March 1, 2017 | Share

Considerations Before Opening a New Law Practice

Note: Not to be considered legal advice. For general informational purposes only.

More attorneys are considering traveling the path to private practice whether solo or as a partnership. Opening any type of business requires a careful thought process and plan.  The plan should come together before you file any documents and should usually take the form of a business plan, which is a business’ roadmap for success.  This article will not discuss business plans, but is intended to get you thinking about the ins and outs of opening a law practice.

The first thing a new attorney should consider prior to opening a law firm are:

1. Corporate structure
2. The area(s) of law you intend to practice in
3. Your target clients
4. Marketing/branding plans
5. Target geographic location
6. Office v. Virtual office v. Office share
7. Start-up capital and monthly expenses
8. Mentorship

Let’s tackle and briefly discuss each of the enumerations above:

1. Corporate Structure: The tax implications you are seeking will determine whether a sole proprietorship, partnership, professional association (P.A.), professional corporation (P.C.), limited liability company (L.L.C.), or professional limited liability company (P.L.L.C.) structure is best for you. Some structures will cause you to incur tax liabilities twice and with others you may only be taxed once on your actual wages. It is imperative to speak with a tax advisor who can advise you on the implications of each and how a particular structure can impact you legally should your firm or practice be subject to a lawsuit. As best as possible, you want to shield yourself from personal liability as it could have negative, long-term consequences should anything go wrong and you become a party to a lawsuit.
2. The Area(s) of Law You Will Practice: As you are aware, there are quite a host of legal practice areas. Some attorneys practice in multiple areas (general practice) while others only practice in a few or even one limited area. As a new attorney, it might be best to concentrate on one to three areas of law instead of biting more off the apple than you can chew, which can cause you to be overwhelmed or have you become the jack of all trades and master of none. You want to provide great service to your clients and starting your practice off with 10 different areas, will not advance that goal. You can always add more to your repertoire in the future as you go along, as it is highly unlikely you will be entering a profession only to leave soon thereafter or retire in a short while. Take your time!
3. Target Clients: You have to know who your clientele will be and where you will focus your marketing (to be discussed next). Will your practice cater to children, if so, surely you will not likely find them roaming the court hallways. Nor will you find them at the animal shelter. If your practice targets elders, many of your clients may be in a hospital or nursing home. If you plan to be a general practitioner and practice several areas inclusive of all different types of individuals, you will have to decide where those individuals are located and how you will reach them.
4. Marketing/Branding Plans: What is your business? Who are you? What is your brand? What is it about your business that you want others to see or know? This is your brand. You must establish your own unique brand. Yes, there are a host of law firms on just about every block, but you must separate yourself and your practice from everyone else. Your brand goes hand in hand with your marketing. Your marketing will be the face of your brand and your business before any client ever meets with or speaks with you. You want this to be something that not only draws a person to your practice, but keeps them there. Your brand and your marketing is inclusive of a logo, maybe a catch phrase, your niche practice area, and how and what you communicate to others. Marketing comes in many different forms; it could be a billboard, mailing letters to potential clients, referrals, networking events, business cards or other paraphernalia, or radio and television commercials, just to name a few. Some attorneys choose to distribute pens or coffee mugs. Which marketing strategy(ies) you choose must not be designed to “keep up with the Joneses,” but must be carefully chosen based upon your brand and your practice areas. Some attorneys may not have to be concerned with marketing if they have chosen a career as in-house counsel with a corporate entity; whereas, on the other hand, a private criminal defense or personal injury attorney may have to engage in some marketing activities.
5. Target Geographic Location: Where will your practice be located and how far are you willing to travel to represent a client? The nature of some practice areas, such as immigration, may require you to travel across the state or out of state for court, while other practice areas may allow you to limit your practice to just a few counties. Although you are licensed for the entire state in which you have been admitted, is it cost efficient and a great use of your time to travel 5 hours for a simple speeding ticket or to have a client sign a will? You entered this career to be a benefit to others, yes, but you also probably do not intend to work for free throughout your career. Therefore, if you want to make a living and be the best attorney you can be, you cannot spend all of your time in a car every day in private practice. Traveling to multiple counties that are far spread apart may result in your being in the car all day every day and you may not reap the financial rewards you are seeking, especially when you are missing phone calls from potential new clients.
6. Office v. Virtual Office v. Office Share: Deciding where you will set up your daily operations is not a decision to be taken lightly as you will want to do what will be most cost efficient for you, the business, and your potential clients. Although it is the most cost efficient (FREE!), you do not want to meet clients at McDonalds or Panera Bread. Those may be good places to eat lunch, but not great places to grow your business. Not only is it unprofessional and does nothing to establish your brand in a successful manner, but client confidentiality, which is necessary and required, will be lost. For attorneys starting a new practice directly after having passed the bar, it is a great possibility that there may not be a lot of capital (to be discussed next) to pay for an office space outright. Moreover, if you are a new attorney, it is highly likely that you do not have many clients. Would it be a good use of your resources to rent a full office on your own? Probably not. What would likely be a better idea is to either pay for a virtual office, which is significantly cheaper than having an office and you can use it as you need it. A virtual office gives you access to a receptionist, a mailing address (other than your home address, which I advise against using as your business address), access to phones, printers, copiers, fax machines, and maybe even some other amenities. With a virtual office, you are allotted a certain number of conference room hours per month in which you can meet with a client as needed. You may not have to sign a long-term contract with a virtual office as opposed to a regular office. Depending on the structure, an office share arrangement might be beneficial as well, but that will be determined by the agreement and the cost. Keep in mind, though, regardless of the office space you choose, it is advisable to make it convenient for your clients. This means, you want to consider location. Is your office near the courthouse if your practice requires you to frequent the courthouse? Is there ample parking nearby your office? Are clients able to easily find your office? Is your office in a well-lit area or in an area where clients would feel safe coming to meet you in the evening?
7. Start-Up Capital and Monthly Expenses: The biggest consideration and the one that causes most distress is money. How do you plan to finance your start-up costs? Not only that, but will you need a place to meet with clients. I have seen various articles written that opine that between $5,000 and $30,000 is needed to start a law practice. That is a huge range, which in truth really depends on all of the considerations aforementioned. However, you will need the basics, i.e. meeting location, pens, note pads, paper, printer/ink, and business cards. Do you intend to pay yourself a salary? If so, will that be weekly, bi-weekly, monthly? If not, how will you cover your personal expenses? How will you finance your yearly CLEs or purchase practice materials such as books?There are several financial options available to get your practice started. Maybe you can get a loan from a family member, apply for a small business loan from a private entity, take money from a savings account or retirement plan, or apply for a grant. Do not let money defeat you in opening your practice, because it is definitely possible. Just be sure to consider all of your options and do what will work best for you and within your means. Loans have to be repaid and the interest rates can be high.
8. Mentors: All new attorneys need mentors. Mentors are valuable resources and can help you and your business flourish. No attorney knows it all, which is why it is called a PRACTICE. We all must lean on the knowledge and experiences of others as we develop our own experiences. Even simple mistakes can happen when you do not know. As I believe all or most attorneys can agree, law school teaches you the basics, but does not teach you how to actually practice law. Learning how to practice and how to conduct a trial or knowing how the rules of evidence work in practice is all learned on-the-job. What better way to learn than to engage with someone willing and able to teach you the tricks of the trade? GET A MENTOR – YOU WON’T REGRET IT!