Leaving daily grind of working for someone else to start your own law practice, or any business for that matter, may seem like a dream come true...at first. The first week or two is incredibly exhilarating- you're getting your office set up, you're implementing the first steps or stages in your business plan and your dreaming about all the money that you could potentially make. After about the third week, reality swoops in and slaps you square in the face. You realize that you've been working 10-12 hour days. However, you probably won't give yourself the break that you need. After all, this is your business and the more work you do from day to day, the sooner you will start to achieve success.
The time commitment that it takes to get a business up and running can be brutal. You may reminisce on the days when you worked for someone else and got to sleep in on the weekends or take a few days off for paid vacation. Even though you probably won't get to take off for an entire week during the first few years of starting your law practice, it is important to take time for yourself. If you start to feel fatigued or burnt out, take the afternoon or evening off and start fresh the next day.
Wednesday, April 28, 2010
Monday, April 26, 2010
Purchasing Malpractice Insurance
Even though malpractice insurance in not necessarily required in every jurisdiction, it is something that you should consider purchasing, especially if you are new to the practice of law. Malpractice insurance protects you and your firm in the event that a disgruntled client brings a malpractice suit against you. Even though you may be on a tight start-up budget, insurance is a "must-have" and will run a new attorney approximately $700 per year (which can be paid in monthly installments).
If you are just starting out and do not anticipate having a large volume of clients right out of the gate, you may want to look into part-time practitioner's malpractice insurance. The premium is lower (obviously) than the yearly rate on a full-time policy, however, most part-time insurance policies will limit you to 10-20 billable hours per week.
Research insurance carriers and make sure that you understand what you are getting for your money. Check to see if your state or local bar association recommends a certain carrier. Decide how much of a deductible you can afford to pay. If you take out a policy with a $10,000 deductible and know that you will probably not be able to come up with that much cash on demand, your insurance policy will be virtually useless. For most firms starting out with limited capital, $1,000-$2,000 is a reasonable deductible- most people can scrape a grand or so together in emergency situations.
Another consideration that you should make is how much insurance you need in terms of policy limits. Most jurisdictions require you to have a $100,000 per claim/$300,000 annual aggregate limit. For lawyers who are under insured, you may be required to disclose this fact to all of your potential clients. The minimum requirement should be suitable for solo practitioners and small firms that are practicing basic criminal defense, family law, landlord-tenant issues, simple wills and small claims matters. However, if you intend on venturing into a legal field such as tax or securities where there are often large amounts of money riding on the line, you should consider a high limit policy with an annual aggregate of $1,000,000 or more.
One last tip- if you have to jump through hoops and bend over backwards in order to get a quote for malpractice insurance, think twice before signing a contract with them- insurance companies are usually on their best behavior when signing new clients. Things tend to get more unpleasant if you actually have to make a claim.
If you are just starting out and do not anticipate having a large volume of clients right out of the gate, you may want to look into part-time practitioner's malpractice insurance. The premium is lower (obviously) than the yearly rate on a full-time policy, however, most part-time insurance policies will limit you to 10-20 billable hours per week.
Research insurance carriers and make sure that you understand what you are getting for your money. Check to see if your state or local bar association recommends a certain carrier. Decide how much of a deductible you can afford to pay. If you take out a policy with a $10,000 deductible and know that you will probably not be able to come up with that much cash on demand, your insurance policy will be virtually useless. For most firms starting out with limited capital, $1,000-$2,000 is a reasonable deductible- most people can scrape a grand or so together in emergency situations.
Another consideration that you should make is how much insurance you need in terms of policy limits. Most jurisdictions require you to have a $100,000 per claim/$300,000 annual aggregate limit. For lawyers who are under insured, you may be required to disclose this fact to all of your potential clients. The minimum requirement should be suitable for solo practitioners and small firms that are practicing basic criminal defense, family law, landlord-tenant issues, simple wills and small claims matters. However, if you intend on venturing into a legal field such as tax or securities where there are often large amounts of money riding on the line, you should consider a high limit policy with an annual aggregate of $1,000,000 or more.
One last tip- if you have to jump through hoops and bend over backwards in order to get a quote for malpractice insurance, think twice before signing a contract with them- insurance companies are usually on their best behavior when signing new clients. Things tend to get more unpleasant if you actually have to make a claim.
Sunday, April 25, 2010
Deciding on Areas of Practice
There's an old quote "Jack of all trades, master of none". These words of wisdom also hold true when starting a law practice. If you are starting right out of law school, you will not have enough experience or time to learn how to handle every case that comes your way, especially cases that are more complex. Focusing on one, two or three practice areas that are related will allow you to become a "Master" of your particular niche of the law. This does not mean that you cannot draft simple Wills or contracts for business owners if you primarily practice family law. It merely means that limiting yourself to one or two practice areas will help you build your practice faster and keep you out of trouble with the disciplinary board.
There are so many potential areas of practice, how do you choose?
Each one of us has our own strengths, weaknesses and comfort zones. If you the idea of defending a person accused of a crime terrifies or repulses you, you should probably cross criminal defense off you list. Some people enjoy working in the quite and comfort of their office and rarely stepping foot in a courthouse. These types of people might thrive in the areas of real estate, personal planning, tax or business formation. For some, the thought of pushing papers in an office all day long might cause them to feel intensely bored. These people might consider civil litigation, criminal defense or family law- all areas that allow you to present arguments in court on a fairly regular basis.
You some people, sitting with a pen and paper might not be helpful enough. Try to locate alumni from your law school or use your networking connections to set up informational interviews. Most attorneys are happy to help new lawyers and provide them with information and advice whenever they can. Ask if you can buy them a cup of coffee and ask some questions about the areas they practice. Ask about their experiences and what a typical day is like for them. Create a list of pros and cons for each practice area that you are considering. Continue to narrow your list of potential practice areas down until you have one or two solid options.
There are so many potential areas of practice, how do you choose?
Each one of us has our own strengths, weaknesses and comfort zones. If you the idea of defending a person accused of a crime terrifies or repulses you, you should probably cross criminal defense off you list. Some people enjoy working in the quite and comfort of their office and rarely stepping foot in a courthouse. These types of people might thrive in the areas of real estate, personal planning, tax or business formation. For some, the thought of pushing papers in an office all day long might cause them to feel intensely bored. These people might consider civil litigation, criminal defense or family law- all areas that allow you to present arguments in court on a fairly regular basis.
You some people, sitting with a pen and paper might not be helpful enough. Try to locate alumni from your law school or use your networking connections to set up informational interviews. Most attorneys are happy to help new lawyers and provide them with information and advice whenever they can. Ask if you can buy them a cup of coffee and ask some questions about the areas they practice. Ask about their experiences and what a typical day is like for them. Create a list of pros and cons for each practice area that you are considering. Continue to narrow your list of potential practice areas down until you have one or two solid options.
Friday, April 23, 2010
How Much Money Should You Save Before Starting a Law Practice?
The answer, as you probably expected, is that it depends. It depends on your personal obligations and how much overhead you expect your law firm to carry each month. Ideally, you should have enough money set aside to pay for personal and business expenses for at least one year. While all firms are different, if you are starting a law firm right out of law school you will need time to grow a professional network and a portfolio of clients. Experienced lawyers who have a portfolio of clients that they will be taking with them from another firm may not need to create this large of a safety net for themselves.
When we started our firm it was done out of necessity. We could have spent our days rotting away at our doc review jobs but we decided to just take the leap with enough saved for about four months of total expenses, which, for our situation was about $12,000- our combined personal expenses are about $2,500 and our business expenses are roughly $500 a month. We have been supplementing that amount with freelance work that we are able to complete at home. Obviously if your personal obligations are greater, you will need to bring in more income. The point is that starting a firm is possible, even on a very limited budget.
When we started our firm it was done out of necessity. We could have spent our days rotting away at our doc review jobs but we decided to just take the leap with enough saved for about four months of total expenses, which, for our situation was about $12,000- our combined personal expenses are about $2,500 and our business expenses are roughly $500 a month. We have been supplementing that amount with freelance work that we are able to complete at home. Obviously if your personal obligations are greater, you will need to bring in more income. The point is that starting a firm is possible, even on a very limited budget.
Thursday, April 22, 2010
Setting Up Shop
The great thing about starting a law practice is that you need very little start-up capital. All told, we spent about $5,300 on start-up costs. We decided to operate with extremely low overhead which meant not renting or buying a "traditional" office. We opted for a virtual office for client meetings and a home office space for doing actual work. Our virtual office came with receptionist services, but we opted to get our own business line at our home office. We only bought equipment that was absolutely necessary to keep our costs as low as possible. Here's a list of the items that we did purchase:
We also didn't spend on high end letter head- at about $100 per box, we just could justify it at this time so we created our own logo and printed our own. We had a close personal friend set up our website. And that was it. We were able to get our law firm up and running in about a week.
- Virtual Office setup-$1000
- Malpractice Insurance-$1000/yr
- Form Books & Practice Guides-$2000
- Business Phone Line- $100 set-up
- All-in-one printer, scanner, fax, copier-$399 on sale for $199
- 2 land line phones-$60
- Dymo Label & Postage Writer- $70
- Business Cards- $60
- Paper Shreader- $50
- Misc. Office Supplies- $150
- Print Advertising-$500
We also didn't spend on high end letter head- at about $100 per box, we just could justify it at this time so we created our own logo and printed our own. We had a close personal friend set up our website. And that was it. We were able to get our law firm up and running in about a week.
Wednesday, April 21, 2010
ANOTHER Law Firm is Created!?!
Aren’t there ENOUGH law firms out there already? The quick answer is “yes” there probably are. We must be crazy to start a new firm in a recession and with little practical experience to boot. The sad truth is that opening our own doors was the best option we had. Both my partner and I did document review for several months after passing the bar. Monkeys could do document review. I did not want to spend the next few years of my life as a gear in a large law firm machine until someone else decided that I was worthy of hiring.
At the time we started, less than half of our graduating class had secured permanent jobs with another firm or government agency. Honestly, it’s a terrible time to be a new lawyer. Large firms were laying off experienced lawyers . Those lawyers were filling positions that new graduates would normally be offered. There was just nothing left for us…except doc review.
We talked to every lawyer and professor we knew about starting a new practice. Most of them poo-pooed the idea.
“You don’t know how to practice yet”…“You’re going to get yourselves into BIG trouble”…“you don’t have any experience”…“it’s a bad idea”...“it’s unheard of”…“you better have a lot of insurance”…“stupid, foolish, crazy”…
Three people out of several dozen actually encouraged this idea-and that was good enough for us.
We know that we have a long way to go and a lot to learn but we are prepared to embrace it with open arms.
Sometimes you have a take a huge chance in order to reap a huge reward.
From Law Student to Law Partner
Less than one year ago I was a law student. Now I’m a founding partner of a law firm. I decided to start this blog to document the growth of our firm. I’ve decided to make it public because there may be some of you out there that are interested in going out on your own or starting a practice after law school. I don’t purport to be any kind of expert or law firm start-up guru-but I would assume that some of you will at least find some of my blunders to be entertaining at the very least. That’s about it. Enjoy.
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