Legal advice for
new law firms

A second point of view…

As a lawyer yourself, it may seem strange to seek legal advice for new law firms. However, a second pair of experienced eyes could ensure that you do not make any mistakes that you will regret later.

Which structure is right for you?

Law firm structures are often a hot topic of debate in the legal profession. The traditional partnership or sole practitioner approach used to be the norm. However, there are now a host of options and choosing the right one for your legal business can be tricky. Let’s take a look at the main options.

Sole trader.

• Your personal assets are at risk should things go wrong.
• You are solely responsible for all business finances.
• Reduced paperwork compared to other structures.
• You must register with SRA / Law Society.

Partnership.

• Your personal assets are at risk should things go wrong.
• Responsibility for debt and financing is shared.
• You must register with SRA / Law Society.

Limited liability partnership.

• Must register with Companies House.
• Must register with HMRC
• Required to file annual accounts.
• Personal assets are not at risk – but other factors may mean this is not ironclad.
• You must register with SRA / Law Society.

Limited company.

• Must register with Companies House.
• Must register with HMRC
• Required to file annual accounts.
• Personal assets are not at risk – but other factors may mean this is not ironclad.
• Corporation tax is payable.
• You must register with SRA / Law Society.

Making your decision.

Before deciding which structure is the right one for you, take advice from both an accountant and a solicitor.

Preferably choose a solicitor who has gone through the process of setting up their own law firm. A good accountant will provide a model to illustrate the most tax efficient business structure for your circumstances.

Business Agreements.

In a partnership, the partnership agreement document determines the relationship between those involved. For an LLP the members’ agreement fulfils the same role. For a limited company, it is both the shareholders’ agreement and the articles of association that determine arrangements.

Whichever route you take, the agreement is critical. It is the opportunity to tackle issues such as:

• Profit sharing.
• Business strategy.
• Removal of under performers.
• Exit strategy for partners / directors.
• Approaches to business valuation for those who wish to leave.
• Areas of responsibility for specific people.

It is always the best policy to tackle these issues from the outset. Disagreements will occur as time passes and people’s priorities change.

Let LawStart put you in touch with the right people.

At LawStart, we have a range of preferred accountants and solicitors who can assist you with all aspects of legal advice for new law firms. All have been in the business for many years and are specialists in their fields. We will be happy to put you in touch with them.