Start a Law Practice in the U.S.

Many law students and established attorneys dream of one day opening their own law practice. However, it's important to keep in mind that there is a surplus of attorneys[1] in the U.S., and competition for new business can be fierce. You may be a great lawyer, but to run a successful law practice you also must be a savvy business owner.

Steps

Evaluating Your Goals

  1. Choose practice areas. If you intend to practice in an extremely small town, it may be necessary to be something of a generalist. However, in most cases, you'll build a stronger business if you specialize in one or two areas where your skills are strongest.
    • If you try to do everything, you run the risk that every other attorney will view you as a competitor, and this can make it difficult to build up a referral network. When you're just starting out, your referral network is crucial, because people often ask attorneys to refer them to an attorney in another practice area.[2]
    • For example, suppose you meet a family law attorney at a local bar association meeting. You intend to practice wills and trusts. Since people often create new wills or revise existing ones after divorce, the family law attorney offers to refer some of her clients to you when they need wills drawn up.
    • Consider focusing your practice in personal injury, criminal defense, family law, or the like. Your clients will be regular people who rarely if ever work with lawyers, and they won't be judgmental or expect you to work miracles. Instead, they tend to hire lawyers who they can relate to, and who they feel care about them and their case.[3]
  2. List your personal priorities in the practice of law. From the outset, decide whether you want to grow big and powerful or stay small. This will help you establish your goals and desired rate of growth.
    • If you want to start your own firm because you want a better work-life balance and you want to spend more time with your family, for example, you are going to build a different practice than someone who wants to be a major player in their field of law.
  3. Assess your strengths and weaknesses. You need to be able to identify possible difficulties before they become insurmountable problems. For example, if you know you have trouble with finances, consider hiring an accountant for your law firm rather than trying to handle it yourself.
  4. Envision your ideal firm five, 10, and 20 years from now. Writing down your ideas and understanding where you want to be can help you focus your efforts in the right direction.
    • Your business plan will project three to five years into the future, so it's important to realistically assess your goals so you can stay on track to grow.[4]
  5. Identify your ideal client. Think about what kind of client you want to attract. Figuring out what they look like, how they behave, where they live, and even where they shop can help you make a lot of business decisions such as where to open an office and how to decorate it.
    • For example, if you plan to open up an intellectual property boutique catering to up-and-coming musicians and independent record labels, you might not get as much benefit out of an office across from the county courthouse full of heavy mahogany furniture as you would a casual office in a dual-zoned residential neighborhood overflowing with young people.
  6. Talk to other lawyers. Informational interviews with local attorneys can help you gain business advice and learn planning and marketing strategies.

Creating a Budget

  1. Go location scouting. Your ideal office location has a lot to do with the practice areas in which you've chosen to specialize.
    • For example, if you plan to be a civil litigator and spend most of your time in court, you would benefit from having an office within walking distance of the courthouse. You won't have to worry about traffic or finding parking when you can just walk to court.
    • Keep in mind how much space you'll need. For example, if you plan to meet often with clients in your office, you may need a dedicated conference room.
    • Study the real estate market in the areas where you'd like to lease office space so you have a good idea of the market value of any available offices you visit. Set priorities for various property features so you know what you can't live without and what you can compromise on. Paying the lowest rent, for example, might not be of much benefit to you if you don't have adequate space.
  2. Evaluate office alternatives. Depending on the area of law you intend to practice, you may be able to work from home for at least a short period of time while you're getting your law firm off the ground.
    • If you absolutely must have a separate office, consider using an office share company or leasing a suite of rooms from another firm.
  3. Decide how many people you want on staff. You need to plan for employee expenses, including payroll, health insurance, and worker's compensation insurance.
    • Early on, you should focus your staffing needs on legal assistants and paralegals who have experience. If they have too much experience, you may not be able to afford to hire them, but you also can't afford to hire someone who requires a lot of training. You need staff members who already understand the basics of working in a law office.
    • If your office is located near a law school, contact the school's career services office and see if you can get a law student to intern.
  4. Consider your needs for office furniture and equipment. You won't inspire much confidence if you open your doors to clients and your desk consists of 2x4s propped up on milk crates.
    • Whether you decide to start a high-tech paperless office or use the traditional paper file method of organization also will have an impact on the type of office space you need and how big your office will need to be.
    • When you budget your start-up costs for furniture and equipment, talk to your tax advisor to determine how those expenses can be deducted. Some equipment you can deduct the full cost of all at once, while other items have to be depreciated over a number of years.[5]
  5. Price document management and research services. At a minimum, you need computer programs to manage your calendar and contacts, track your billing, and organize your digital files.
    • You also may want to subscribe to an online legal research system such as LexisNexis or Westlaw. These companies have different subscription levels so you can balance access to the information you need with a price you can afford.
  6. Include marketing expenses in your budget. If you're going to focus on internet presence, you may want to hire a web designer or a social networking expert, at least on a freelance or temporary basis to get your accounts set up.
    • You also might consider hiring a copywriter or blogger to create informative copy for your website.
    • Depending on your practice area, you might consider targeted advertising online or in local publications that cater to your ideal client base.

Drafting a Business Plan

  1. Create an executive summary for your business plan. Your executive summary describes the founding of your firm, where it's located, and the focus of its practice, as well as goals and objectives for the future.[6]
    • You also should include a mission statement explaining what your firm is all about and why you're doing what you're doing.[7] For example, suppose you want to provide low-cost legal services to a struggling neighborhood. Your mission statement would include details about your commitment to the community and your desire to see its residents prosper.
  2. Write a description of your firm and the scope of services you will provide. Your business description should include the nature of your business and the specific marketplace needs you are trying to satisfy.
    • Explain your competitive advantage, whether it comes from your reputation and expertise, friendly staff, or ideal location.[8]
    • Your firm description also will include information on the ownership of your firm, how it is organized, and a brief summary of start-up costs. You'll want to include your assets, liabilities, and any existing funding or need for investment.[9]
    • Discuss your services in detail, your prospective clients, and who you think will benefit from your expertise.[10]
  3. Conduct market analysis. You're a lawyer, but if you're opening your own law practice you're also a business owner. In addition to Study Law, you need to study the area and find out how viable your plans are before you start your law practice.
    • The market analysis report in your business plan should summarize where you expect your clients to come from and how they will find you. In other words, you need to develop and describe a marketing strategy that will attract all of those ideal clients you identified.
    • Use your market analysis to project your firm's growth over the next three to five years based on the success of your marketing strategy.[11]
    • Since the practice of law is a highly regulated profession, make sure you include practice restrictions and professional regulations as a factor in your market analysis.[12]
    • In addition to being a highly regulated profession, legal billing is an area in constant turmoil. It's important early on that you decide your firm's fee structure so you can have more confidence in your cashflow projections.[13]
  4. Outline your organizational structure and ownership information. If you plan on starting your practice as a sole practitioner, this might not be a very lengthy section of your business plan, but it still needs to be there.[14]
    • What type of business entity you choose initially depends primarily on whether you intend to go it alone or want to start out with a partner. Your state's laws or rules of professional responsibility may include restrictions against attorneys partnering with non-entities.
    • Keep in mind that some states don't allow attorneys to form LLCs or the like to shield themselves from personal liability.
    • In this section of your business plan, you also may want to list the staff you plan on hiring, how much they will cost, and when you will expand your staff over time.[15] For example, you may want to start out by hiring a paralegal part-time because you need someone who already knows basic court procedure and how to format a legal document. As the firm grows more established, you may be able to take on a couple of legal assistants who will need more training to be effective employees.
  5. Plan your market strategy and project your profits or losses. The next section of your business plan needs to summarize all the important financial information, including analysis and projections for the next three to five years.[16]
    • If financial planning is not your strong suit, consider working with a financial advisor to plan your practice's finances.
    • Creditors and potential investors typically want to see projections at least five years out so they can assess the risk in providing money to you for your business.[17]
  6. Consider including an appendix. An appendix isn't necessary, but could be helpful especially if you are seeking funding. It would include documents such as your resume, credit history, licenses, and letters of recommendation.[18]
  7. Show your business plan to established lawyers. Call on some of the contacts you've made and ask them to read and critique your business plan. Their feedback can be crucial in developing a strong plan.[19]

Complying with Regulatory Requirements

  1. Join the state bar association. Some states such as Wisconsin and Oregon require you to join the state bar association or legal society.
    • Even if your state doesn't require you to join the bar association, you still must maintain your license, which means paying whatever registration fees and privilege taxes are required, as well as completing the required number of hours of continuing legal education each year.
  2. Get malpractice insurance. Most states don't require law firms to have malpractice insurance, but it's still a good investment, and many states do require attorneys to disclose whether they have malpractice insurance.
    • Many states do require malpractice insurance for attorneys in firms organized as limited-liability business structures such as LLCs.
  3. Determine if you need an IOLTA. An Interest on Lawyers Trust Account, or IOLTA, allows you to accept and hold funds for advanced fees or costs that belong to someone other than yourself. If your practice will require you to hold money for someone else, check your local rules to find out how to set up a trust account.
  4. Fulfill other business licensing or insurance requirements. Your city or county may require you to buy a business license, and maintain premises liability or other property insurance for your office. Check the applicable laws and make sure you're operating within the law.
    • Particularly if you're working from a house or in a residential area, check the zoning ordinance and make sure you can operate a business from that location.
  5. Get an EIN. Even if you are a sole practitioner, you need to get an employer identification number from the IRS for tax purposes, so you can file a separate tax return for your firm.

Growing Your Practice

  1. Build a professional and extensive web presence. Most people hit the internet rather than the phone book when they're looking for a lawyer, so building up your web presence is crucial to growing your business.[20]
    • Have a professional website that's pleasant to look at and easy to navigate. You can build your own website using a hosting company, or hire a professional web designer to build your site. Consider including informational articles or linking to a blog where you write about news and issues that affect your practice area.
    • Establish a social media network so you can interact with past and potential clients. Be careful with social media, though, as the Model Rules prohibit real-time contact with a prospective client. For example, if you're a family law attorney, it is not okay for you to reply to a tweet from someone who says she just caught her husband cheating and tell her you are a divorce attorney and can help her get a divorce.
    • Pick a domain name for your website that's simple and easy to remember, and use it for all your social media accounts. This helps you establish name recognition for your brand across the internet. Make sure the name is available everywhere before you lock it in. For example, suppose your name is Atticus Finch and you practice criminal defense. You might choose "mockingbirdlaw.com" as the domain name for your website. From there, you can create pages or accounts on social media networks such as Facebook or Twitter with the user name "mockingbirdlaw." This helps ensure you have a consistent presence on the internet and can be easily found by potential clients.
    • Monitor your internet presence carefully or consider paying for a service to do this for you. If you discover complaints or negative comments about you on the internet, respond to them promptly and do what you can to mitigate the damage.
  2. Join bar associations and practice groups. These organizations can connect you with more experienced attorneys in your practice area who can mentor you and help show you the ropes.
    • Ask if you can sit in on a planning session, an interview, or even a trial to learn how they work.
    • See if more established attorneys have any form documents or other resources they would be willing to share with you.
    • Talk to other attorneys when you attend seminars or other classes to fulfill your bar's continuing legal education requirement.
  3. Network with other attorneys. Make connections not just with attorneys in your own practice area, but in other areas as well. This can help you gain referrals.
  4. Volunteer your services. In some practice areas, doing pro bono work can provide you with significant experience and get your name out there in the legal community.
    • For example, if you practice family law, consider volunteering at your local domestic abuse shelter to draft and file restraining orders for domestic abuse victims. Not only are you providing a valuable and beneficial service, but these women also may return to you as paying clients later on, simply because they know you and trust you.
  5. Become involved in your community. Being connected to the people in your neighborhood can be some of your best advertising. If people know you and like you, they'll be more likely to think of you when they need legal services, or to recommend you to friends.
    • Participate in activities you love and feel passionate about, regardless of whether they have anything to do with practicing law. Listing these interests in your bio on your website allows potential clients to get to know you a little as a person. For example, if you loved softball and played all through high school and college, see if there's an adult softball league in your community that you can join.

Related Articles

References

  1. http://www.bloomberg.com/news/articles/2015-05-13/there-are-too-many-lawyers-say-law-firms
  2. http://www.businessinsider.com/how-i-started-my-own-law-firm-right-after-law-school-2014-1
  3. http://www.businessinsider.com/how-i-started-my-own-law-firm-right-after-law-school-2014-1
  4. https://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/how-write-business-plan
  5. https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses
  6. https://www.sba.gov/content/business-plan-executive-summary
  7. https://www.sba.gov/content/business-plan-executive-summary
  8. https://www.sba.gov/content/company-description
  9. http://www.bplans.com/law_firm_business_plan/company_summary_fc.php
  10. http://www.bplans.com/law_firm_business_plan/services_fc.php
  11. http://www.bplans.com/law_firm_business_plan/market_analysis_summary_fc.php
  12. https://www.sba.gov/content/market-analysis
  13. http://www.lexisnexis.com/en-us/small-firms/ctr/starting-your-own-law-firm-guide-financial-ethical-considerations.page
  14. https://www.sba.gov/content/organization-management
  15. http://www.bplans.com/law_firm_business_plan/management_summary_fc.php
  16. http://www.bplans.com/law_firm_business_plan/financial_plan_fc.php
  17. https://www.sba.gov/content/financial-projections
  18. https://www.sba.gov/content/appendix
  19. http://www.businessinsider.com/how-i-started-my-own-law-firm-right-after-law-school-2014-1
  20. http://www.businessinsider.com/how-i-started-my-own-law-firm-right-after-law-school-2014-1