There are an estimated 1.3 million lawyers in America and a small fraction of them go on to start a new law firm.
Starting your own legal practice can open doors that working for an established firm can’t. You can land the exact clients you’re hoping to serve, set a schedule that fits your needs, and avoid difficult or demanding bosses.
However, it’s going to take quite a bit of work and effort to get started. Whether you’re ready to get started right away or you’re preparing to start your own law firm next year, there are steps you can take to get the ball rolling.
Read on for the step-by-step guide to starting a new law firm and establishing yourself as the best lawyer in town.
Step 1: Establish Your Niche
Whether you plan to work solo or with a group of other attorneys, you’ll need to establish your niche. Preferably, you should work in an area of law that aligns with your professional background.
Establishing your niche can also help you decide where to open up your law firm. What kinds of clients need help and can’t find it in your region? As a local attorney, you want to stand out from the competition.
Step 2: Pick Your Entity Type
You will need to pick an entity type for your new legal practice. The entity formation you choose will impact how your law firm is taxed and how much liability you take on. Common entity types chosen by lawyers include:
- sole proprietorships
- limited liability proprietorships
- professional corporations
- limited liability companies
Before settling on the right entity type for your law firm, consult with established legal professionals. We recommend talking to both an accountant and a business lawyer before making your choice.
Once you have officially formed an entity, you will need to file for a federal EIN (Employer Identification Number).
Step 3: Open the Proper Financial Accounts
Even if you are running a solo practice, you will need to open the proper financial accounts. When operating a law firm, it is not permissible to handle client and business funds using your personal financial accounts.
First, you will need a checking or operating account. You can’t place client funds directly in your personal bank account. In order to cover various expenses (including your own salary), you will need to place all income in your business checking or operating account.
Next, you will need a client trust account. Clients will often pay a retainer fee or provide a tangible asset to secure your legal services. These fees and assets must be held in a client trust account so that they are not unlawfully used.
In addition to a client trust account, you may want to open an IOLTA (Interest on Lawyers’ Trust Accounts). This is an account that allows you to transfer any interest accrued in your client trust account.
Finally, all law firms–especially new law firms–require a line of credit. There will be times when your expenses outweigh your income and you don’t want these times to uproot your business.
Step 4: Get Insurance
Even if you select a limited liability proprietorship or company for your law firm, you should consider getting additional liability insurance. These entity formations cannot protect you from all financial liabilities and having insurance can protect you from serious trouble.
Liability insurance for law firms is designed to cover any major losses resulting from errors you may make in providing legal services. In some states, having liability insurance is actually required, rather than optional.
Step 5: Come Up With Marketing Materials
In order to establish your law firm as the best in the region, you’re going to need to build brand recognition and attract clients. Start with a logo and web design that represents your business well. Consider dark and neutral tones in your branding materials, as these tend to look more professional than bright colors.
In addition to your branding materials, you will also need to come up with a marketing plan. Marketing is an endeavor that requires a great deal of expertise and we recommend working with a marketing firm like this one that offers marketing for divorce lawyers.
Step 6: Secure an Office Space
You have more options now than ever for creating the ideal work environment. Some lawyers have gravitated toward digital office space, meeting with clients virtually. Others have chosen to take advantage of shared office spaces, cutting down costs by forming spatial arrangements with other companies.
However, it’s worth noting that renting a traditional office space comes with unbeatable benefits. For example, you have to provide a real address in order to become search engine optimized. Plus, meeting with clients in a quiet, professional office space can increase their comfort and confidence in working with you.
Step 7: Get the Gear You Need
Finally, you’re going to need the right equipment to get the job done. This includes phones and business phone plans, an internet connection, computers and tablets, printers, and fax machines. It also includes suitable software plans (like Microsoft Office Suite) and a secure email server.
Remember, you may not be able to start with top-of-the-line gear. It’s best to start with equipment that will get the job done now and splurge on better equipment when you have a steady income.
Get Started on Your New Law Firm
Are you a new lawyer looking to get started on your own? Have you been working for someone else’s law firm and want to take control of your own career? We hope that our guide to starting a new law firm will help you launch the law practice of your dreams.
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