How I started my own law firm
I decided that I would take the plunge and start my own law firm in early 2017, shortly after having my third child. Having worked as a consultant solicitor for 3 years, it felt like the next logical step – although I’m pretty sure my pregnancy hormones played a part in my decision-making because when I look back, it doesn’t seem at all logical!
This article focusses on the regulatory aspects of starting a law firm and doesn’t go into detail on all the other aspects you need to consider when starting a business, such as branding, recruitment, sales and marketing, technology and finances.
The process is quite complex, and you’ll need to set aside a fair amount of time to get your head around and complete all the steps required. But if I can do it, anyone can!
- Don’t allow yourself to get overwhelmed – break everything down into manageable tasks and take one step at a time
- Linked to the above, set yourself some deadlines to ensure you keep everything on track
- If you’re not already, make sure you’re really familiar with the SRA Code of Conduct
- Don’t be afraid to ask for help from people who know more than you do
- And most importantly, don’t listen to people who couldn’t do it themselves – it is possible!
The first thing I did was scour the SRA website and read all the information available on applying for authorisation.
The first decision I needed to make was whether I actually needed to be authorised by the SRA. The position has recently changed and there’s now an option for registered solicitors to provide certain legal services through a non-regulated entity, but in 2017, there were so many restrictions on what you could and couldn’t do without authorisation that I decided I needed it.
The next question was: what type of authorisation was I going to apply for?
There were (and still are) 3 options:
- Licensed body
- Recognised body
- Recognised sole practice
I decided to apply for a recognised body because I knew that I intended to grow Stephenson Law and take on additional owners in the future but I didn’t envisage branching out into non-legal services. The application for a licensed body was also considerably more expensive and complicated.
I had to pay for the privilege of being authorised, so I needed to work out what the cost was going to be. I didn’t initially intend to hold client money, so it worked out at less than £500.
The application was pretty long and detailed and, as part of it, I needed to confirm that an insurance company was prepared to insure me.
Next, I needed to know whether the PI insurance was going to be prohibitively expensive, assuming I could get it at all! I’d heard countless lawyers who had aspired to start their own firm recount their experience that the insurance premium was an insurmountable obstacle. I was therefore pretty nervous that it was going to make or break my plans.
Using Google, I found an extremely friendly, helpful and patient insurance broker called Claire Wills (details below). She talked me through the process and the documents I needed to submit to be provided with an insurance quote. I had a pretty long to-do list!
I also found out about the run-off insurance premium that needed to be paid if you later decided that you didn’t want to run a law firm. At 2-3 times your annual premium, you have to be fully committed!
The main part of my application consisted of my business plan and financial projections, so now it was time to download and refine the ideas in my head.
Don't be afraid to ask for help from people who know more than you do
Business Plan & Financial Forecasts
Claire provided me with some really useful templates, but the rest was up to me! I had to really drill down into the detail of what my business was going to look like. What services was I going to provide and how was I going to be different from my competitors, who my clients were going to be and how I was going to persuade them to use me, and what the team and finances of the business were going to look like for the first 3 years.
Chances are that your actual business is going to look pretty different from the one envisaged in your business plan (I know mine did!), but that doesn’t matter. What matters is that you write a plan that is realistic, well thought-out and gives the insurers and SRA no cause for concern.
It’s also worth noting that your revenue forecasts will be taken into account when calculating your insurance premium, so avoid the temptation to be overly optimistic.
A big part of the business case is demonstrating how the firm will comply with the SRA Code of Conduct, so I needed a really good understanding of this. I also needed to understand the roles and responsibilities of the COLP and COFA, as I would be taking on both of these.
The Law Society has some really helpful compliance guidance, and I also signed up to a subscription with Infolegal to give me access to support and template policies.
Bringing it all together
I first submitted my application for PI insurance and waited with baited breath for a quote to come back. There aren’t many insurers willing to back startup law firms, so my options were somewhat limited, but I was delighted when I received a quote for approx. £5k for the first year. I’d prepared myself for a much higher figure than that, so I was really happy!
With my insurance quote in hand, I sent my application for authorisation off to the SRA. Their website told me it would take 3 months to hear back, but within a couple of weeks I had someone contact me with some questions about my business case, which I could answer on the phone, and within another couple of weeks I received my authorisation!
Whilst this article is a summary of my personal experience in starting a law firm, it can hopefully provide you with some tips and pointers that will help you in your own journey. Good luck!
Helpful links and contacts:
- SRA application for authorisation
- Approval of role holders
- PIB Insurance: Claire Wills - Claire.Wills@qpilegal.co.uk
- Client information requirements
- AML guidance
- Business plan guidance