First Legal Hire for a UK Startup: In-House Lawyer, Retainer, or Outsourced GC?

Founders usually frame this as a choice between hiring someone and finding a law firm. There's a third option most arrive at eventually — an outsourced General Counsel function — and it's worth weighing all three before signing anything.

Deciding · Part of Outsourced General Counsel

Three routes, one decision

Most founders reach for their first legal hire later than they should, then choose between two options — hire someone, or find a law firm — without knowing a third exists. All three routes can work. None of them work for everyone. Here's what each one actually costs, covers, and misses.

Option 1: An in-house lawyer

What it costs. Salary is the visible number, but it isn't the real one. On top of salary, an employer pays Class 1 National Insurance contributions — 15% from April 2025, on earnings above the £5,000 secondary threshold, according to gov.uk. Add automatic enrolment pension contributions, where the employer must pay at least 3% of qualifying earnings, per gov.uk's guidance on workplace pensions. Then add recruitment fees, equipment, software licences, holiday cover, and the management time it takes to run a hire most founders haven't managed before.

What it covers. One person, one set of experience. A generalist in-house lawyer at seed or Series A stage is usually strong on contracts and reasonably confident on employment and data protection, but thin on corporate transactions, regulatory work, or anything needing a second opinion. There's no bench. If they're on leave, or they leave, the function goes with them.

What it's best at. Speed of internal access and institutional memory. An in-house lawyer sits in the meetings, knows the deals, and can turn documents around same-day because they're not billing by the hour or managing five other clients. For a business with high transaction volume — dozens of customer contracts a month, frequent supplier negotiations — that internal presence earns its cost.

Where it fails. Coverage gaps on anything specialist — IP litigation, regulatory licensing, complex tax-driven structuring — and cost that doesn't flex down in a quiet quarter. A single in-house hire is also a single point of failure: no partner review, no second pair of eyes, and a founder often the only person able to judge whether the advice given is any good.

Option 2: A law firm on retainer

What it costs. Retainer arrangements with law firms vary enormously — some are a discounted block of hours, some a minimum monthly spend against hourly rates, some an informal 'call us when you need us' arrangement with no fixed cost until the invoice arrives. The billing unit is time, not outcome, which means the founder pays to have a question thought about, not just answered.

What it covers. Reserved legal activities — the conduct of litigation, exercising rights of audience, reserved instrument activities, probate activities, notarial acts, and the administration of oaths — sit with authorised persons under the Legal Services Act 2007: solicitors and firms regulated by the Solicitors Regulation Authority, or barristers regulated by the Bar Standards Board. A law firm on retainer is the only one of these three routes that can conduct litigation or exercise rights of audience directly.

What it's best at. Depth on the specific things law firms are built for — contentious disputes, regulated transactions, anything where professional indemnity cover and rights of audience actually matter. For a one-off, high-stakes matter, a firm is usually the right call regardless of what else is in place.

Where it fails. Coverage of the day-to-day. Founders don't usually ring a law firm to ask whether a Slack message to a supplier just created a binding variation, or whether a commission clause in an offer letter needs redrafting before Friday. The billing model discourages exactly that kind of low-stakes, high-frequency question — which is most of what an early-stage business actually needs answered. There's also no one holding the whole picture: a retainer relationship answers the question asked, not the question that should have been asked.

Option 3: An outsourced General Counsel function

What it costs. A fixed monthly fee, agreed in advance, covering ongoing commercial, contractual and corporate affairs work. No hourly clock, no surprise invoice for a fifteen-minute call.

What it covers. Contracts, terms of business, employment documentation, supplier and customer negotiations, corporate housekeeping, and the general 'is this a problem' triage that founders otherwise carry themselves or ignore. Dinmore Bell — a retained legal, commercial and corporate affairs function built for founder-led businesses in the UK and UAE — sits close enough to the business to know the deals and the people, without a full-time headcount cost.

What it's best at. Coverage and continuity without the single-point-of-failure problem of an in-house hire, and accountability without the metered-time problem of a retainer. Delivered as a fractional General Counsel, it gives a first-hire business the seniority it could not employ, for the part of the week it can use. It's also well suited to the statutory housekeeping that gets missed when no one is clearly responsible for it — confirmation statements due within 14 days of the review period ending, and annual accounts due nine months after the company's year end, both filed at Companies House, according to gov.uk.

Where it fails. It doesn't undertake reserved legal activities itself. It won't stand up in court, and it isn't a substitute for a specialist tax adviser working a complex structuring question. What it does do is hold the budget and the outcome — instructing and managing the right specialist when a matter genuinely needs one, rather than leaving the founder to find, brief and manage that relationship alone.

When an in-house hire is genuinely the right answer

There's a real threshold. Once a business has enough contract volume, enough hiring, or enough regulatory-adjacent work that a full-time person is provably cheaper than any external arrangement — and once the founder has the management capacity to run that hire properly, including cover for when they're not there — in-house is the right call. That's usually a Series B or C decision, not a seed-stage one, but it does arrive. The mistake is making it too early, because a single hire without a function around them tends to become the bottleneck they were meant to remove.

Where a specialist is needed

Litigation, court appearances, conveyancing and other reserved instrument activities, probate, and complex tax computations or filing positions all require an authorised specialist — a solicitor or barrister regulated by the SRA or Bar Standards Board respectively, or a chartered tax adviser for tax work. Dinmore Bell coordinates that instruction and holds the budget and the outcome on the founder's behalf.

The practical test

Ask three questions before choosing. How often does the business need a legal answer — daily, weekly, or a few times a quarter? Is the need broad and commercial, or narrow and contentious? And can the founder manage a direct report doing this work, or would that time be better spent running the business? The answers usually point clearly at one of the three routes — and for most founder-led businesses in their first two or three years, they point at a fixed-fee function rather than a headcount or a metered relationship.