Launching a solo or small law practice is a bold move that combines the demands of legal work with the rigors of entrepreneurship. Lawyers are often told that “one of the great things about having a law degree is that you can always hang out your own shingle!” But is that really a “great” thing? After all, lawyers are not known for being good at business.
Nonetheless, many lawyers dream of being their own boss and building their own firm from scratch. Being a successful dream chaser requires a blend of self-awareness, strategic planning, and business acumen. Below are some important considerations that every lawyer should weigh before taking the leap.
1. Are You Ready to Practice Law and Run a Business?
The transition from practicing lawyer to law firm owner is significant. It involves a lot of hard work and extra hours. As a solo or small firm lawyer, you are not just delivering legal services—you are also responsible for every aspect of running a business, from administration and marketing to compliance and risk management. This dual role can be both rewarding and exhausting. Honestly assess whether you have the drive, resilience, discipline and organizational skills to manage both the legal and business sides of your practice. One quick way to assess your interest—look at the managing partner where you currently work . . . does her job look like fun to you?
2. Time Commitment: Do You Have the Hours to Dedicate to Both?
Running your own practice is a time-intensive endeavor. Beyond client work, expect to spend substantial hours on administrative tasks, employee management, marketing, billing, and compliance. Effective time management is crucial. Many successful solo practitioners set aside specific blocks for administrative work and use practice management software to streamline operations. If you are not prepared to invest the necessary time and resources, or if your current lifestyle cannot accommodate this, reconsider your readiness.
3. Motivation: Why Do You Want to Do Both?
Clarify your motivations. Are you seeking autonomy, flexibility, or a specific work-life balance? Do you want to build a legacy, serve a niche market, or simply escape the constraints of larger firm life? Are you hoping to increase your personal income? Understanding your “why” will help guide your business decisions, sustain you through challenges, and shape your firm’s culture and brand.
4. Resources and Runway: Do You Have the Financial Cushion?
Financial preparedness is critical, and that includes having a “runway” or “cushion” to support you during the first several months. You will first need to calculate your startup costs (office space, furniture, insurance (health, legal malpractice, employment liability, cyber), technology (computers, internet, phones, office management software), copier/printer/scanner, marketing, bar dues), ongoing monthly expenses (postage, office supplies, rent, salaries, subscriptions), and personal living costs. Then, calculate how many hours you need to bill and at what billing rate to generate sufficient monthly revenue to cover those expenses and eventually pay yourself. Ensure you have enough capital to cover your expenses for at least several months, as it may take time to generate consistent revenue. More than likely, you will not get out of the red for several months, so consider whether you can adjust your lifestyle to accommodate a potentially lean startup phase and go without personal income for 3-6 months. Remember, it will be approximately 30 days before you send your first invoice, and that invoice may not get paid for another 60-90 days.
While it is important to be frugal during the initial start-up period, you should still make certain investments in your practice to protect yourself (i.e., insurance) as well as give yourself the tools you will need to successfully service your client’s legal needs (i.e., law office management software). Another investment that will make your life easier is the retention of a bookkeeper early on to ensure that you’re staying on track with expenses, billing, and accounts receivable, as well as taking full advantage of the tax benefits available to business owners.
5. Risk Tolerance: Can You Handle Uncertainty?
Solo and small firm practice comes with inherent risks: fluctuating income, client disputes, regulatory scrutiny, and the possibility of business failure. Assess your risk tolerance honestly. Are you comfortable with uncertainty and able to adapt quickly? Can you keep overhead low and pivot your business model if needed? Understanding and accepting these risks is essential.
6. Leadership and Delegation: Are You Willing to Lead?
As the owner, you must motivate, serve, direct, and delegate—even if your “team” is just you and a virtual assistant. Leadership skills are vital for client relations, vendor management, and, eventually, hiring staff. Consider how comfortable you are making decisions, setting priorities, and holding yourself and your team accountable. Effective delegation, even of small tasks, will free you to focus on higher-value work. If you currently manage people, ask yourself how comfortable you are doing so, and then consider how comfortable you might be managing them when you’re also responsible for ensuring that there’s enough business to support them on payroll.
Managing others also has ethical considerations. A lawyer who possesses managerial authority in a law firm is required to make reasonable efforts to ensure that the firm has policies and procedures in place giving reasonable assurance that all lawyers in the firm conform to the disciplinary Rules. See, Tex. Disc. Rule of Prof’l. Conduct 5.01(a). Further, a lawyer having direct supervisory authority over a nonlawyer is required to make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer. See, Tex. Disc. Rule of Prof’l Conduct 5.03(a). The requirements regarding nonlawyers do not just apply to employees who are on-site, but also include virtual assistants, third-party vendors, and technology applications used in the law practice.
7. Business Structure and Branding: How Will You Organize Your Firm?
Choosing the right business structure is foundational. Will you be a limited liability company, professional limited liability company, profession corporation, or a sole proprietorship? Each has implications for liability, taxation, and regulatory compliance. Consult with a business attorney and CPA to determine which structure fits your needs and best manages your risks. Also, Texas lawyers may now operate under a trade name as long as it is not false or misleading (see, Tex. Disc. R. Prof’l Conduct 7.01), so be sure to consider the benefits and burdens of taking that path, including registration beyond mere entity formation (e.g. trademark) and branding and marketing.
8. Client Base and Revenue Model: Who Are Your Clients and How Will You Get Paid?
Identify your target clients and determine how you will attract them. Will you focus on existing relationships, referrals, or digital marketing? Define your practice areas based on market demand, your expertise, and local competition. Decide how you will charge: hourly, contingency, flat fee, or a subscription model. Ensure your clients are comfortable with your billing model, especially if you plan to use non-traditional arrangements. Develop a standard form representation agreement to use with all new client matters that clearly and plainly sets out your fee arrangement to protect your rights regarding payment and to avoid misunderstandings with the client about fees, expenses, and billing. Remember that contingency fee arrangements must be in writing. Tex. Disc. R. Prof’l Conduct 1.04(d). Offering flexible payment options (online, in-person, over the phone) can improve client satisfaction and cash flow. When it comes to collections, remember that malpractice claims against you are compulsory counterclaims in a lawsuit against your client for fees. Additionally, the use of arbitration provisions in a fee agreement, as well as the use of collection agencies to collect past due fees both require certain disclosures to the client.
9. Risk Management and Compliance: Are You Protected?
Risk management is paramount. Obtain malpractice insurance and consider additional coverages like employment practices liability, business owners liability, theft, commercial general liability, and cyber liability. Planning for these worthy expenses up front will also ease your mind as you launch your practice. Most insurance companies offer considerable resources to help support your law practice, including forms, loss prevention guidance, sample policies and procedures, help lines, and continuing education.
Additionally, as previously mentioned, as a managing attorney you are required to have certain policies and procedures in place to make sure the attorneys in your firm are conforming with the disciplinary rules. Comment 1 to Rule 5.01 states that these policies should include those that 1) detect and resolve conflicts of interest, 2) identify dates by which actions must be taken in pending matters, 3) account for client funds and property, and 4) ensure that inexperienced lawyers are properly supervised. Other policies may be required depending on the nature of your law practice. It is imperative that you stay current with ethical obligations, bar requirements, and trust accounting rules. Failure to manage these risks can have severe professional and financial consequences.
10. Bookkeeping and Financial Management: Can You Keep the Books?
Accurate bookkeeping is essential for compliance, tax planning, and business success. Set up separate bank accounts for operating and trust funds as required by Texas Disciplinary Rule of Professional Conduct 1.15. The State Bar of Texas offers resources on how to set up a trust account, as well as how to appropriately and ethically use the trust account.
Invest in accounting software or hire a professional bookkeeper to track income, expenses, accounts receivable, and trust accounting. Regularly review your financial statements to monitor cash flow and profitability. If you don’t know how to read a financial statement or the difference between cash flow and income, learn how. If you dislike that idea, consider whether you really are eager to run your own business. Make a budget and stick to it. Do not spend more on overhead than you are making in revenue. Lawyers who get out over their skis tend to make poor decisions based on desperation which can have severe ethical consequences. Good financial habits will help you make informed decisions and avoid costly mistakes that not only can impact your bottom line but can impact your law license as well.
Conclusion
Starting a solo or small law practice is both an opportunity and a challenge. It demands a blend of legal expertise, business savvy, and personal resilience. By carefully considering the factors above—your readiness, time commitment, motivations, resources, risk tolerance, leadership skills, business structure, client strategy, risk management, and financial discipline—you can set a strong foundation for a sustainable and rewarding practice.
The State Bar of Texas produces a myriad of resources to help with each of the considerations listed above, as do private businesses, like Lawyerist. Attorneys who are insureds of TLI can contact us about risk management issues and for further guidance to other trustworthy sources.
The journey is not for everyone, but for those who are excited about the dual roles of lawyer and entrepreneur, leading your own practice offers significant autonomy, flexibility, and the chance to build something truly your own.