The Basics of Starting Your Own Law Firm

My old boss was fond of the saying, “Hanging a solo shingle right out of law school is almost per se malpractice.” Although it may not be that extreme, one would be wise to gain at least a general understanding of the practice of law before going it alone.

Law school is a terrific educational endeavor, and one that trains the mind unlike any other, but it doesn’t train you to actually practice law.  Most lawyers would probably agree with the adage that “In theory there is no difference between theory and practice…but in practice there is.” A young attorney should learn the practical aspects of lawyering before venturing out on their own.  The best way to do this is working under the supervision of an experienced attorney who can provide the guidance needed to develop the basic skills needed to practice law effectively.  It is imperative that you develop a relative degree of expertise in each area or areas of law before striking out on your own. But that is merely the first step in setting up a solo practice. 

If you are working for a firm when you decide to open your own shop, you should do as much as you possibly can within the bounds of your ethical duties to your current employer and clients to prepare yourself for a soft landing once you depart.  It may be some time before you turn a profit in your new practice, so plan and prepare as much as you can while you are still getting a paycheck. But remember, your duties to your clients and employer must remain your top priority during this planning period. 

How much revenue do you need to cover all your personal expenses, and how much revenue do you need to operate your practice? Making a list or budget sheet is a good idea.  While remaining mindful of the adage “It takes money to make money,” do your best to keep overhead as low as reasonably possible.  

Should you lease or buy an office?  Should you enter an office-sharing arrangement with another attorney?  Can you run your type of practice from a home office?  Remember that face time is also marketing time, so, dollars saved in office expenses could result in dollars lost from unrealized daily personal interactions.  What about staffing?  Although many solo practitioners are truly solos…meaning they have no office staff and handle everything from answering phones to making court appearances, the type of practice you have will largely dictate the amount of support you need in the office.  A solo who does mostly court-appointed criminal and guardian ad litem work may be able to handle the full panoply of work that comes their way.  A solo who handles matters such as estate planning or real estate will likely need someone to assist with intake, drafting, and other duties.  You don’t want to lose clients and revenue because you are devoting too much time to administrative and office tasks. Sharing an office and intake staff with another attorney can be an effective way to increase your efficiency while also minimizing your expenses.  Finally, and with the caveat that you must always be careful relying upon technology, there is an ever-expanding number of computer-based office management tools to choose from.  For more information on technology and the law, you may want to peruse some of the articles on the ALPS Blog Home Page.

You will need to set up a bank account for your practice, which will include at a minimum, an operating account, and an Interest on Lawyers Trust Account (IOLTA).  Although relatively straightforward, you should be well-acquainted with the rules governing an attorney’s duties when handling client and third-party funds.  Depending on the type of practice you run, you will likely need to choose between a large national bank or a smaller, regional or local option.  Different banks offer different business banking options.  Keep in mind that the closer the relationship you have with your bank, the greater the potential for using those relationships to market your practice and bring in future clients. A smaller bank where you have personal contacts may be more inclined to refer matters to you than a larger bank.  

You will need to decide what type of business entity (LLC, PLLC, PC, etc.) to set up.  You may wish to consult with an accountant and perhaps an attorney specializing in business entities to determine what best meets your needs and goals.  You will also need to name your practice.  Can you name your business “John Doe and Associates” if you are the only attorney in the office?  Check with the bar to make sure you don’t run afoul of the rules governing law practices.

Consider the kind of technology you will need in your new practice, with an eye to both efficiency and economy. Depending on the type of practice you have, the level of technology will vary, but most solos don’t need much more than a reliable computer, cell phone, printer/scanner, and a backup system either on hardware of with a cloud service.  But make sure that the equipment and services you use are high-quality and reliable.  You may also want to engage the services of a tech support company to assist you in setting up your office, but at the very least, you should have technical support on standby to assist when issues with your technology arise…and rest assured, they will at some point. 

Marketing should be a top priority.  You can get the word out on your new practice with any number of tech options offered on platforms such as Google and LinkedIn.  Send letters to everyone you know about your new practice. Setting up and maintaining a quality website is also a clever idea when it comes to marketing.  There are ever-increasing web design options, from do-it-yourself to professional designers available to assist you in creating a law firm website.  Most bar associations have some type of lawyer referral service, and they are a good option to explore.  There are also a number of paid professional referral services such as LegalMatch and Pre-Paid Legal, that you may want to investigate.  Always remember to check the rules about such associations. Other professionals you deal with, such as real estate agents, bankers, counselors, doctors, accountants, and other attorneys, are a good marketing source.   Finally, good old-fashioned client referrals are a good way to grow your practice.  As is true of most businesses, there may be no better advertisement than word of mouth from satisfied customers.  

Depending on the state(s) in which you practice, you may or may not be required to have malpractice insurance. Whether required or not, you should seriously consider purchasing a Lawyer’s Professional Liability (LPL) insurance policy.  Basic coverage is usually relatively inexpensive and can provide peace of mind for the conscientious attorney.  Make sure to have a policy that is in effect the moment you open your doors.  For information on LPL policies and other insurance products offer by ALPS, please visit www.alpsinsurance.com and search under the Law Firm Insurance tab at the top of the page. 

Client selection is an important aspect of any law practice.  Of course, you need income to keep your practice operating, and you need clients to generate income. But keep in mind that you don’t need every client or case.  More importantly, you don’t actually want every client or case.  Learning to screen potential clients and cases for red flags is imperative.   If a potential client who has an active matter tells you that they have had three prior attorneys before coming to you, you should ask yourself why, and whether you want to be the next to take on this client and case.  The same goes for a potential client seeking initial advice about a matter who tells you they have taken their case to a number of attorneys who declined to take on the client.  Sometimes there are legitimate reasons for this history such as conflicts that arise, illnesses, and so on…sometimes it is a red flag about the client and/or their case.  Be wary of potential clients bearing a laundry list of prior attorneys.  Time wasted on a difficult client or bad case is time and revenue lost.

Before you start taking on clients in your new practice, you should associate with a fellow attorney who is familiar with your area of practice and who you would trust to assist in your absence.  Unlike a larger, multi-attorney firm with any number of attorneys who can step in in for a member of the firm, a solo practitioner has no one to fall back on if they don’t have an established backup/succession plan.  Even a short-term absence can have devastating financial and ethical results for a solo practice without sufficient backup coverage.  You can avoid this unfortunate scenario by simply having another attorney on whom you can rely in the event you are unable to manage your practice for any amount of time. 

Finally, remember to take care of yourself.  Law school teaches us how to think like a lawyer, but it does not teach us how stop thinking like a lawyer.  Find hobbies that offer respite from the practice of law, not hobbies that are part of the practice of law.  Golf outings are great, but golf isn’t much of a relief if you break clubs more often than you break par.  Don’t put off troubled files…unlike fine spirits, they won’t get better with age.  Unplug from work as often as you can and ask friends and colleagues for help when the job becomes too much.  By prioritizing yourself over your practice from time to time, you very well may find that you improve both in ways you never would have thought possible. 

Going solo can be exciting and daunting, but taking the proper steps before hanging out that shingle can be the difference between a smooth path to success and a rocky road filled with legal potholes.