Start Up LLP: Creating Your Own Law Firm

Starting your own law firm: it isn’t for everyone. Some of you may recall that Roxana, of Notes from the Breadline, viewed herself as ill-suited to solo practice.
But many other lawyers do want to strike out on their own. And some attorneys, faced with the difficult legal job market, decide that they have no choice but to hang up a shingle.
The final panel of Tuesday’s conference, Getting Back in the Game: How to Restart Your Career in a Down Economy, was devoted to the subject of how to start and grow your own law firm. Four successful solo or small-firm lawyers told their stories and offered advice.
Read about the discussion — covering such nuts-and-bolts topics as office space, malpractice insurance, and how much it might cost to set up your own firm — after the jump.


The solo practice panel was composed of:

OLIVERA MEDENICA (moderator), Chair, City Bar Small Law Firms Committee;

JEREMY SALAND, Crotty & Saland;

CAROLYN ELEFANT, Author, Solo By Choice and myshingle.com; and

ALLA ROYTBERG, Solo Practitioner; Director, City Bar Small Law Firm Center.

If you can’t find a job, should you just start your own practice?
Alla Roytberg said she was “tempted to say no.” You should really put all your heart and effort into starting your own firm if you want it to be successful. It’s not best done as a temporary measure — say, something to do before returning to a job at a large law firm.
Starting your own firm has many appeals: more independence, more control over your work, and more flexibility. You may struggle in the beginning, but in the long run, this is an opportunity for you to do exactly the type of work you’ve always wanted to do.
There is such a thing as starting your own practice by default. It’s not the best idea to start by default, but it doesn’t mean you won’t be successful.
Carolyn Elefant echoed Roytberg’s views. She said she sometimes compares solo practice to the Supreme Court. The SCOTUS is the court of losers; a petitioner winds up there because they’ve lost everywhere else. The Supreme Court is, in that sense, the court of last resort. But who wouldn’t want to argue before the Court? Solo practice is an opportunity to vindicate yourself and your clients — just like appearing before the Supreme Court.
Even if you go solo by default, you’re still making a choice — you’re choosing to stay in law. Why should you give up the intellectual challenge and satisfaction of practicing law just because you’ve lost or can’t get a job with a law firm? You can offer lower rates than the large firm you used to work for, while doing the same type of satisfying work.
Jeremy Saland agreed, but stressed the importance of maintaining a good relationship with the firm you used to work at. You may get referrals from your former employer. For example, in a criminal case with multiple parties, with your former firm involved as counsel to one of them, you might be brought in to represent another party.
What do you need in order to start your own firm?
Roytberg outlined some of the requirements. First, you need to pick your corporate structure. Talk to your accountant about the options and tax consequences. If you think this will just be temporary, it might not be worth it to adopt a complex structure.
Second, you need office space. The most shoestring option is a virtual office. Several companies offer this option. In New York, for a few hundred dollars a month, you can have a Manhattan address, a receptionist, voice mail, etc. If you need to meet clients, the New York City bar association has conference rooms that you can book.
Third, you need to open bank accounts: a business operating account, and an attorney trust account, under IOLA (Interest On Lawyer Account). There are different types of escrow accounts too. Some banks offer these accounts for free.
Fourth, you should think about malpractice insurance. It’s not mandatory in New York, but it’s highly recommended. When you first start your own firm, your costs should be fairly low, unless you’re practicing in a high-risk area (like securities, IP, or entertainment). Insurance won’t be expensive at the start, but the premiums will rise as the years pass (because you’re covered from the time that you started your practice).
Miscellaneous considerations: health insurance, for yourself and any employees; workers’ comp; basic tech tools, like a computer, a handheld device, a database program, and some kind of billing software.
It’s also good to develop a business plan. There’s a sample business plan on the New York City bar association website, under small firm resources. You can measure your progress against your business plan.
Saland emphasized the importance of setting goals in advance. What type of work do you want to do? What financial milestones do you want to reach? What kind of work-life balance do you want to have? You should know the answers to these questions going in.
If you’re starting your firm with a partner, you have more preparation to do. You need to figure out how to divide the revenues and expenses. You need to vet your partner carefully. Does he or she have good credit? Can this person provide financial support for the practice, especially in the lean early years? What kind of contacts does this person have? To succeed in the solo or small-firm world, you don’t just need to be a good attorney; you need to have the ability to generate business.
Elefant sounded cautionary notes about partnership. You and your partner may have different goals. You may partner up with someone who commits malpractice. To test out a possible partnership, you can start off sharing an office space and/or other expenses with someone else, but without becoming a full-fledged partnership; if that works well, then you can take the plunge into full partnership.
How can you generate business for your firm?
For starters, according to Saland, you need to have a web presence. It can legitimize you, and it can drive your business. You can start by posting on Craigslist. You may not land a million-dollar client that way, but everyone has to start somewhere. There are referral services available online. There’s Avvo.com, as well as LinkedIn and Facebook.
Think about blogging. Saland has a blog that generates about 400 hits a day, which helps in terms of marketing; readers think that you’re a guru in a given topic. If you do blog, however, update at least once a week or once every other week. Don’t let six weeks go by without updating.
Of course, networking is key. Tap into the network of former colleagues. For example, Saland is a member of a network for former prosecutors under Robert Morgenthau in the New York District Attorney’s office.
What is the ballpark budget for starting your own firm?
The costs are not high, said Elefant — maybe $2,500, plus your malpractice insurance (which can range from $900 to $2,000 a year), plus your health insurance and office space costs (a few hundred dollars a month each).
All in all, according to Medenica, you’re probably looking at about $10,000 for the first year. Join a bar association; your dues will get you a lot. You can get access to some legal research services, useful forms, conference rooms, and other resources.
Roytberg identified additional costs, including a website and business cards. But these are not expensive.
It is not necessary to have full-time support staff when you start out. Elefant mentioned the possibility of working with a “virtual assistant,” to keep your fixed expenses low in the beginning.
How do you figure out what to charge your clients?
It’s a process of trial and error, according to Saland. Try to get a sense of what other practitioners in the field are charging — but don’t compare yourself against a big firm, which will be much more expensive.
It can be helpful to accept credit card payment, Roytberg said. Just be careful not to mix your business funds and your client funds.
And what about collection issues — how can you make sure you get paid?

Credit cards can facilitate this. Elefant also likes electronic billing: you can send invoices to clients electronically, which they can they pay online.
Get a retainer up front, and require clients to replenish the retainer. Give clients predictability about what they’ll pay; then they’ll budget for it. Flat fees can be helpful in this regard. Collection problems often arise when legal fees go outside the scope of the client’s budget — say, a $20,000 matter that turned into an $80,000 matter, with the lawyer failing to keep the client updated on the expanding scope of the matter.
The collections process can be a pain, but you should try to avoid suing clients for non-payment, said Roytberg. They might respond by hitting you with a grievance charge or malpractice case, which is the last thing you need — especially in the early stages of your practice.
Earlier: Breaking Back into Biglaw
Casting a Wider Net: Small to Mid-Sized Law Firms
Career Alternatives for Attorneys: A Panel Discussion

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