How Much Money Do I Need to Start a Law Firm

Question: How much capital is needed to start a viable law practice?

It really depends on your personal situation, but you can open a firm  for a very small amount of capital these days. This is fortunate because  credit is tight and as a brand new attorney you will probably have  trouble getting a traditional business loan.

The best way to figure out how much money you need is to write up a  business plan. A business plan also improves your chances of getting a  loan, if you need one. It shows the forethought banks like to see.

You need to be honest about your chances of bringing in clients, whether  you have good referral sources, marketing opportunities, etc. Also,  look at how much money you need to live on and whether you have the  necessary resources for that along with the money to keep your practice  running. I would suggest you plan for at least 3 months without any  money coming in. Could be longer, could be shorter, but 3 months is a  good starting point.

You can certainly do as Andrea suggests, but make sure you know at what  point you will find yourself in financial trouble due to over use of  credit cards. You also need to think about your own level of comfort  with risk.  I know the job market is terrible right now, so you, like  many, might be in a situation where opening your own firm is your best  choice, so your aversion or lack thereof to risk might be irrelevant.

These days, opening the office itself, especially if you are using  virtual space, is the least of the issues. Technology is relatively  inexpensive and you can get most of what you need for low monthly costs.  Internet connection, phone, domain name, cloud-based exchange email,  secure cloud based document storage (for backup,) simple website for  marketing, etc.

Make sure that you are prepared for the ethical aspects of practice in  terms of operating/trust accounting, organization so you don’t miss  SOLs, client confidentiality, etc. That is where most people get in  trouble. So make sure you spend whatever money you need to spend so you  are properly organized. It will save you money and headaches later if  you set yourself up properly in the first place.

Also, malpractice insurance is expensive, but the sooner you can get it, the better.

Rather then reinvent the wheel, I’ll send you to an article my ex business partner  wrote on the subject of creating a business plan.…

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