Most attorneys who open a solo practice immediately after law school will struggle, suffering several false starts before finding their footing. Many more will fail. Of those who do build a sustainable business, only a select few will thrive. If you’re considering starting a solo practice, here are the three things you will need to succeed, according to the creator of Cooley Law’s “Solo By Design,” Professor Gary Bauer.
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“Don’t spend time beating on a wall, hoping to transform it into a door.” ― Coco Chanel
The Three-Legged Stool
Most law school grads “don’t know what they don’t know” about starting a business. If you want to thrive as a solo attorney, build your startup with these three essential tools, which I call the “Three-Legged Stool.”
- Hire a certified public accountant.
- Get malpractice insurance.
- Get integrated practice management software and use it.
The Three Essentials for Establishing Your Solo Practice
Putting these three things in place will help you find your way and give you the confidence you need as you establish yourself in your own practice.
1. Hire a Certified Public Accountant
Why do you need a CPA? To avoid disbarment! Comingle your client’s trust account funds with your personal or business account and you can kiss your bar card goodbye. You went to law school to learn legal theory, not business accounting. Do what you are trained to do, not accounting.
A CPA can:
- Help determine what type of business entity you should begin with, and help you evolve into other taxable structures as you grow. Sole practitioner? LLC? S Corporation, or PCorp?
- Identify financial institutions that will help you establish a line of credit and payment mechanisms for your clients and suppliers.
- Set you on a path using accounting software that is compatible with that CPA’s accounting systems.
- Guide you on quarterly state and federal tax payments due, and identify what portion of your income is taxable versus deductible. A CPA will be at your side if you are audited as well, to answer questions with authority in a language the auditors understand. If your CPA has been out there a while, they may have relationships with some of the auditors and hearing officers, which can bring credibility to your accounting systems.
- Help set up personal accounts, business accounts and trust accounts, and help you understand how to avoid comingling those accounts or making charges against clients for fees that may be unauthorized in your jurisdiction.
- Explain conservative versus aggressive approaches to expense deductions when filing your taxes.
When should you start your search for a CPA?
Right away! While you are still in law school, search for CPAs who have experience doing accounting for other attorneys, and who are willing to work with you to finance the cost of their services. Engage them with the idea that you have a sound business plan and that you expect a long-term relationship, which will result in a steady stream of income as your practice grows. Interview several CPAs until you find one who is not only a great CPA but also a good fit. You will know them when you meet them, when you feel comfortable talking with them, and if they are willing to work with you before you have paying clients.
2. Get Malpractice Insurance Now
Don’t do what some attorneys do and “go naked” when first opening the doors to your law practice. Get malpractice insurance right away. It is true that you will likely have no clients at first, and with no clients, you will have no claims. But the minute you hold yourself out for business and communicate with potential clients, there will be opportunities for you to misguide or miss an issue altogether, opening the door for a legal malpractice claim.
Why is it a good idea to have a malpractice policy in place before you open your practice?
- You immediately have someone in your corner. Your malpractice carrier will instruct you to call them anytime you think a claim is a possibility. They will tell you how to handle the claim, including what to say and what not to say. If a client sues you, they will go to bat and defend you with the power and experience that only expertise in that arena will provide. Unless you are a legal malpractice defense attorney as your day job, you will find yourself at a loss for the best way to defend against a claim. Let the experts do it for you. (See “Attorney Discipline: A Fool for a Client.”)
- Malpractice insurance costs for new solo attorneys are very reasonable. This is because, with very few clients, the possibility of claims against a startup is relatively remote, and the insurer’s risk is low.
- Having a policy in place will give you greater confidence to pursue new and novel legal matters. Instead of turning business away, you will be inclined to expand your legal expertise and grow your business with less fear of financial ruin. (If you tread into an area of law outside of your coverage, make sure you alert your carrier to your expanded practice areas or you may not be covered.)
- Malpractice carriers will train you to avoid ethics mistakes and guide you through complaints. For good reason, attorneys are usually more concerned about ethics complaints or other charges that put their law license at risk than about lawsuits that seek financial reparations. An ethics grievance could mean the suspension or termination of your law license. Again, your malpractice carrier will come to your defense and coach you through the process. They will also evaluate your practice to ensure you have systems in place to avoid common ethics issues, such as missing deadlines, and vet those clients you wish you never took on in the first place.
3. Use Practice Management Software
Practice management software (PMS) will keep you organized in a way that sticky notes and scratch pads cannot. Many solo attorneys get by without this essential leg of the stool, but a good PMS brings together all the details of your practice in a secure space: Client records and case files, scheduling and deadlines, client communications, time and billing, document generation and reporting tools are all aspects of PMS. Using practice management software reduces errors, and security features help ensure client data is protected.
Why do you need practice management software?
- With cloud-based practice management software, client and case information is centralized and accessible anywhere you can connect to the internet. You will not be held captive to a sheet of paper or paper file folders — or to an office.
- Integrated software — meaning a platform that can connect case management with accounting, email, document automation, and your contact management system and marketing tools — will allow you to see the status of each client’s case and billing particulars, collaborate on documents, communicate securely with clients, and monitor your business, all in one place.
- PMS companies continually update their products with new features, including artificial intelligence capabilities and security updates. In addition to keeping your practice up to date with the latest technology, understanding how to use these tools effectively in your practice helps ensure that you meet the ethics requirements for technical competency and keep your client data safe.
Check out Capterra.com to identify various providers of law practice management software. You can compare providers side by side and identify which companies offer software best suited for your practice and type of law. This is a one-stop shopping source and a very good one.
Once you choose your practice management software, start using it from the first day you open your practice. Don’t wait until you’re busy; the best time to learn the software’s features is now, when you have few clients.
Tip: Check with other attorneys in your practice area to ask about the practice management software they use. They can tell you about the long-term pricing history, support and frequency of updates. Also, that attorney can be your best resource for resolving a software glitch on a Sunday evening when no one at software support is available.
Image © iStockPhoto.com.
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