Your Entity Structure Options
A law office can be created in several different ways. The most common type of law office is a sole proprietor. Because there are fewer regulations and administrative requirements when compared to other entity types, the sole proprietor is the default law office option. Essentially, if you have not formed another business structure, then you are a sole proprietor by default. The main disadvantage of being a sole proprietor is that you only have liability protection if you stay below the threshold for personal liability. Instead, almost all of your liabilities will pass through to you individually for liability purposes. Again, the primary reason most people choose to be a sole proprietor is that you are not required to do anything other than practice law. If your goal is to simply create a law office and practice law, then being a sole proprietor is probably the best option for you.
An alternative to a sole proprietorship is a liability shield entity. "Liability shield" entities include: partnerships , Professional Corporations (PC), Professional Limited Liabilities Companies (PLLC), and Professional Limited Liability Partnerships (PLLP). All of these entity types are created through administrative requirements. Although they all offer some form of liability protection, as the person starting a law office, it is not a good decision to jump to one of these entity types merely to avoid liability. Instead, it usually makes better economic sense to wait and create a law office in a liability protection entity once you reach an amount of total liability that justifies the costs of maintaining the entity. As an example, if you are going to work for the government or make little money during your first 3 years, then you probably do not need to go to the additional expense of having a liability protection entity. It would be more cost effective to remain a sole proprietor for a few years and then form a liability protection entity once you are over a certain net income threshold.
How to Write a Business Plan
Just as you would for any other business, it’s smart to draft a detailed business plan for your law office. Your plan should include a market analysis, solid financial projections, marketing strategies and an operational plan. Your plan should map out the steps necessary to get you to the next level and the steps required to move you and your new office toward that point.
Thankfully, putting these pieces together need not be overwhelming. Use your contacts for information obtained from them about the marketplace. Reach out to friends, family (who may know of good office space), the local chamber of commerce and the county courthouse in your area for more information. If you and your areas are new to each other, then approach the Bar Association in your area to see if they lend any support to new lawyers opening their own firms and what that entails.
Some of the questions you’ll want to answer in your plan:
By answering these questions, you’ll gain a clearer picture of where you will be in a year or two and how you’ll get there. Do you seek to be the top firm in your area? Or do you have a different vision? Will the size of your firm be sufficient to serve your needs? Do you seek to manage a staff just as well as you manage your case load? Based on what you know of your area and clients, do you expect to enjoy success with your law practice?
These are all important questions to consider now, and before you open the law office. Otherwise, you could wind up falling into a trap of providing services or products you didn’t intend to offer. You could wind up offering services that your firm cannot actually support with staff. Your clients’ needs might be the exact opposite of your business plan. The point is to determine in advance where you’re headed with your new law office.
Getting Funded
The next step in determining how much money will be needed to launch the new office and how to secure it is determining your financing options. This means putting together your own financials to get some seed money and also determining how to finance necessary office expenses. There are several different ways to finance your new law office. You can obtain funds from a bank, or you can use private investors, or you can do a little of both. You should definitely have a line of credit with the bank for emergencies.
Most lenders will take into account past credit history, a credit score, income, employment or other earnings, and other personal assets. It is always best: To improve your chances for getting a loan, be sure to have a complete credit history that balances liabilities against assets. Two important factors as they look at your balance sheet are that you are able to complete projects and pay debts incurred while doing it. This will show lenders that you are able to generate revenue three months after opening the new office.
This step may take some time so begin to think about securing financing early on. But keep in mind, no matter how you choose to finance your new practice, you should have at least three months’ rent in reserve; aim for more if possible. Remember, this three months’ rent has to include your daily operational costs and all unexpected costs. Most banks will require 20% down for a loan and a good interest rate. Fortunately, there are also several government programs available that help new business owners by guaranteeing loans up to 80% of startup costs. Most of these loans are 10 or 15 year fixed loans. Small business loans are often smaller loans than traditional bank loans.
So whether you opt for a bank loan, private investors, small business loans, or even venture capitalists, you need to do your homework on securing financing or you could end up in big trouble if your bank calls in your loan or your investor makes unreasonable financial demands.
Location, Location, Location
The location of your law office is going to be one of the major decisions you make when starting your practice. You want your office to be very accessible to your clients and coworkers. Having an office close to the courthouse or near downtown makes your clients feel better about you, and gaining the respect of the local judges and lawyers will give you a valuable marketing asset. If you are considering billing your clients based on work performed at your office, the location becomes even more important. You need to look at how long it will take you to get to work, and how much time your clients will be spending getting to your office. All of these factors will influence your decision.
Depending on your practice and your clients, you may want or need "in and out" office access in the office you choose. This means that you would like your clients to be able to come to see you without the need to schedule an appointment. They can stop by and meet with you easily. Or, you can work a flexible schedule where you fly in or out of town on a regular basis, returning to the office frequently.
One point to consider is that taking public transportation to your office frequently can take longer than driving. If you are in good traffic and know where to park, driving can be faster. You’ll need to weigh the costs of parking at your office space in the downtown area of your city versus finding an inexpensive place to park that is still close to your office.
Technology and Software You Need
Just like the actual office itself, running a law firm from a technology standpoint has never been easier. Today, all firms, regardless of size, have access to affordable servers, workstations, firewalls, telephones, video conferencing, practice management solutions, cloud-based storage, encrypted email, virtual receptionists, live chat, and more. Even the smallest firms have full access to what their BigLaw competitors have through third-party providers. And these tools are essential if you’re going to open a law firm and succeed.
Practice Management Software
All practice management software platforms now sit at the cloud level. That means you don’t have to have anything on your local server or even your firm’s computer for it to work. Again, we turn to the cloud. Your practice management solution will look different depending upon the size of your firm, but any firm needs a practice management solution, from the solo practitioner on the go to 500+ attorney firms. The benefits of practice management software are many: Efficient time and billing, litigation support, case management, client relationship management, conflict checking, reporting, calendaring, and client web portal management. These are all expensive endeavors in any law firm, regardless of size . Practice management software frees your administrative staff to focus on areas that really matter to your law firm – and helps prevent costly errors.
Communication
For solo practitioners in the market, traditional means of communication always seem to get the job done. You can easily communicate with your clients, you can meet with them, you’re available when they need you – that piece is pretty simple. But as you begin to grow, things become more complex. You have to bring in support staff, you have a larger caseload and more client meetings, you’re working in multiple locations, and you need to keep up with constant communication with your clients. Client portals, secure email services, video conferencing, and collaboration software all become important tools in keeping your law firm efficient.
Cybersecurity
Many solo practitioners skimp on cybersecurity because they think they don’t have enough data to make it worthwhile, but that’s not the case. In fact, small law firms are particularly vulnerable to cyber attacks for several reasons: Among others. If your law firm uses technology in any way, you need to consider additional cybersecurity protections. The right solution can be affordable and can be tailored to your firm.
Staffing Your Firm
Whether you are just starting a solo practice or expanding a mid-sized firm, you will likely want to hire a few staff members to help with the workload of running a law practice. Hiring the right people for your law office is an investment in its future. You need to find qualified people who can pitch in and share the workload without taking away so much time that it negatively affects the practice.
Before hiring new staff, evaluate the current workload and which tasks take up the most time. Common areas in which you will need assistance are receptionist duties, administrative tasks, legal research and paralegal work, accounting, and collections.
To start, keep the recruitment process simple. Use your existing personal and professional networks to find suitable candidates. You can also place a simple ad on the practice area-specific forums. Don’t forget to post the job internally. An existing employee may know someone who would be an ideal fit for your law office.
Once you have a list of candidates, invite them to come in for an interview. It’s a good idea to ask them to complete a short homework assignment beforehand to get an idea of how they might handle some of the tasks they will need to complete if hired.
Once you have selected your candidates, be sure to call their references and double-check the information they provided to you. Consider visiting their social media pages to learn more about how they represent themselves online. If everything lines up and no red flags pop up, then you are ready to extend an offer.
Once you have hired your first employee, it’s important to set up the right structure. Whether you plan to have them as a full-time employee or on-call, make sure to have clear lines of hierarchy and responsibility from the outset. It’s important to keep lines of authority clear with your staff to be able to transition new team members smoothly without losing momentum.
Of course, everyone you hire will require training, but it is important not to micromanage them. Once they have proven their commitment to the position, giving them the freedom to overcome obstacles on their own can help them get fully acclimated to how your office operates. You should never leave them entirely to their own devices, however, and you will still need to supervise them and make sure that they are accomplishing the tasks they are meant to accomplish.
Bringing on new staff can be very beneficial to a small firm, but you must ensure that you have the demand for their services and the capital to support them before moving forward.
How to Market Your Firm
After the above steps are completed, it’s time to focus on marketing. As a new law office, the emphasis should be on bringing in clients and building a positive reputation. Some effective strategies include: Create a strong online presence. Use social media platforms as a free tool to grow your network. Get Facebook, LinkedIn and Twitter accounts up and running quickly. You can also create a blog on your site. Use this as an opportunity to create fresh content for your website, which can improve your search rankings, thus driving traffic to your site. Network. Focus on meeting with other local business owners and building relationships with them through one-to-ones and joint ventures. As a new law office, you may have difficulty getting meetings, so start by connecting with them via email and phone first. Explain who you are and how you can add value to their businesses. Once you build a relationship with them offer to take them to lunch or coffee. Ask for referrals. Talk with friends, family members and acquaintances that you trust. Once you have it set up so that others can refer business to you when the need arises, you will begin to receive flows of clients from your network. This is a great way to grow your practice relatively easy and can be used strategically to grow your business fast. Become involved in the community. Join a country club, business association or even a church. This will allow you to network and meet people while simultaneously giving you a social aspect in place to balance your work life. Volunteer. Get involved in your community; find organizations that you feel passionate about and volunteer your time. This will allow you to meet generous people while doing something good for your community. Attend events. Start going to local networking events in your area a few times a month. These events are normally free, and don’t take much time up. If there is an event worth paying for, such as the Florida Bar Annual Convention, then do so. Start out by creating a plan to build your network and decide what tactics to employ. As your practice grows it will get easier and easier to fill your schedule with new clients because they will just continue to flow in.
Compliance and Ethics
Running a law office comes with a set of responsibilities that extend beyond the legal work itself. Lawyers must adhere to a strict code of legal and ethical standards to ensure the protection of their clients and their practice. Compliance with these codes is not only about avoiding disciplinary actions; it’s also about maintaining public trust in the legal system and your individual practice.
Lawyers in the United States are admitted to practice law by virtue of meeting specific requirements set by the state(s) in which they practice. Those requirements often include the completion of pre-licensure examinations and standardized tests (the bar exam), background checks, and an interview with the local bar association.
Most state bar associations issue ethical rules that all members of the bar must follow. These rules cover various aspects of legal practice, including confidentiality, advertising and solicitation, competence, loyalty, and conflict of interest. Knowing how they apply to your practices and how to implement them is essential for maintaining compliance and an element of professionalism that extends past the immediate benefits of ensuring you stay in good standing with your local bar association.
An example of one of these ethical rules and how they may apply to your law firm includes the ban on "conflicts of interests." A conflict of interest arises when a lawyer engages in or is presented with a situation that could harm a client through divided loyalties or cause the lawyer’s personal interest to interfere with his or her professional duties. For example, if you run a sole practice law firm – made up solely of yourself – you have a conflict of interest if you attempt to represent both parties in a divorce .
An easy way to identify and avoid any potential conflicts is to evaluate whether a situation could be considered a "conflict" and avoid those situations at all costs. However, for complex conflict issues, consider consulting an ethics committee or professional advocate service at your local bar association. The services and contact information for your local bar association can be found on the American Bar Association’s website, which also provides various resources for lawyers that are applying for admission across state borders, finding pro bono opportunities, or seeking help with issues that might affect their professional performance, such as addiction, stress, and depression. From here, you can also access test preparation and educational resources, as well as fellowship programs.
Every law office is different, operating within different legal areas, and subject to different rules through state and federal regulations. There are plenty of general rules that govern every attorney, but be mindful of regional laws and ethical considerations that may be unique to your practice, such as laws governing lenders, manufacturers, and employers.
Compliance and ethical problems can arise for many reasons. In some cases, lawyers might be oblivious to the rules that apply to them; in other cases, they may decide that bending or breaking the rules is the most efficient approach. Either way, it’s critical to understand all the potential pitfalls before you’re penalized for it.
Your reputation, your career, and your legal practice are on the line. When in doubt, err on the side of caution. The penalties for violating the law, your rules of conduct, or your ethical duties can be surprisingly severe.