There is an ever-increasing number of start-up practices, with practitioners establishing law firms across the country. Numerous solicitors are justifiably attracted to self-employment and the ability to profit directly from their own efforts in the absence of needing to answer to the needs and targets established by others.
Nevertheless, establishing and operating a successful law firm is no walk in the park. We will take a look at 10 things you consider if you are aiming to set up on your own firm:
- CHOOSE THE COMPANY STRUCTURE
First, off first, it is vital to make a choice what kind of entity you wish to operate. Will it be a recognised sole practice, traditional partnership, limited liability partnership (LLP) or limited company? We can advise you regarding these and the options.
- CREATE A COMPANY PLAN PRIOR TO SETTING UP A LAW FIRM
It is critical that you establish an extensive business plan before establishing your own legal practice. At the minimum it should cover:
What legal services you plan to provide;
How you will acquire work from clients;
Where your funding will originate from;
Where you will be based;
Risk management and contingency preparation;
Particulars of the management team;
And how you suggest handling SRA compliance.
- CASH FLOWFORESIGHTS
It is necessary to develop a realistic cash flow foresight so you could see precisely how much funds it will require to establish and run your law firm. It is essential to allocate a slow build-up of revenue potential, due to because it requires time to generate new business, or for current clients to pay you. The SRA and your funder will wish to see precise foresight for the capital for your business. You will also enquire that your law firm will absolutely be profitable which you have adequate finances behind you to start the firm and endure yourself throughout its infancy.
- PROFESSIONAL INDEMNITY INSURANCE
It is a requirement for every solicitor’s secretive practice to have the smallest degree of PII address from an authorizing insurance provider. This must remain in place before you commencing work and the SRA would desire to view details of the designed cover you would take.
- SRA APPROVAL
If you are establishing a solicitor’s practice you will require to secure authorisation from the SRA. Not simply must the entity itself be validated to practice, you will also need to employ for the validation of a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA). The SRA goal for processing such decisions is currently 12 to 16 weeks although expect this to be extended in respect of ABS’s. In reality, they tend to turn things around in 6 to 8 weeks. The length of time scale for authorisation can be lengthy and you should factor this into your company preparing. For more information, visit our SRA authorisation page.
- COMPLIANCE WITH ACCOUNTS RULES
Nevertheless, you handle this, you are responsible for any breach of the accounts guidelines, whether or not you are aware of them. You will need to contemplate how you are proceeding to comply with the Solicitors Accounts Rules, particularly where you are attending to handle a client account. Except if you contract out, you are likely to need to invest in an accounts package, which could be very highly-priced. You are also most likely to decide who is most likely to work your accounting body.
The more you do, the less time you will have to generate business and undertake fee-paying services. If you are planning to employ someone to do it for you, this will be an additional expense to the firm, as well as entailing an element of trusting another with one of your key regulatory duties. Whatever choice you make, it is vital that you understand the Solicitors Accounts Rules and, if you have no knowledge of them, you should undertake an extensive training course.
Where will you operate your firm from and where will you meet clients? If you decide to have fixed business premises, you will incur further expenses which could entail long term obligation if you stop to practice or outgrow the space.
- TAX ISSUES
It is potentially that you will involve the assistance of an accountant at some stage to guide you with the finance and tax side of your business. If you are going to have staffs you will need a PAYE (pay as you earn ) scheme. You will also consider enrolment for VAT and how you will make a quarterly return.
- CONTINGENCY PREPARATION
Whilst it may appear strange initially to consider what occurs in case the business closes, it weighs that you need to contemplate due to the regulatory and financial consequences of shutting a practice. This will include the payment of escaped cover unless there is a practice to succeed in your firm. Escape cover will provide insurance coverage for a duration of 6 years for the cost of a single premium of roughly 3 times the cost of your last annual premium. In establishing you, therefore, commit to a lowest of a minimum of four years of insurance coverage.
The SRA will also enquire that you have contingency arranges in place for a well-kept closure of the firm which will comply with your regulatory obligations. This will include concern about what occurs to ongoing client documents and archived data. It is also necessary to consider what will take place in case you are absent due to illness or holiday.
- MAKE A NEW WILL AND POWER OF ATTORNEY
It may not seem apparent but if you are intending to set up a new law firm, but you must think about what will occur in the event of your death or incapacity. No matter what else you will need to designate a solicitor to become a special executor to deal with your practice regardless of the management of the remainder of your assets. You will also need an appropriately qualified attorney to manage your practice in case of your inability.