The 1-2-3 Guide to Starting Your Own Law Firm
Law schools teach their students the profession of law but not necessarily the business of law. In other words, the same knowledge and skills that make someone a good lawyer may not be the same knowledge and skills that make them a good businessperson.
Yet, managing your own practice could be the most professionally fulfilling thing you can do as an attorney. When you start a law firm, you can choose what kinds of clients you represent. You also get to craft your business however works best for you, with control over a broad range of matters from mission and vision to office culture.
Fortunately, establishing a law firm is not much more complicated than establishing any other kind of business. These few simple steps can help put you well on your way to building your professional future as the owner of a law firm.
1. Determine Your Law Firm’s Startup Costs
First, consider creating a financial roadmap for yourself. Major startup costs to consider include:
Will you be leasing office space, renting a virtual office that you use only when meeting with clients, or working entirely out of your home until you have the revenue stream to support commercial premises?
Your supply needs will generally depend on your space. For example, if you’re renting a virtual office, you’ll likely only need your laptop and possibly a dedicated printer/scanner. If, on the other hand, you’re leasing a commercial space, you may need to outfit it with furniture for yourself and your clients. If you’re running your law firm out of a home office, all you might need to add are the standard business supplies like notepads, pens, etc.
Licensing and continuing legal education are mandatory expenses.
You may also consider getting insurance, such as general liability and property insurance policies. Some attorneys opt for a business owners' policy (BOP), which combines the general liability and property exposures. A BOP policy helps protect your business and business belongings much like a homeowner’s insurance helps protect your home and personal belongings.
Additional coverage types to consider include professional liability insurance for lawyers, cyber liability, employment practices liability, directors’ and officers’, and workers’ compensation policies.
Spending money on marketing can help you gain those first clients. At the very least, you may need a website and business cards. However, paid advertising options could help you become solvent much faster.
2.Create a Business Plan
What is your business all about? Creating a business plan may present an opportunity to get clear about what you want to accomplish and how you’d like to go about it. A business plan should include:
An Executive Summary
The summary should include your firm’s:
- Mission and vision statements
- Core values
- Key goals
- Value proposition
- Specific legal areas your practice will serve
A Detailed Description of Your Firm
Here, you should state what type of law you will practice and the kinds of clients your firm aims to serve. This is also a place to outline your legal structure and practical details like your physical location.
You can include the following in your market analysis:
- Description of your target audience
- Description of your areas of practice
- Competitive analysis that identifies your competitors and how they serve your target clients
- Financial projections based on your target audience research and pricing structure
A marketing strategy is your roadmap for attracting new clients. You can use it to create an action plan for reaching potential clients. You may also need to outline a dedicated budget to support your marketing strategy.
This can include your startup budget, break-even analysis, and detailed financial projections.
3. Form Your Business Entity
Once you have a financial roadmap and a business plan, the next step is to set up your business entity.
If you plan to:
- Be a one-person firm: You can register your business as a sole proprietorship, professional corporation, or single-member limited liability company (LLC).
- Have other attorneys working for your firm: You can register as a professional corporation, partnership, limited liability company, or limited liability partnership (LLP).
While a sole proprietorship may offer the simplest route to getting your law firm off the ground, you could be held personally liable for damages not covered by your insurance in case your firm is sued for any reason. You should also note that not all states allow law firms to form as LLPs, and the joint liability between partners may not make this the most attractive option to start a law firm.
Putting It All Together to Start Your Law Firm
With a financial roadmap, business plan, and business entity registration, you should be well on your way to practicing law on your own terms.
Get insurance for your law firm today.
As you put your financial and business plans into action, a good next step is to also be proactive about mitigating risk. You should know ahead of time how you would handle anything from data breaches to firing your clients. To that end, Aon Attorneys Advantage offers risk management articles designed to help you handle difficult situations in your practice.
Finally, keep in mind that starting your own law practice can be a rewarding but complex process. Protecting your business with the right insurance policy from the start can help clear its way for future success and minimize headaches along the way.