Starting and running a law firm can feel a bit like wandering in the dark. Few lawyers write books or maintain websites telling other lawyers about their experiences starting or running a law firm.
This means that many lawyers just follow the patterns for running their firms that they learned while working in someone else’s law firm without knowing why. Equally importantly, many lawyers do not look for ways to improve on the customary ways of running a law firm. This causes law firms to stagnate.
Here are nine tips for family lawyers for starting and running a law firm:
Choose Your Area of Focus Carefully
Running a law firm can be very satisfying if you enjoy your work. Choosing to practice family law or any other specialty should be made very carefully and after some reflection. Once you start running your law firm, you will find that changing your area of focus becomes difficult. Therefore, you should choose a practice area that you enjoy and will bring you both success and satisfaction.
Specifically, a family law practice will have highs and lows and you must be able to deal with both. A family law practice will include legal issues such as:
- Divorce: In many states, a family lawyer will see divorce and legal separation cases for married couples and domestic partners who want to separate their legal and financial affairs.
- Child custody: Arrangements for caring for children after a divorce need to be adjudicated by a court. Likewise, custody disputes can arise when the parents are unfit and a guardianship lawyer needs to request that the court place the child in a safe environment.
- Child support: If a child’s parents are not married, a judge can order the biological father to pay child support.
- Adult guardianship: Some disabled or elderly adults require someone to make legal and financial decisions on their behalf. A family lawyer can help to make the arrangements and get them approved by a judge.
- Adoption: Adoptions must be approved by a court. As a result, adoptive parents often hire a family lawyer to prepare the adoption petition and deal with any issues that arise during the adoption hearing.
- Name changes: In many states, a judge must approve name changes.
- Emancipation: When a child wants responsibility for the child’s legal and financial affairs taken from the child’s parents, a family lawyer can start an emancipation proceeding.
- Prenuptial agreements: Family lawyers do not spend all their time in court. Family lawyers also write contracts like divorce settlement agreements and prenuptial agreements.
As you might appreciate, working for clients who are going through traumatic experiences like divorces and child custody battles, can be very stressful, even to the point of causing secondary trauma in family lawyers. When you choose to open a family law firm, you need to be prepared to deal with the stress of practicing family law along with the stress of running a law firm.
Incorporate Your Law Firm
In the same way that doctors sometimes make the worst patients, lawyers sometimes make the worst clients. Take the same advice you would give a client who is forming a business and incorporate your law firm.
Trying to operate your family law firm as a sole proprietorship or partnership will expose you to personal liability for any law firm liabilities. For example, if the law firm has a credit card for business expenses, the credit card company can come after you for late payments if you do not incorporate. Likewise, if your law firm is sued for malpractice, you could be on the hook for any damages or settlement if you do not incorporate.
When you incorporate, you can choose to form a limited liability corporation (LLC), limited liability partnership (LLP), or professional corporation (PC). Most law firms choose to incorporate as a PC, although the exact options and liability protections will vary depending on your state. For example, California law firms are not allowed to be LLCs, so PC is the only option in that state.
To incorporate, you will prepare the articles of incorporation and file them with your state’s division of corporations. Usually, the division of corporations is run by the Secretary of State’s office. After the articles are filed, you will need to write up an agreement with your partners, if you choose to have lawyers as co-owners in your firm.
Buy Malpractice Insurance
Only two states — Oregon and Idaho — require lawyers to carry malpractice insurance. However, nearly half of states require lawyers to disclose to clients whether they have malpractice insurance.
More importantly, the consensus among lawyers is that malpractice insurance is essential to protect both lawyers and clients. When a lawyer fails to provide legal representation that is reasonable under the circumstances, the lawyer has committed malpractice. For example, if a divorce lawyer misses a filing deadline and, as a result, loses the opportunity to keep a client’s pension fund out of a divorce, the client has suffered a loss as a result of the lawyer’s malpractice.
If the client files a malpractice lawsuit against the lawyer, one of two scenarios can occur:
- When the lawyer has malpractice insurance, the lawyer will tender the lawsuit to the malpractice carrier. The insurance carrier will either defend the suit or settle it based on the malpractice insurance policy limits. Although the client has suffered due to the malpractice, the client will receive some form of compensation.
- When the lawyer lacks malpractice insurance, the lawyer is on his own to defend the lawsuit. If the client wins, the only assets that will be available will be the assets of the lawyer and the firm. If the lawyer has no assets, the lawyer could be bankrupted by the lawsuit and the client might receive nothing. In this case, no one wins.
Malpractice insurance is a specialty product that is not carried by all insurance companies. For example, you probably will not be able to buy your malpractice insurance from the same company that sells you an auto, home, or life insurance policy. Instead, you will need to search for insurance companies that specialize in business insurance.
Find a Mentor
Every lawyer needs a mentor. While the ideal mentor would also be a family law attorney, you could find any mentor that has years of experience practicing law and running a law firm.
The reason it is important to have a mentor is that there is no substitute for experience. Learning how to practice law is very different from learning the law. Law school does not prepare you for practice. Instead, law school teaches you where to find answers to legal questions and how to think like a lawyer.
The skills for running a law firm are very different. To run a law firm, you will need to learn how to manage:
- Finances: You will need to decide when to expand by adding more lawyers and staff without disrupting your cash flow.
- Cases: You must stay on top of cases to avoid committing malpractice and keep your clients happy.
- People: Your staff and lawyers will need to be paid and provided benefits so they are productive.
When you have a mentor, you can ask your mentor questions, rather than trying to figure out how to run your law firm on your own. Your mentor can help you avoid costly mistakes by explaining what work and what does not. Most importantly, the leadership of a law firm can be lonely. Having a mentor will give you someone who understands how hard it can be to run a law firm.
Learn Law Firm Marketing
The legal market is very competitive. To make sure you have a steady stream of clients, you will need to market your law firm. Consider where potential clients look for lawyers and make sure you can get in front of them.
Some ways you can consider marketing include:
- Website: Key to website marketing is search engine optimization. Most potential clients use search engines to find a lawyer’s website. You need to include the terms clients search for on your website so the search engines return your website. Make sure you include some more obscure terms, such as child adoption attorney, to pick up traffic that other firms have missed.
- Billboards: Billboard advertising is popular with lawyers. Just remember that billboard advertising has a different goal than a website. You want to create brand recognition with a billboard so clients call you when a family law issue arises. Packing a billboard with information is a waste of your money. Instead, pick a visual or tagline that will make an impression.
- Referrals: Some of the most reliable sources of cases are colleagues who refer clients to you. Over 800,000 divorces are filed each year and each divorce requires two lawyers. Networking with lawyers will result in referrals of cases that they cannot take due to caseload or conflicts of interest. Moreover, networking with financial advisors, adoption agencies, and accountants will help you pick up divorces, adoptions, prenuptial agreements, and adult guardianship cases.
Do Your Work
While people might think that a divorce attorneys are rich, remember that when you are running a law firm, you only get paid when you do your work. In other words, you cannot simply go to the office for ten hours a day and get a paycheck. You actually have to do work during that time and collect your fees to get paid.
This might seem a simple task, but running a law firm requires a lot of administration. Some of the tasks that must be performed to keep your law firm running, but do not directly generate any revenue, include:
- Accounting: Bills must be paid, fees must be collected, and employees must be paid. Records of all these transactions must be maintained.
- Compliance: Rules that apply to all businesses, including law firms, must be complied with including paying taxes, maintaining business and law licenses, and keeping the workplace safe.
- Human resources: Hiring, firing, and managing employees will consume an unexpected amount of your time. Moreover, the amount of time required will increase as your law firm grows.
To ensure that your time is not consumed by administration, delegate administrative tasks to staff.
Have an Outlet
The stress of running a law office combined with the time you will spend working as a lawyer will cause long-term health problems if you do not have a way to relieve it. Some of the effects of stress include:
- Increased blood pressure
- Digestive problems
An outlet to relieve stress can take any form. Exercise is a good way to release endorphins and other positive hormones to balance the cortisol that is released by your body under stress.
Choosing nutritious meals and spending time on hobbies other enjoyable activities can keep your body and mind healthy. Avoiding alcohol, drugs, and tobacco will allow you to cope with stressful situations rather than avoiding them.
Stay Current on Law
A divorce lawyer needs to keep current with developments in the law. Family law continuously evolves with new laws and regulations that can affect:
- Court procedures: Courts periodically update rules. For example, over the past few years, many states have enacted rules covering electronic filing of documents.
- Financial rules: Tax laws have a major impact on divorce proceedings. One recent change in tax law, for example, eliminated the income tax deduction for alimony.
- Guardianship procedures: With the population of the U.S. aging, the law has evolved on the issue of decision-making for seniors with dementia who require adult assisted living.
Think About Cash Flow
Over the course of a career, a divorce lawyer can make a fairly decent living. However, when you are running a law firm, you need to focus on cash flow as well as revenue.
Specifically, cash flow in law firms will ebb and flow. Some months will be especially slow, due to bills being due all at once or slow payments from clients. Other months will be flush as the payments from a busy month come rushing in together. Some ways a law firm can smooth out cash flow include:
- Pay bills on time: Paying bills on time avoids late fees.
- Send bills quickly: Keep up on entering your time and send out bills as soon as work is finished. Clients are more willing to pay immediately after you provide work to them.
- Get some fees in advance: For large projects, like preparing a divorce petition, ask for some of the fees in advance. For example, make sure you ask for enough to cover hard costs, like filing fees, and at least a portion of your fees so you are not left unpaid if the client fails to pay the bill.
- Handle your collections: If a client does not pay a bill, contact the client directly. Clients can ignore your staff, but they cannot ignore their lawyer.
Whether your practice is directed to transactional work, like drafting agreements, litigation, like divorces, or appellate work, like family appeals, a family law practice can be fulfilling and financially rewarding. Just make sure you are committed to the work, have a mentor, and have an outlet to relieve stress. Once your law firm is up and running, focus on cash flow, delegate administrative tasks, and learn marketing so your work pipeline remains full. Protect yourself, your firm, and your clients by buying malpractice insurance. Above all else, remember you work for your clients.