How to Start a Law Firm

//How to Start a Law Firm

Starting your own law firm can be a rewarding experience especially if you’re someone with an entrepreneurial and adventurous spirit. But setting up a legal practice takes more than passion and desire, you need to understand the ins and outs of setting up a law office so that it’s positioned to thrive. Let’s take a look at how to start a law firm even if you’ve never owned a business before.

Law Firm Structure

Before starting a law firm, you need to consider what type of business structure you want to use. When you’re setting up a legal practice, you should decide if you want to be a sole-proprietor, a partnership, a limited liability company (LLC), or a corporation.

Sole-proprietor – This is the simplest business structure for a solo-practitioner who is just starting a law practice for the first time and has no employees. The tax scheme is very simple as all your law firm earnings are reported as personal income and you’re personally responsible for any debts the law firm incurs.

Partnership – If you’re working with another attorney, setting up a partnership may be a better option. In some states, depending on the law, you may be able to set up a Limited Liability Partnership (LLP). If you structure your law firm as a partnership, each partner will be responsible for their share of the firm’s debts, and taxes are paid through each partner’s individual tax returns. When you’re setting your law firm up as a partnership, you must have a clearly defined agreement regarding responsibilities and how profits will be split. Also have an exit plan if one partner decides to leave the firm.

Limited Liability Company (LLC) – If you are setting up your law practice as an LLC, you must file a membership agreement with your state. The responsibilities of each member must be spelled out in the membership agreement. A law firm set up as an LLC can choose to be taxed as a corporation or a partnership. It’s important to note that it may be possible to set up your law practice as a single member LLC. You can always amend the membership agreement if you add more partners at a later date.

Corporation – If you set up your law practice as a corporation, your firm will be treated as a unique entity separate from the owners. There are special rules and requirements to open a law firm as a corporation, so check the laws of your state. Some states allow certain professionals to create professional corporations.

When deciding on which business structure you will choose for your law firm, consider your future plans for adding new partners or employees. It’s advisable to structure your law firm in a way that gives you the flexibility to grow and change.

Consider Law Firm Costs

Location

One of the biggest impacts when considering how to start a law firm and the cost of running your law firm is location. Some locations can be cheap while others can be quite expensive. But depending on your clientele and the brand that you want to build when starting a law practice you may want to choose a location that gives you the easiest access to your desired clients. Here are a few questions you should ask yourself about finding the right office location.

  • Will you meet clients in your office?
  • Will you have employees such as an assistant or associate?
  • How will location impact your business?
  • Are you willing to share space with other attorneys?
  • Do you want to rent or buy your office location?

When you’re looking at office space when starting a law firm, it’s important that you look at all your options and try to stay as flexible as possible. There are many opportunities to share space and even support staff with other attorneys especially if you’re located in a decent sized city. You might also consider a virtual office if you don’t have a need to meet face-to-face with clients very often. There are meeting rooms that you can rent when you need to have meetings. When you’re starting your own law firm, make sure that you pick the office setup that will work best for your kind of law firm.

Employees

Before you take the first steps to owning a law firm, think about how you envision the office running. Do you want to work alone? Do you want to manage and hire several employees? What about a partner to take on half the workload and other responsibilities?  Whether or not you have employees working for you will have a huge impact on your costs.  Not only do you have to pay law firm employees a salary but you will need to pay payroll taxes and provide other benefits such as health insurance.  These expenses can drive up the overhead costs of your law firm quite significantly.

Technology Tools

What technology tools you use when you’re setting up a legal practice can make the difference between thriving and struggling financially. You need technology tools that will make it easy to do common tasks and that will reduce errors and save you time and money.  This is especially important when it comes to legal time-tracking and invoicing. Smokeball time-tracking tools will make it very easy to track exactly how long you’ve worked on a task (it’s done automatically) and will reduce errors when it comes to billing clients for time spent on their case.

You should also make sure that you can increase productivity by making all of your files and documents easily accessible no matter where you are. When you’re starting a law firm, every moment you spend should be spent in a profitable way.  Smokeball’s hybrid cloud-based system lets you access important case documents on the go from your laptop, tablet or smartphone with one of the best legal apps on the market. No more wasting time between appointments, access your documents and get work done at any time.

Even if you are a solo-practitioner, you should have the best tech tools possible for your law firm so that you don’t waste time dealing with tech malfunctions caused by old and incompatible systems. You should also make sure that your systems can easily accommodate your law firm as you add employees.

Owning a law firm requires you to have a long-term strategy about how you will structure your business, what location works best, and what technology tools will help you maintain and maximize productivity.  Before you take on your first client, take the time to figure out how to form a law firm in a way that will provide the best financial outcomes with the least amount of frustrations and missteps.

Myths of Starting Your Own Law Firm

For lawyers, once you strike out on your own, it’s only you who is in charge of everything —  from business development to streamlining organizational processes for yourself and your staff. It can be scary and there are a lot of myths floating around about hanging a shingle. But starting your own law firm isn’t as scary as you may think. In order to prove that, we’ve debunked a few of those pesky myths that might be holding you back from going out on your own.

Myth #1 – I won’t have enough billable work

This is usually the #1 concern for lawyers who are considering going solo. Of course, it’s hard to give up a guaranteed, dependable salary in favor of a risky move like starting your own business. But you likely have more resources at your disposal than you realize. Once you get the word out about your transition to a solo or small practice, your friends, family and former colleagues are all great sources of referrals to potential clients. Additionally, industry and small business networking events are great places to get the word out about your practice and meet potential clients.

Myth #2 – There are too many upfront costs

Depending on the industry, starting up a business can be costly. Office space, software and cost of materials can add up pretty quickly. Luckily for lawyers, the service you’re selling doesn’t require much more than your laptop, a decent printer, case management software and your brain. To save on costs, you can even work out of your home until you build up your client base enough to justify having an office. Until then, you can hold meetings with clients in co-working spaces or at restaurants and coffee shops.

Myth #3 – There will be too much administrative work

Even small law firms handle a fair share of paperwork on a daily basis. In order to avoid mix ups, mistakes and disorganization, it’s a smart idea to start your small law firm with a program that helps you manage your matters efficiently. Programs like Smokeball are designed specifically to help solo and small firm attorneys keep their matters in order and get work done faster. With this kind of software, you can do the best work possible for your clients in less time. Before you know it, your firm could go from a solo practice to a multi-attorney firm in no time!

Becoming a legal entrepreneur can sometimes feel like a scary journey, but with the right support systems in place, running a successful solo or small practice firm is within reach.

By | April 18th, 2018|

About the Author:

For years, Josh has helped lawyers become more organized, productive, and profitable. A trained litigator, Josh came to Smokeball from a large east-coast law firm where his practice focused on franchise, insurance, marine, and general litigation. His work with Smokeball, and his continued passion for what he does each day, is driven by a desire to help lawyers and their staff do better in every way. Knowing well the stress and strain put on today’s legal professional, he regularly focuses on improving work and life in the law. He has traveled the country working with and learning from lawyers and their staff. Josh speaks regularly to bar associations about successful law firm practices and other legal topics. Recent notable engagements have been with the Chicago Bar Association, the Illinois State Bar Association, and the Missouri Bar’s Solo and Small Firm Conference. In addition to his work at Smokeball, Josh serves on the Writing Resource Center staff at The John Marshall Law School. Besides legal technology, his research interests include judicial decision-making, jury decision-making and psychology, and legal writing. He has written and overseen research exploring causal effects of sex/gender on federal appellate court decision-making, and assisted with research for a forthcoming textbook on judicial decision-making. Josh holds his J.D., cum laude, from Washington University in St. Louis, where he served as a Senior Editor of the Wash. U. Law Review, held the prestigious Thompson Coburn Research Fellowship, served as Research Assistant to then-Vice-Dean (now Chancellor) Andrew D. Martin, and clerked at the U.S. District Court for the Eastern District of Missouri. He holds a B.A. in Political Science and a B.M. in Music Performance with Honors Scholar distinction from the University of Connecticut, making him a Huskies basketball fan through and through. Follow Josh’s activity on LinkedIn, and keep up with new articles on the Smokeball Blog.

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  1. […] inform you of your legal rights (which can be explained by a personal lawyer, even if they are just starting a law firm) in the United States. Also, this fact sheet provides the same information as the pamphlet titled, […]

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