It is called “hanging up your own shingle” or “going into private practice.” Whatever the reference, starting a solo practice can be a challenging endeavor. One of the keys to success is starting out the right way. Any attorney who endeavors to embark on this journey must consider a few fine details that will have important ramifications on the success of the practice for years to come. The first consideration is a rather basic one.
Is Solo Practice Right for You?
When it comes to deciding whether solo practice is right for you, you must determine whether your background as well as personal traits and goals match up. Attorneys from a variety of professional backgrounds go into solo practice. Some solo practitioners are new attorneys recently out of law school. Others are seasoned professionals with years of experience in their field of practice. There is no clear cut answer to the type of background an attorney should possess before starting a successful solo practice. However, there are a few practical considerations that may facilitate this decision. The attorney should have some experience in the area of practice or at least be willing to put in the time and effort to learn. In addition, if the attorney is a bit inexperienced in the area, they should be willing to consult with a more experienced attorney to form a mentorship relationship. Pro-bono and volunteer opportunities are a great way to gain more experience. The attorney’s personal traits are also an important consideration when starting a solo practice. Many successful solo practitioners are entrepreneurial by nature, willing to put themselves out into the public sphere (mainly for advertising purposes), and they work well in an autonomous setting.
For solo practitioners, the location of practice is an important consideration. Some locations lend itself better to the industry of legal practice. Big cities are usually hubs for potential clients as industry and jobs drive the flow of people and in turn, legal issues. An area like the Washington, D.C. metropolitan area is ideal for a solo practitioner when considering its proximity to the federal government and the lawmaking bodies of the country. At the same time, the practice area should also dictate the location of the firm. An immigration law firm is certainly more useful in a locality that has an immigrant population. Many estate-planning firms are located in Florida due to the high population of retirees and people of advanced age. If an attorney has an established network of contacts in a given location, it is probably best for the attorney to establish the practice in that location as those contacts may help yield a considerable amount of referrals.
To Incorporate or Not
Questions of incorporation are crucial and should be addressed at the outset. Choosing one entity form over another does not mean the attorney cannot go back to revise it. However, it is wise to conduct the proper research to arrive at the most suitable entity type at the initial stage. The type of entity chosen has budgetary, branding, legal liability and tax implications. That is why the type of entity chosen should fit with the firm’s business model and goals. Some solo practitioners do not incorporate at all and decide to run their businesses as a sole proprietorship. Others opt to incorporate as a limited liability company or as a corporation. For example, the “Law Office of X” formation is synonymous with a sole proprietorship. Attorneys who are interested in protecting their personal assets and keeping it separate from the firm are wise to form an LLC or PLLC, which generally shields the owner from personal liability. If an attorney intends on expanding in the future, incorporation is probably the best choice. Both sole proprietorships and small LLCs have a “pass through” tax structure at the federal level. This means that the business does not file a separate income tax return, but the owner lists the firm on his or her personal return.
Plan to Keep Overhead Low...at First
Starting a solo practice can become a costly endeavor, but it does not have to be. The smartest way to start is to ensure that expenses do not outweigh revenue. There are many clever ways of keeping overhead low when starting out. A virtual office can provide a shared office or co-working environment for solos that are not quite ready to take on an office lease. These companies usually provide an address for marketing and mailing purposes at a reasonable rate. Business cards, domain names, and web hosting services are also reasonably priced through various providers. There are a number of payment processors who charge lower fees for credit card payments processed through merchant services accounts. Starting smart means not opting for an office with multiple employees. It is not a wise choice given a need to still establish the goodwill of the firm. Practitioners who start out this way are not so pressured to find clients to meet their expenses so that they may focus on the substance of the legal work. As the firm retains more clients and a steady stream of revenue, it can budget for additional expenses.