Tom Wallerstein

I was talking to a friend who is a junior partner in a large firm, and who is thinking of starting her own firm. She knew what practice area she would focus on, and she had at least one client who she felt sure would go with her. But she still had two critical questions to resolve. First, she wasn’t sure if she wanted to open a solo practice, or if she would try to recruit someone to form a partnership. Second, she wasn’t sure if she would form a “virtual” office, or try to start a traditional “brick and mortar” shop.

With regard to her “solo versus group” decision, we talked about the differences in tax treatment, liability exposure, etc. But I offered her my opinion that another important consideration is the practical, day-to-day differences between running your own shop and being in a partnership….

With a solo practice, you alone make all the decisions and all the rules. You don’t share profits. That independence and autonomy serves many people well, but it comes at a cost. When a solo goes on vacation or takes a day off, he or she has to arrange coverage for office matters. You can’t be in two places at once — even if some lawyers’ time records suggest otherwise. And, of course, a solo stops making money when he or she isn’t working.

Bearing sole responsibility also means that you alone are, well, solely responsible. If you fall, you fall alone. I’ve talked to quite a few solos who have formed small partnerships, and nearly every one of them reports feeling much less stress simply by having someone else help make decisions and share responsibility.

On a more practical level, it’s enormously helpful to have other people to bounce ideas off, and to brainstorm. By necessity, small firm lawyers often find themselves practicing in unfamiliar territory. The value of having another lawyer to consult cannot be overstated.

A partnership also is perceived differently by prospective clients, referral sources, and colleagues. I’ve found that being an “LLP” itself provides a subtle boost in client perceptions, at least for defense-side litigators. “The Law Offices of John Doe” and even “John Doe and Associates” does not seem to impress as much as “Doe & Baker LLP.” It also is helpful that outsiders can’t tell from the name alone whether Doe & Baker LLP has two partners, or two hundred.

Having one or more partners also can serve as motivation in the same way as two friends may try to quit smoking together, encouraging and spurring each other on. (Admittedly, some partnerships by design are little more than separate solo practices which share expenses. In that case, this and many of the other benefits I ascribe to partnerships don’t apply).

On the other hand, forming a partnership raises a host of complexities. How will expenses be shared? How will compensation be set? By percentage of investment? Hours worked? Hours billed? Client origination?

Before forming a partnership, you also have to carefully consider and discuss what is expected of each partner, how decisions will be made, how disagreements will be settled, and what are the effects should a partnership dissolve. Partners should discuss their vision for the business, and at least a five-year plan.

I’ve also seen several partnerships fizzle out due to what I call “roommate issues.” Consider people who move in together, but, within three months, are bickering over trivial things and leaving passive-aggressive notes on the refrigerator door. Business partnerships have similar challenges. Fights about putting the cap back on the toothpaste become fights about who is hoarding all the yellow highlighters. Personalities are critical, and you can’t sit down and anticipate every issue in advance. A partnership faces an uphill battle if the partners don’t at least get along on a personal level.

The second major issue my friend was considering was whether to opt for a virtual firm or to look for office space. No one can deny that technology can allow attorneys to fully function, and collaborate, without a physical office. Many people do most of their work via email and telephone anyway, and a virtual firm has the obvious advantage of lower overhead. At a minimum, it might make sense to defer paying rent until you actually are generating income.

Lower overhead not only helps your bottom line, it also can be effective marketing. Most attorneys in virtual firms are good at explaining how their lower overhead translates into lower overall expense to clients.

One of the nice parts of working at Quinn Emanuel was the lax dress code; a virtual practice offers even more flexibility in terms of dress code and schedule. I’ve talked to lots of attorneys who are downright giddy that they can actually be paid for legal work they perform mostly while sitting at their kitchen table in their bathrobe, or while lounging in Starbucks.

On the other hand, a traditional office offers intangible credibility. To some extent, it signals your seriousness about your business. Many otherwise unemployed attorneys hold themselves out as running a virtual, solo practice. Justified or not, some people might wonder if a virtual firm is a “real” firm. An attorney at a virtual firm might have to work extra hard for credibility if a client hears a dog or baby in the background. This is unfortunately true even if the lawyers in the virtual firm are working just as hard as lawyers in a traditional office setting.

I also believe that having a brick and mortar office outside the home, and dressing for work, helps you stay motivated and focused. Even if you aren’t particularly busy, putting yourself into an office setting might help you accomplish more than if you spend the day “working from home.”

I’m not sure if my friend ultimately will try to find a partner or go it alone, or if she will opt for a virtual firm. When I confronted those questions, I answered them in a way that made sense for me. Two things are certain: First, resolving both issues is fundamental to forming a new law practice. Second, the right answer for any given person probably depends just as much on personality and inclination as it does on economics.


Tom Wallerstein lives in San Francisco and is a partner with Colt Wallerstein LLP, a Silicon Valley litigation boutique. The firm’s practice focuses on high tech trade secret, employment, and general complex-commercial litigation. He can be reached at tomwallerstein@coltwallerstein.com.


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