Due to the attractive qualities of self-employment, more and more start-up law firms are cropping up across the globe. These qualities include an ability to directly profit from individual efforts and a reduced need to answer to targets and demands. With this being said, establishing your own company regardless of the industry presents many difficulties. Establishing a law firm isn’t a straightforward process and there is a multitude of aspects that need to be considered when looking to set up your own firm. Whether you want to provide domestic abuse aid or testify against criminals, the same rules apply when it comes to planning the establishment of a law firm.
Table of Contents
Select A Business Structure
Firstly, you need to select a suitable business structure. When it comes to law firms, there are many routes that you can take. These include a sole practice, traditional partnership, limited company, or limited liability partnership (LLP), as well as other alternatives. A legal or professional advisor will be able to guide you in the right direction when it comes to selecting your business structure. Otherwise, you’ll have to perform thorough research to decide which business structure is best suited to what you’re looking to offer. Once you’re set on your business structure, you can’t start to delve further into the establishment process.
Make A Business Plan
Following the selection of your business structure, you’ll need to commence the construction of your business plan. At the very least, a comprehensive business plan for a law firm must include what legal services you intend to offer, how you’ll obtain work from clients, where your funding will come from, where you’ll be based, risk management and contingency planning, details of the management team, and how you intend to handle SRA compliance. Don’t be afraid to add further detail to your plan on top of these basics; the more elaborate your plan is, the easier it will be to follow.
Cash Flow Forecasts
Money is massively important when it comes to establishing any company in any industry, meaning that you’ll need to compose a realistic cash flow forecast. This will detail how much money will be required to establish and run your law firm. In doing so, you must also account for a slow build-up of income, as it takes a sufficient amount of time to get a new business up and running. Similarly, you may find yourself waiting on outstanding payments from clients.
On top of this, your funder and the SRA will require accurate forecasts of your cash flow. Furthermore, the main purpose of establishing a law firm is to obtain a profit, meaning that it’s important for you to learn whether the legal practice will be profitable.
Professional Indemnity Insurance
All lawyers in a private practice must have a minimum of professional indemnity insurance from a qualifying insurer. This needs to be in motion ahead of you establishing your firm, and the SRA will require information of your proposed cover.
Speaking of the SRA, you need to gain their authorization before you’re permitted to open a legal practice. The entity itself must be authorized to practice and the authorization of a compliance officer for legal practice and compliance officer for finance and administration will need to be applied for. This entire process can take anywhere between 12 and 16 weeks, meaning that you should allow ample time for this to go through before officially opening your practice. Ultimately, any authorization can be lengthy, and this time should be accounted for within any business model.
Do you have any other tips regarding the process of establishing your own law firm?
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