay only for what it uses.

  1. Project work. The company hires a lawyer for one defined job, billed hourly or at a flat fee for that job. Under Minn. R. Prof. Conduct 1.2(c), “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Project work fits occasional, predictable needs.
  2. A monthly flat fee. The company pays a fixed amount each month for a defined set of services, such as contract analysis and routine employment questions, and other work is billed separately. Because Rule 1.5(b)(1) permits a flat fee “for specified legal services,” the agreement should list what the monthly amount covers.
  3. An hourly on-call relationship. The company keeps one lawyer as its first call and pays the lawyer’s hourly rate for the time used. The cost rises and falls with the volume of questions, and there is no monthly commitment.
  4. A fractional general counsel. A lawyer works part-time as the company’s general counsel, for example a set block of hours each month at a monthly price, and may attend leadership meetings. This shape fits a company that wants a lawyer inside its management routine without a full-time salary.
  5. An in-house hire. The company employs a lawyer full-time and pays salary and benefits, as it would for any employee. An in-house lawyer may still need outside lawyers for litigation and for areas outside the lawyer’s experience.

An arrangement can also blend these shapes, such as a monthly flat fee for routine work with litigation billed hourly.

How do Minnesota’s fee rules shape a monthly retainer?

Minnesota’s fee rule decides whether a monthly payment belongs to the lawyer when paid or stays the company’s money in a trust account until earned. Under Minn. R. Prof. Conduct 1.5(b), “fee payments received by a lawyer before legal services have been rendered are presumed to be unearned and shall be held in a trust account pursuant to Rule 1.15.” Two exceptions apply to monthly arrangements:

  • A flat fee for specified services. Under Rule 1.5(b)(1), a flat fee becomes the lawyer’s property on payment only “If agreed to in advance in a written fee agreement signed by the client.” That agreement must tell the company the nature and scope of the services and the total fee and payment terms. It must also say that the fee will not be held in trust until earned, that the company may end the relationship, and that the company is entitled to a refund if the services are not provided.
  • An availability fee. Rule 1.5(b)(2) lets a lawyer charge a reasonable fee for being available during a specified period, apart from pay for legal work, in a writing the company signs. “The writing shall clearly state that the fee is for availability only and that fees for legal services will be charged separately.”

Rule 1.5(b)(3) sets a limit on both: “Fee agreements may not describe any fee as nonrefundable or earned upon receipt.” When the relationship ends before a flat or availability fee is fully earned, the lawyer must refund the unearned portion. Any other prepayment, such as a monthly deposit drawn against hourly bills, goes into trust under Minn. R. Prof. Conduct 1.15(c)(5), and the lawyer must “withdraw the fees as earned,” with written notice of the time, amount, and purpose of each withdrawal under Rule 1.15(b). The word “retainer” can describe any of these three payments. I suggest asking which one an agreement means, because the answer decides what the company gets back if it leaves.

When is paying per project the cheaper fit?

Paying per project costs less when the company’s legal needs are occasional or predictable enough to schedule, because the company pays only for defined work and nothing for availability it does not use. A company that signs a few contracts a year, has a stable workforce, and has no dispute in sight may spend less with a lawyer it hires for each job.

Three options can lower the cost further:

  1. A one-time review. A focused review can produce a ranked list of fixes the company works through over the year. A one-time prioritized legal checklist is one version of this.
  2. Other professionals for the parts that are not legal work. A CPA can handle tax filings, and a payroll or HR provider can run payroll administration, leaving the lawyer the documents and decisions that carry legal risk.
  3. A defined-scope project. Under Rule 1.2(c), the company and the lawyer can agree to a limited scope, such as one contract template the sales team reuses, as long as the limit is reasonable and the company gives informed consent.

The tradeoff is context. A lawyer hired per project learns the company again each time, and the company carries the job of noticing when a question needs a lawyer. I suggest comparing a year of past legal bills against a monthly quote before choosing, because that history shows which arrangement the company’s actual volume supports.

What should an outside general counsel agreement spell out?

An outside general counsel agreement should state the scope, the fee basis, the expected response time, who at the company directs the lawyer, how conflicts are handled, who keeps the documents, and whether a yearly checkup is included. Minn. R. Prof. Conduct 1.5(b) requires the scope and the basis or rate of the fee to be communicated “preferably in writing.”

  1. Scope. The agreement should list what the monthly or hourly arrangement covers and what is billed separately, such as litigation or the sale of the company.
  2. Response time. Minn. R. Prof. Conduct 1.4(a) sets the floor: the lawyer must “keep the client reasonably informed about the status of the matter” and “promptly comply with reasonable requests for information.” A specific turnaround, such as a stated time for contract comments, should be written in when it matters to the company.
  3. Who directs the lawyer. The agreement should name the officers or managers who may assign work.
  4. Conflict waivers. Some engagement letters ask the company to consent in advance to future conflicts. Comment [22] to Minn. R. Prof. Conduct 1.7 says that “If the consent is general and open-ended, then the consent ordinarily will be ineffective, because it is not reasonably likely that the client will have understood the material risks involved.” The same comment adds that “if the client is an experienced user of the legal services involved and is reasonably informed regarding the risk that a conflict may arise, such consent is more likely to be effective.”
  5. Document ownership. Under Minn. R. Prof. Conduct 1.16(e)(1), the client is entitled to “the papers and property for which the client has paid the lawyer’s fees and reimbursed the lawyer’s costs,” and Rule 1.16(g) says “A lawyer shall not condition the return of client papers and property on payment of the lawyer’s fee.” In transactional work, unexecuted drafts the company has not paid for are excluded under Rule 1.16(e)(3), and Rule 1.16(f) permits a retrieval charge only if the company agreed to it in writing before the relationship ended.
  6. An annual checkup. The agreement should say whether a yearly review is part of the monthly price or quoted separately.

Who does the company’s lawyer represent when owners disagree?

The company’s lawyer represents the company, not any one owner. Under Minn. R. Prof. Conduct 1.13(a), the lawyer represents “the organization acting through its duly authorized constituents,” so in an owner dispute the lawyer takes direction from the people the governing documents and the statute authorize to act for the company.

Who is authorized depends on the type of entity:

  • A corporation. Under Minn. Stat. § 302A.201, subd. 1, “The business and affairs of a corporation shall be managed by or under the direction of a board, subject to the provisions of subdivision 2 and section 302A.457, and except as may be otherwise provided in the articles.”
  • A member-managed LLC. Under Minn. Stat. § 322C.0407, subd. 2, an ordinary-course difference “may be decided by a majority of the members,” and “An act outside the ordinary course of the activities of the company may be undertaken only with the consent of all members.”
  • A manager-managed LLC. Under Minn. Stat. § 322C.0407, subd. 3, company matters are “decided exclusively by the managers,” except as the chapter expressly provides otherwise. The same subdivision keeps some decisions with the owners: “The consent of all members is required to” take an act outside the ordinary course, such as selling substantially all of the company’s property or amending the operating agreement.
  • A board-managed LLC. Under Minn. Stat. § 322C.0407, subd. 4, the company’s activities “are to be managed by and under the direction of a board of governors.” The board has one or more governors, as the members holding a majority of the voting power decide. In that structure, “only officers, managers, or other agents designated by the board or through a process approved by the board have the right to act for the limited liability company, and that right extends only to the extent consistent with the terms of the designation.” The consent of all members is still required to sell substantially all of the company’s property outside the ordinary course (with exceptions, such as granting a security interest), approve a merger, or amend the operating agreement. In any of these LLCs, members may give a required consent without a meeting under Minn. Stat. § 322C.0407, subd. 5, “by the written consent of the members holding the voting power required to take such action at a duly called meeting at which all members were present.”

For a corporation, the board’s authority can shift through the articles, through unanimous shareholder action under subdivision 2 of § 302A.201, or through a written shareholder agreement that Minn. Stat. § 302A.457, subd. 2 makes “valid and specifically enforceable” when all of the shareholders and subscribers sign it. For an LLC, an operating agreement can change those defaults, which is why the question of who can bind the company belongs in the governing documents before any dispute.

Under Rule 1.13(f), the company’s lawyer may represent an owner personally only “subject to the provisions of Rule 1.7,” and any required company consent must come from another official or from the shareholders. When an owner’s interests become adverse to the company’s, Rule 1.13(e) requires the lawyer to “explain the identity of the client.” Comment [9] adds that “when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged.” An owner who wants advice on that owner’s own position against a co-owner may need a separate lawyer, as happens when co-owners separate. The directors’ own obligations are covered in the duties the board owes the company.

An annual legal checkup compares the company’s legal documents against how the business looks now, so the records catch up with a year of growth. It should cover the governing documents, key contracts, employment documents, intellectual property, open disputes, and state filings:

  • Governing documents. The articles, bylaws or operating agreement, and owner agreements should match current ownership, officers, and voting.
  • Key contracts. Renewal dates, limits on assignment, and terms that changed in negotiation should be on a list someone owns.
  • Employment documents. Offer letters, the handbook, and independent-contractor agreements should reflect the company’s current headcount and locations.
  • Intellectual property. Trademark registrations and written assignments from the employees and contractors who created company work should be on file. Under Minn. Stat. § 181.78, subd. 3, an employment agreement requiring an employee to assign inventions also requires the employer, “at the time the agreement is made,” to give the employee written notice that the agreement does not reach certain inventions. Those are inventions developed “entirely on the employee’s own time” without the employer’s equipment, supplies, facility, or trade secret information that meet the further conditions the statute lists, and subdivision 1 makes a provision reaching them “to that extent void and unenforceable.”
  • Disputes. Threatened claims and demand letters should be logged, with the related records kept.
  • State filings. Under Minn. Stat. § 302A.821, subd. 1, beginning the calendar year after it incorporates, a corporation “must file with the secretary of state by December 31 of each calendar year a renewal.” The secretary of state “may send annually” a notice informing the corporation “that failing to file the annual renewal will result in an administrative dissolution of the corporation.” Under Minn. Stat. § 322C.0208, an LLC likewise “must file with the secretary of state by December 31 of each calendar year a renewal containing the items required by section 5.34,” beginning the calendar year after it files its articles of organization. The optional notice to an LLC warns of “an administrative termination of the limited liability company.” I suggest checking the statute’s current text before relying on that date, because the legislature can amend it.

The Minnesota business compliance calendar lays out the recurring dates a checkup should confirm.

How do fractional and in-house general counsel differ from an outside firm?

A fractional or in-house general counsel works inside the company’s management, while an outside firm advises from outside it. That difference changes three things: licensing, conflicts, and the attorney-client privilege.

Licensing. Under Minn. R. Admission to the Bar 10A, a lawyer licensed in another jurisdiction “shall not practice law in Minnesota as house counsel unless he or she is admitted to practice in Minnesota” under one of the listed rules. A house counsel license “authorizes the holder to practice solely for the employer designated” in the employer’s affidavit (Rule 10D), and it expires when that employment ends (Rule 10E). Minn. R. Prof. Conduct 5.5(b) separately bars a lawyer not admitted here from establishing a “systematic and continuous presence in this jurisdiction for the practice of Minnesota law” except as the rules or other law authorize. I suggest confirming that a fractional general counsel holds a full Minnesota license, because a house counsel license covers only the one employer named.

Conflicts. A fractional general counsel who serves several companies owes duties to each of them. Minn. R. Prof. Conduct 1.7(a) treats it as a conflict when a representation will be “directly adverse to another client” (Rule 1.7(a)(1)). The rule also treats it as a conflict when “there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person, or by a personal interest of the lawyer” (Rule 1.7(a)(2)). Rule 1.7(b) permits it only on four conditions, including that “each affected client gives informed consent, confirmed in writing.” Under Rule 1.10(a), a Rule 1.7 or 1.9 conflict of one lawyer in a firm generally bars the other lawyers in that firm as well.

Privilege. Minnesota’s privilege statute, Minn. Stat. § 595.02, subd. 1(b), protects the attorney’s advice “given thereon in the course of professional duty.” A lawyer who also gives business advice as an executive should keep legal advice identifiable as legal advice, because the statute reaches advice given in that professional role. The risks of one person holding the COO and general counsel roles and the wider rules on attorney-client privilege inside a company are covered separately.

Does a 40-person company need its own in-house general counsel?

Not necessarily. A company of that size can have an outside lawyer handle its routine legal work for a monthly flat fee covering specified services, or on an hourly on-call basis that bills only the time used, instead of paying a full-time salary. An in-house hire fits when the legal work would fill a full-time role. A lawyer licensed only in another state must be admitted in Minnesota to work as house counsel here, under Minnesota Rule for Admission to the Bar 10A.

Can a lawyer charge a monthly fee just to be available?

Yes. Minn. R. Prof. Conduct 1.5(b)(2) permits an availability fee for a specified period, separate from pay for legal services. The fee must be reasonable and set out in a writing the company signs, and the writing must clearly state that the fee is for availability only and that fees for legal services will be charged separately. Under Rule 1.5(b)(3), the agreement may not describe the fee as nonrefundable.

Is a prepaid monthly retainer refundable if we end the relationship early?

The unearned part is. Under Minn. R. Prof. Conduct 1.5(b)(3), when a client has paid a flat fee or an availability fee and the relationship ends before the fee is fully earned, the lawyer must refund the unearned portion, and no fee agreement may describe a fee as nonrefundable. Rule 1.16(d) also requires refunding any advance payment of fees that has not been earned. A deposit held in trust under Rule 1.15 remains the company’s money until the lawyer earns it.

Can our company's lawyer also represent me personally?

Sometimes. Minn. R. Prof. Conduct 1.13(f) lets a company’s lawyer also represent an owner, officer, or employee, subject to the conflict rules in Rule 1.7. When the company’s consent is required, it must come from an appropriate official other than the person to be represented, or from the shareholders. If your interests become adverse to the company’s, Rule 1.13(e) requires the lawyer to explain the identity of the client. Comment [9] adds that when there is such adversity of interest, the lawyer for the company cannot provide legal representation for you, and your discussions with that lawyer may not be privileged.

Do we get our files if we switch outside lawyers?

Yes. Under Minn. R. Prof. Conduct 1.16(e), the papers the company delivered and the work it paid for are the client’s, though in transactional work unexecuted drafts the company has not paid for are excluded. In a pending claim or lawsuit, Rule 1.16(e)(2) also gives the client the pleadings, motions, discovery, memoranda, correspondence, and other litigation materials that have been drafted and served or filed, regardless of whether the client has paid for them. Rule 1.16(g) bars a lawyer from holding the files until fees are paid, and Rule 1.16(f) allows a copying or retrieval charge only if the company agreed to it in writing before the relationship ended.

Should our outside lawyer sit on our board?

It can work, but I suggest weighing two risks first, because each can cost the company protection it expects. Comment [35] to Minn. R. Prof. Conduct 1.7 says a lawyer who is also a director should tell the other directors that matters discussed at board meetings with the lawyer present as a director might not be protected by the attorney-client privilege. The comment adds that conflict of interest considerations might require the lawyer’s recusal as a director or might require the lawyer and the lawyer’s firm to decline representation of the corporation in a matter. If there is material risk that the dual role will compromise the lawyer’s independence of professional judgment, the comment says the lawyer should not serve as a director or should cease to act as the corporation’s lawyer when conflicts of interest arise.

Choosing an Ongoing Arrangement

Outside general counsel gives a growing Minnesota company one lawyer who knows its contracts, owners, and people, under a contract the Minnesota Rules of Professional Conduct shape. The five arrangements differ in how they price that lawyer’s time, and the right one follows the company’s actual volume of legal work. Whatever the shape, the agreement should state the scope, the fee basis, who directs the lawyer, and who keeps the files, and a monthly payment should be labeled as a flat fee, an availability fee, or a trust deposit. Project work stays the cheaper fit for a company whose legal needs are occasional. For related questions about who controls a company and how it decides, see Minnesota company control and governance. If you are weighing an engagement letter or a monthly quote, email [email protected] with a short description of the company and the arrangement. I run an intake and conflict check before reviewing any confidential document, so I suggest sending the letter or quote itself only after that check clears, because it may name your current lawyer and that lawyer’s terms. I can then tell you which fee type it uses and what its scope leaves out.