Essentials for Success
Congratulations on making the decision to start your law practice. This is a very exciting decision which, done properly and with care, will establish the basis for long term success. Planning for success includes a thoughtful analysis of what services you are qualified to provide, where you will provide those services, how you will market your services, how you will deliver your services, how you will charge and bill for your services, and how you will finance your dream until your work translates to income. In planning for success you also need to implement best practices for operations and management. LOMAP will help you set the foundation by providing this law practice start-up kit, consulting services upon request, access to reference materials, and referrals to experts in mission critical areas of operation.
Begin with these top 5 considerations when starting a new law practice and then visit specific topics of interest, available to the left:
Do I Need Malpractice Insurance?
Professional malpractice insurance is not required for attorneys who are licensed and practice in the Commonwealth of Massachusetts. However, it is highly recommended to mitigate the cost of a malpractice insurance claim.
There are a number of places from which attorneys can acquire malpractice insurance. If you have an existing insurance policy, such as home, automobile, or life, you should check with your carrier to determine whether that company also provide professional malpractice insurance. Bundling policies can help reduce prices.
Bar associations are good options for malpractice insurance. The Massachusetts Bar Association and Boston Bar Association both offer malpractice coverage through CNA and USI Affinity, respectively. You can also opt for a broker to search for a competitive rate based on your circumstances. A few brokers include (but are not limited to): Landy Insurance, Duffy Insurance, and BL Insurance Brokerage.
> More on malpractice and other insurance considerations, here.
Do I Need Startup Funds?
Unless you are leaving another firm and you are confident that a steady stream of clients plan to follow you, you’ll need money to cover your startup costs, and if possible, one year of operation and personal living expenses. Even if you can break even at the end of your first year, it is prudent to have additional funds to cover your personal expenses for that year.
In order to determine how much money you need to start your practice, you should prepare a budget. A budget is an essential element of the planning process for starting a solo or small law practice. You must know what it will cost you at startup and through your first year, so that you can determine what funds you will need upfront and how much you must collect on a monthly basis to cover expenses.
Your own personal savings should be your starting point. It’s the easiest and safest funding method. If you don’t have the requisite funds, you should then consider family members who could loan to you without interest (or, at least at a low rate). Beyond that, you could consider a bank loan, home equity, or line of credit to subsidize your startup costs. Contact your bank or the Small Business Administration if you choose to go this route.
> Read more about startup finances and financial management, here.
Where Should I Locate My Practice?
Many practitioners start out practicing in a home office to keep costs low. However, a home office has its drawbacks, including distractions, often a lack of professional conference space for client meetings, and you simply may not want to invite some clients into your home. On the other hand, a home office can be used effectively in certain circumstances, for example with a virtual practice, where you conduct much of your business online. Another popular option among practitioners is to share space with other attorneys or professionals. You can typically find arrangements with other attorneys by networking in bar associations. There are professional shared workspaces, including HQ, Regus, Workbar, Oficio, and WeWork, that provide alternative options such as office or conference usage for a certain number of hours per month, secretarial services, and mail collection.
The benefits of a shared office must be balanced with the ethical and malpractice risks which arise.
> More on practice location and office space, including ethical risks, here.
Should I Form a Legal Entity?
There are a number of considerations to weigh when determining whether and what legal entity to form. Sole proprietorship is the most common and easiest form of ownership structure for solo practitioners. You do not need to register with the state or file any special papers to set up a sole proprietorship with one exception. If you do business under a name other than your own name, you must file a doing business as “d/b/a” certificate with your town for a nominal fee.
Other forms include general partnership, limited liability partnership, limited liability company, or professional corporation. Establishing a legal entity may require certain formalities, such as annual reporting and payment of fees to the state. Further, certain forms such as the LLP and LLC are subject to the Supreme Judicial Court’s Rule 3:06, which sets limits on the extent to which lawyers can reduce their malpractice liability through a legal entity.
Before selecting a form, you should review the entity requirements, consider liability limitations, and obtain advice from a tax professional. Entity selection will depend upon your unique circumstances.
> Further information on choosing your legal entity can be found here.
What Technology Do I Need to Startup My Practice?
- A laptop or tablet is ideal for mobile practitioners, and can serve as a primary computing device. A redundant backup system using external hard drives and cloud backups is essential. A sampling of back up providers and manufacturers include: Seagate, WesternDigital, Carbonite, Crashplan, BackBlaze, Drobo,and SpaceMonkey.
- Many practitioners start off with a free Google Voice number ported through a smartphone. Skype and other Voice Over Internet Providers (VOIP) are simple, cost-effective alternatives.
- Building a paperless law office is cheaper and more efficient than maintaining paper files. The Fujitsu ScanSnap is a popular device. When purchasing a scanner, you should consider price, speed, whether the capacity of its automatic document feed is sufficient for your needs, necessary functions like OCR, and the different software features you want (photo editing, etc.)
- Word Processing Software. You’ll need a program to draft documents. Top options include Microsoft Workvia Microsoft 365, Google Docs via Google Apps for Work, and Pages for Mac with iCloud. There are also free alternatives, including LibreOffice, NeoOffice, and OpenOffice.
- A Law Practice Management System is one of the best investments you can make to keep your practice organized. They can be used for client, contact, and matter management; time and billing; trust accounting; document and email integration; calendaring and docketing; and more. Several don’t provide a full financial management tool for accounting, payroll, and expense reporting purposes — you’ll need to use alternatives such as Quickbooks or Xero.