Introduction
Starting your own law firm can be an exciting and essential endeavor, whether you’re tired of demanding bosses, seeking a specific type of case, or craving schedule flexibility. However, the process can feel overwhelming at times. As an experienced lawyer, legal marketing expert, and business consultant, I’ve not only started my own law firm but also helped numerous attorneys navigate similar career changes and professional transitions, making this a topic deserving of thorough addressing.
Six Steps to Start Your Own Law Firm
Even if you’re uncertain about leaving your current job, there are several steps you can take to prepare for your eventual exit. Breaking down the tasks into manageable phases is crucial to prevent getting deterred. Here are the necessary basics:
1. Entity Formation
Consult with both a business lawyer and an accountant to determine the type of entity you should form. Your choice will impact various business aspects, including taxes and individual exposure to business debts and liabilities. Common entity types for small to medium-sized law firms include sole proprietorship, limited liability partnership, professional corporation, and limited liability company. Once you’ve formed your entity, file for a federal Employer Identification Number (EIN).
2. Financial Accounts
To ensure compliance with specific regulatory guidelines, lawyers must handle client funds appropriately. Set up the following accounts for your law firm:
- Checking Account(s): It’s crucial to avoid commingling client funds with personal money. Maintain a separate checking or operating account for your law firm to cover monthly expenses and other business-related costs.
- Client Trust Account: If a client pays a retainer or provides funds for their case, you’re typically required to keep the money in a client trust account.
- IOLTA: IOLTA refers to the Interest on Lawyers’ Trust Accounts. Funds stored in client trust accounts can potentially earn interest for varying periods. Lawyers must keep any interest earned on these funds in a separate IOLTA account.
- Credit Card: Having a business credit card is essential, especially since cash flow issues are common for new firms. It can help cover expenses and allow you to earn rewards or gain higher status on various programs.
3. Professional Liability Insurance
No entity type can provide the legal or financial protection that malpractice insurance offers. This coverage protects you in case of financial loss resulting from errors in providing legal services. Consult your state’s laws to determine if this coverage is mandatory for lawyers and the required amount.
4. Logo
Create a professionally designed logo for your entity. The logo should be consistent across all media platforms and come with the Pantone color numbers and font(s) used. It’s crucial to have the logo in multiple file formats, especially a vector file (.eps or .ai extension). Your law firm’s logo sets the tone for your marketing materials and dictates all marketing decisions, so it should be designed early in the entity creation process.
5. Office Space
While virtual offices and shared arrangements are becoming more popular, having dedicated physical office space is still important for various reasons. You’ll need a professional setting to meet clients and run your business. Additionally, a physical location with a unique address or suite number is necessary to rank well in search engine results organically, something many lawyers overlook.
6. Hardware and Software
Your law firm will require hardware such as phones, computers, and printers, as well as software like the Microsoft Office Suite and an email client. While you may not have the budget for your dream case management software right away, take note of your ideal IT setup and work towards it gradually.
What’s Next?
Once you’ve formed your entity and completed the basics, you can begin utilizing your logo to develop your core marketing channels. This includes creating a website, setting up social media accounts, and listing your firm in online directories. Set attainable goals in areas such as budgeting, marketing, hiring, and revenue forecasting, then work towards achieving them. Despite the significant changes in the legal industry over the years, the fundamentals of opening your law firm’s doors remain largely unchanged.
For more information and expert advice on starting your own law firm, visit Garrity Traina.
Note: This article is for informational purposes only and does not constitute legal advice.
