Going Solo: Six Financial Tips for Setting Up Your Own Law Firm

Many associates in large law firms dream of the day when they can go out on their own. However, without a clear understanding of the financial and operational realities involved in running a law practice, the transition from lawyer to small business owner can become a challenging one.

Not only can the road to success be rocky, it tends to take much longer than most people anticipate. Below are six business and financial tips an aspiring solo practitioner needs to know to help guide them through the process of starting their own business:

Forecasting Income Revenue

Before you head out on your own, you'll need to put a lot of thought into how much capital you are going to need to get you through the start-up years. Don't just guess. Meet with a certified public accountant (CPA) who can help you develop a strategy for accurately forecasting revenue and spending. Depending on your practice area, it could be a year before you see a dime, so you will need a solid plan for paying the bills up until then.

Setting Up Accounts

You will most likely need to set up several bank accounts before you can officially get your firm up and running. This will include at least one operating account and, if you hold money for clients, trust accounts and an IOLTA (Interest on Lawyers Trust Account).

An operating account holds revenues to cover such expenditures as payroll, taxes, rent, malpractice insurance and day-to-day needs. Some firms have several operating accounts to make it easier to keep track of expenses. One might be earmarked for payroll, another for taxes.