[Direct answer]The two options are not mutually exclusive. The choice depends on the business volume and professional depth: for enterprises with limited budgets and frequent basic tasks such as contract review and daily consultation, hiring part-time legal consultants on an annual basis can cover their needs, with the annual fee typically lower than the comprehensive employment cost of a full-time legal professional; for medium and large enterprises with frequent transactions, multiple confidential positions, and the need for real-time supervision, it is advisable to establish a full-time legal department. The safest solution for most enterprises is to have "full-time legal professionals handle daily affairs and external consultants handle litigation and special projects". According to Article 919 of the Civil Code (effective January 1, 2021), the consultant contract is a contract of entrustment, and the scope of services can be flexibly agreed upon. According to Article 933, the contract can be terminated at any time, offering great flexibility in adjustments. You can start byIntellectual property protection and corporate legal servicesEvaluate the portfolio solutions, or visitBeijing Henglu Law FirmObtain configuration suggestions.

1. Problem background and typical scenarios

For startups and growth-stage enterprises, the annual number of contract reviews can reach dozens, but the employment cost of full-time legal staff far exceeds the actual workload, leading to a situation where "they can't afford them and don't use them to their full potential". For medium and large enterprises, although they have established legal departments, they often lack sufficient capabilities when dealing with specialized matters such as litigation, mergers and acquisitions, equity incentives, and intellectual property planning, resulting in legal departments being "unable to handle these tasks". Both types of enterprises also frequently encounter issues with unclear boundaries between in-house legal teams and external consultants - duplicate reviews of the same contract or major decisions being delayed due to no one taking the lead. Improper selection and combination design can lead to either inflated costs or uncovered risk exposure. Only when a crisis occurs do they realize that the "having a legal department" or "having consultants" they once took pride in can't provide timely assistance in emergencies.

II. Key points of dispute

  • Comparison of cost perspectives: Legal costs include not only salaries, but also social insurance and housing provident funds, as well as office space and management costs. The comprehensive annual cost is usually significantly higher than the annual fee for external consultants; however, when the number of cases is large, the consultants' hourly or per-case fees may exceed the total cost, so it is necessary to calculate the break-even point based on the actual number of cases.
  • The differences in capabilities cover the following aspects: Legal departments focus on internal processes and business scenarios, but litigation disputes, cross-field special projects, and cases in other regions require external resources; consultants have limited understanding of the internal situation of enterprises, and there is a time difference in their responses.
  • The division of responsibilities: the boundary between internal decision-making responsibilities and external advisory responsibilities, the scope of review and the boundary of exemption from liability. If these are not clearly stated in the two agreements, it will be easy for the parties to shift the blame on each other after a risk occurs.

III. Professional analysis by Henglue Law Firm

Based on Henglue Lawyer's observations after serving various enterprises, the selection of legal services can be summarized as "Three Checks". First, check the workload: For enterprises with an average of less than ten legal affairs per month, mainly involving contract review and consultation, hiring external lawyers is more cost-effective; for enterprises with a daily average of multiple legal affairs and the need to embed into business processes for real-time supervision, full-time legal affairs departments are more efficient. Second, check the depth of professional needs: For enterprises that are frequently involved in litigation, involved in intellectual property layout, equity structure, or cross-border business, the specialized capabilities of external lawyers are irreplaceable. Cooperation between legal affairs departments and external lawyers can balance efficiency and depth. The dispute experience accumulated by external lawyers in the fields of commercial disputes and contract disputes can improve the quality of contract drafting, which is difficult for legal affairs departments to cover alone, and can be combined with external lawyers' expertise to achieve better results.Business and contract dispute services for enterprisesEvaluation. Third, consider the management approach: Legal affairs involve labor relations, subject to the Labor Contract Law of the People's Republic of China (amended in 2012 and implemented on July 1, 2013), with management costs for recruitment, assessment, and resignation; consultants are subject to contractual relationships, and according to Article 933 of the Civil Code, clients can terminate the contract at any time (and should compensate for any losses caused), offering greater flexibility in decision-making and being suitable for enterprises with significant business fluctuations. After the new Company Law (amended on December 29, 2023 and implemented on July 1, 2024) strengthened the compliance responsibilities of directors, supervisors, and senior executives, the total amount of corporate compliance matters has increased, and the combination of "legal affairs managing daily affairs + consultants managing special projects" is becoming the mainstream approach.

IV. Practical suggestions and legal basis

At the legal basis level: Article 919 of the Civil Code defines the entrusted contract, and the content, fees, and term of the consultant service can all be agreed upon by both parties; Article 933 grants the client the right to terminate the contract at any time, allowing enterprises to retain flexibility in adjustment; the Labor Contract Law relates to the employment costs and termination costs of legal affairs, which should be included in the budget when making decisions; the Company Law stipulates the fiduciary duties and diligence obligations of directors, supervisors, and senior managers, raising the baseline requirements for corporate compliance arrangements. At the practical advice level: First, estimate the annual legal affairs volume and special needs before determining the staffing; for enterprises with established legal departments, retain external consultants to handle litigation and major special projects, and avoid duplicate reviews through written division of responsibilities; for small and micro enterprises without legal departments, require consultants to provide a service list—specifying the number of cases, response deadlines, and on-site frequency; review the service structure annually and adjust it dynamically with the business scale. For configuration solutions, please consult us.Intellectual property protection and corporate legal servicesTeam.

5. Henglu Law Firm's Reminder

There is no standard answer for legal services and consultations, only a degree of compatibility. We need to be wary of two extremes: entrusting major litigation to in-house staff who are unfamiliar with litigation procedures to save money, which not only results in losing the case; and outsourcing everything to avoid hassle, leaving no one internally to accumulate compliance assets and memorize processes. The safe path for SMEs is to adopt a "one person in charge internally + external consultants for professional support" model, leaving daily affairs to internal staff and delegating professional litigation to external consultants. When signing contracts, it's more important to specify the division of responsibilities, response deadlines, and fees in the agreement than to obsess over "who to hire". If you need to conduct a configuration assessment based on your company's current situation, you can do so throughBeijing Henglu Law FirmMake an appointment for an interview.

Q1: At what scale does a company need a full-time legal department?

There is no absolute threshold for the number of employees. The decision typically depends on the volume of legal affairs and exposure to risks: for companies with more than ten legal affairs per month, multiple contractual parties, and needs for labor management and compliance, it may be advisable to hire a full-time legal counsel; for small and medium-sized enterprises with dozens of contracts per year and primarily focusing on consulting and document drafting, the annual fee for external consultants is usually much lower than the total annual employment costs (salary, social insurance, housing provident fund, and management costs) of a full-time legal department. A compromise solution is to first hire external consultants and establish internal liaison personnel. Once the workload increases, the company can then transition to a full-time legal department, which helps control the transition costs and risks and avoids the burden of fixed staffing from the outset.

Q2: How much does an external legal consultant cost per year, and which is more cost-effective, hiring an external consultant or having an in-house legal department?

In the Beijing area, general legal consultants are priced according to the service list and response requirements, usually starting from tens of thousands of yuan, and complex needs can reach hundreds of thousands of yuan; a full-time legal affairs officer, in addition to salary, also has social insurance, housing provident fund, and management costs, and the annual comprehensive cost is generally higher than the annual fee of a consultant with the same coverage. However, when the workload is large, consultants charge by the piece, which can quickly accumulate and even exceed the fixed salary. The judgment criterion is the break-even point: list the number of annual contract reviews, consultation frequencies, and litigation cases, and calculate the total annual cost under the two models respectively, which is more accurate than just looking at the quotation, and can also expose hidden expenses.

Q3: Can we just hire a consultant without setting up a legal department, or vice versa?

Yes, it depends on the business model. For enterprises with low litigation risk and small transaction volume, it's sufficient to hire external consultants; however, for enterprises with high litigation frequency and complex organizational structures, relying solely on in-house legal departments may face challenges in handling major litigations and cross-field special projects, as litigation defense and specialized expertise require long-term case accumulation. In practice, most enterprises ultimately adopt a combination model: managing factual issues and processes internally, and handling litigation defense and specialized projects externally. If only one of these models is retained, the escalation path should be clearly defined in the agreement — specifying the circumstances under which external lawyers or additional legal positions must be engaged to avoid being unprepared or missing procedural deadlines when needed.

Q4: Can consultants be replaced without renewing their contracts at any time?

According to Article 933 of the Civil Code, either party may terminate the entrusted contract at any time, but those who cause losses shall be liable for compensation. There is also an obligation to give advance notice in industry practice. To avoid service disruption, it is recommended to stipulate in the contract the advance notice period (such as 30 days), the obligation to hand over matters and files, and the transition period services; avoid replacing lawyers in a concentrated manner before key stages such as annual audits and major contracts. Enterprises should usually keep the information of two or three alternative law firms, so that they will have room for bargaining and connection when changing lawyers, and will not be forced to entrust lawyers in a passive situation.

Q5: How to evaluate the service quality of part-time legal consultants?

Four hard indicators: the rate of achieving response deadlines, such as the proportion of written responses within 48 hours of consultation; the quality of contract review, checking whether risk warnings are reflected in specific clause amendments rather than general statements; the existence and depth of annual risk review; and the actual support level for litigation or major negotiations. It is recommended to establish a usage ledger, summarize it quarterly, and conduct a check against the service list at the end of the year as a basis for renewal and price adjustment. Timely replace those who fail to meet standards continuously. It is the most common waste to leave contracts unused after signing, which is also the real reason why many enterprises mistakenly believe that "consultants are useless".

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Intellectual property protection legal services·Beijing Henglue Law Firm