Opening a Small Law Firm: What to Do First

Opening a firm is mostly a run of decisions that go more smoothly in order. Some of them cannot be undone cheaply, such as the entity and the name, and some can be changed next month, such as the software. This guide takes them in the order that tends to hold up.

It is general information for lawyers in the United States, not legal advice. Your state bar’s rules and guidance decide what is allowed where you practice.

Check what you owe your current employer

If you are leaving a firm, read your employment agreement and any partnership documents before you tell anyone. Look for notice periods, limits on taking files or contacts, and any rule about how clients are told you are leaving.

Many bars publish guidance on how departing lawyers and their firms notify clients, because clients decide who handles their matters. Do not copy files or client lists on the way out. Many state bars run an ethics hotline, and a short call before you act is cheap.

Choose the structure and the name

The usual choices are a sole proprietorship, a professional corporation, a professional LLC or an LLP. Which of these are open to lawyers, and how liability works, differs by state. None of them shields you from your own malpractice. Take the tax side to an accountant, who can compare the options against your expected income and explain what each one means for how you pay yourself.

Keep personal and business money apart from the first day, with a separate business bank account and card. It makes the books easier to keep, and it supports your position if anyone ever questions how the firm handles money.

Firm names are regulated in most states, and a name that could mislead clients about who practices there can be a problem. Check your bar’s rules on names and trade names before you print anything.

Get malpractice coverage lined up early

Apply before you leave if you can. Insurers ask about your practice areas, your experience and the systems you use for conflicts and deadlines. Many policies are claims-made, so when you move or close a firm you need to ask about prior acts coverage and tail coverage. A few states require lawyers to carry coverage or to tell clients when they do not.

Open the bank accounts before the first dollar arrives

You need an operating account for the firm’s own money. If you will hold client funds, you also need a trust account at a bank your state allows, set up and labeled as the rules require. An ordinary business account is not a trust account. Read trust account basics before you open either, and keep the two completely separate from day one.

Pick software for the work you do every week

A small firm usually needs a place for matters and contacts, time and billing, a calendar, documents, e-signature and secure sharing with clients. You do not need every feature of the largest products. The practice software guides compare tools by task.

Your duty of competence includes understanding the benefits and risks of the technology you use, and the conduct rules also ask for reasonable efforts to prevent unauthorized access to client information. When you evaluate a vendor, ask where data is stored, how it is protected, who at the vendor can see it and how you get your data out if you leave.

Build the intake and engagement paperwork

Have the templates ready before the first call: an engagement letter, a non-engagement letter and a closing letter. The client intake checklist lists the steps between the first call and a signed agreement.

Make deadlines hard to lose

Choose one calendar system and record every deadline in it once, with reminders ahead of the date. If you practice alone, arrange for another lawyer who can step in if you are sick or away, and tell your insurer and your bar if they ask. The deadlines and calendaring guides go deeper.

Enter deadlines the day the order, notice or rule creates them, not the day you get around to the file. For a deadline calculated from a rule, record the rule you used so that someone else can check the date. Then test the system: pick three open matters and confirm that every date you know about is on the calendar.

Decide how you will be paid

Pick fee structures you can explain in a sentence: hourly, flat or contingent where your rules allow it. Decide when you bill, how clients can pay, and who follows up on late invoices. Then work backward from the income you need. The billable hours calculator shows how many hours a target takes once write-downs and slow payers are counted.

Budget for the slow months

A new firm usually spends before it collects. Time recorded this month is billed next month and paid the month after, so cash trails work by weeks or longer. List your fixed costs: insurance, bar dues, software, rent or a virtual office, a phone line and accounting help. Add your own living expenses. Then decide how many months you can run on savings if the first invoices are paid slowly.

Set money aside for taxes as you collect, because no employer is withholding it for you. Your accountant can tell you how often estimated payments are due where you live.

Handle the paperwork the bar and the government expect

• Update your address and contact details with the bar and the courts where you practice.
• Get an employer identification number if your entity needs one.
• Ask your accountant which business licenses, local taxes and estimated tax payments apply to you.
• Read your bar’s rules on lawyer advertising before you launch a website or send a mailing.

A sensible order

1. Read your agreements and decide how clients will be told.
2. Choose the entity and the name.
3. Apply for malpractice coverage.
4. Open the operating and trust accounts.
5. Set up practice software and backups.
6. Write the engagement and intake documents.
7. Set up the calendar and a backup lawyer.
8. Update the bar, the courts and the tax agencies.

Quick answers

Do I need a trust account before my first client?

If you will ever hold money that belongs to a client or someone else, including advance fees, open the account before the first deposit arrives. If you plan to bill only after work is done, ask your state bar whether it expects an account anyway, since some do.

Can I run the firm on a personal email account and a free cloud drive?

Confidentiality duties follow the information wherever it sits. A consumer account can be used with care, but you would need to review its terms, its security settings and what happens if you lose access. Many lawyers find tools built for legal work simpler to defend.

How much does it cost to start a firm?

It depends on the state, the practice area and how lean you run. List the categories, collect real quotes from your insurer, bank and software vendors, and build the budget from those. The billable hours calculator can turn an income target into hours.