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Hanging Your Own Shingle: For the New and the Not So New Attorney
Note: Not to be considered legal advice. For general informational purposes only.
Extinct are the days of easily finding a job. Many new attorneys are turning to starting up their own private practice since the job market has become cold and the number of jobless law school graduates are increasing. Opening a law firm or hanging a shingle, as many refer to it, is not an easy task and requires looking into the future to plan for the right now. Rarely are new attorneys taught how to open a new practice and what is required by the N.C. State Bar. The goal of this blog, is not to be all inclusive of everything one needs to do, but is to serve as a roadmap for the things that are required and those things that one should consider before hopping out into the world of solo practice.
Before you hang your own shingle, there are several big ticket items you need to consider. Refer to my previous blog post, “Considerations Before Opening a New Law Practice,” which will guide you in the pre-opening considerations that must be established before you take any steps to hang your own shingle.
Once these pre-opening necessities are considered and planned, then comes the actual opening activities. Well, what is your practice to be called? You have to develop a name for your practice, which is not usually a difficult feat. In fact, it may be the easiest thing to do of all the other steps to opening your practice. Once you have selected a name, you have to get your firm or practice name approved by the N.C. State Bar, which is a form (“Application for Trade Name Registration”) that can be located on their website at: https://www.ncbar.gov/for-lawyers/forms/. This form will be submitted and within a few days typically, you will receive confirmation whether your name has been approved.
Once your business’ trade name has been approved, you must decide which corporate entity, if any, you would like to establish your business as. To determine which corporate entity will be most beneficial to you, it is a good idea to speak with a tax advisor. If you have chosen to establish a corporation or partnership or some other corporate structure you will have to complete a form to register your professional corporation with the N.C. State Bar, which can also be found at the website listed above. This application must be submitted to the N.C. State Bar before you file any professional entity documents with the N.C. Secretary of State. Once that application has been approved, then you may submit your corporate documents to the N.C. Secretary of State, which can be found at http://www.sosnc.gov/corporations/Forms.aspx?PItemId=5429742. The filing fees must be paid to the NC Secretary of State at the time you submit your application. Once those corporate documents have been returned with a file stamp, you must submit a copy of the corporate documents to the NC State Bar. For sole proprietorships, no corporate documents must be filed with the NC Secretary of State, but check with the N.C. State Bar to confirm what their requirements are for registering a sole proprietorship.
Next, apply for an Employer Identification Number (EIN) online through the IRS website at https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers-eins. This number is similar to a social security number, but it is for your business and prevents you from having to use your social security number on your business documents. This is essential especially for a corporate entity, because it keeps you separate from your business.
You have come a few miles on this hanging-your-own-shingle journey. Once you have your EIN number assigned to you, you must file for a privilege license with the NC Department of Revenue and pay the appropriate fee, which is relatively nominal. The application can be completed online at http://www.dornc.com/electronic/registration/index.html. Now that your firm has been established, here is where the rubber meets the road.
You will need to establish a bank account for your practice; usually two accounts. One account will be your Operating account, which is for all of your firm’s operating expenses (payroll, marketing, office space, supplies, bar dues, other fees, etc.) and for all monies you have earned from a client. The second account many attorney’s need, depending on their area of practice, is an IOLTA Trust account. This account is for all entrusted funds that do not belong to the attorney or which contains monies an attorney has not yet earned. Refer to the State Bar’s website for more information on trust accounts and the do’s and don’ts of maintaining and establishing such accounts. You must file with the bank a N.C. IOLTA Status Update Form certifying that your trust account was setup pursuant to IOLTA. You will also complete the IOLTA Overdraft Form, which will alert the N.C. State Bar if ever your Trust Account is overdrafted. The bank has these forms, but you can also access them from the N.C. State Bar Website (https://www.ncbar.gov/for-lawyers/forms/). You will need to order checks for both accounts. Your trust account checks must be business sized (longer than 6”) and not the standard check size. Your trust account checks must say IOLTA on them. It is recommended that you get your operating and trust account checks in different colors so as not to confuse the two. Refer to the State Bar’s rules on the exact requirements for your IOLTA account and what information is required to be printed on your trust account checks.
All attorneys should have malpractice insurance. Malpractice insurance is just like health insurance. When your Firm “gets sick” and is facing some lawsuit for some form of malpractice, this insurance will protect you and pay on any claims. For a first year practicing attorney it is cheaper, but as the years of practice increase, so will the insurance premium. Lawyer’s Mutual is a company that many attorneys use for their malpractice insurance needs. They will provide you a free quote at their website based on your Firm’s practice information and location.
If you are financially able to, it is a good idea to join some local bar associations or other legal associations. Not only are they great for networking with other attorneys, but some associations offer free or low-cost CLE classes and other events or member-only incentives. Each county has a local bar association and there are other statewide associations as well as national. National associations will be more costly.
Speaking of CLEs, N.C. has a new requirement for recent bar exam passers. New attorneys must complete a 12 hour “Professionalism for New Attorneys” two-day CLE. This will cover your first year CLE requirements. This course is designed to teach new attorneys about the practice, managing stress, relating to clients, maintaining and reconciling your trust account, and other topics.
Since all of your pre-opening activities have been completed, now it is time for you to starting reeling in your clients and begin your practice. What is your marketing plan? Will you have a website? How will potential clients find your Firm’s contact information? What supplies will you need to begin practicing? Will you have a printer? What about an office phone or cell phone or Google voice number? There are so many important decisions to make. Take your time and make the best ones for you and your new law firm.