Starting your own law firm: How to make it official

Selecting a name for your law firm

You might be surprised to know that there’s more to naming a law firm than brainstorming and narrowing down your favorite options.

The American Bar Association’s (ABA) Model Rule of Professional Conduct Rule 7.5 originally outlined the law firm naming rules you needed to follow—while the rule was deleted back in 2018, many bar associations still enforce its guidelines.

While this is an extra factor to take into account, the rule itself is simple. In short, your law firm name can’t be misleading. A few examples include: 

• Don’t use “And Associates” if there are no actual associates at your firm.
• Don’t use “Partners” or “Group” if you’re a sole proprietor.
• Don’t use celebrity names if they are not actively practicing law with your firm. Don’t use state or jurisdiction names if you are not a public legal aid agency.

In addition to this federal guideline, be sure to check your jurisdiction’s law firm naming rules as each state is different. For example, New York prohibits trade names.

The name of your law firm gives your potential clients, partners, and colleagues the first impression of your business. Remember to keep these guidelines in mind when selecting a name. Also make sure that the name reflects how you want others to perceive you and your law firm.

Designing a logo for your law firm

Your logo is an important part of your brand and how you decide to express your law firm visually. It’s the main symbol and most visible graphical element that appears on your website, business cards, emails, and other marketing materials.

For this reason, spending time and money on a professionally designed and well-thought-out logo is essential for any successful marketing plan. From choosing the right logo color and font to hiring the right designer, make sure your law firm’s logo is an accurate reflection of your brand—this is a process that involves thorough research, thought, and iteration.

While there are no strict federal guidelines for law firm logos, there are a few considerations to take into account. Consider whether :

• You want to trademark your logo (not required but strongly recommended)
• What main colors you want to use to represent your law firm
• If the font you’ve chosen is web-safe (so your audience views your content the way you designed it, on any device and browser)
• Whether you want to outsource a custom logo built from scratch or perhaps you’d want to buy a template from a stock image site to use.

While it may seem complicated at first, designing your law firm’s logo is a very rewarding process that is pivotal to creating your brand.

Forming a legal entity

There are four main legal structures available for lawyers looking to start their own law firms, which determine your share of liability and how you will be taxed. 

1. Sole proprietorship: This is the simplest option if you’re a solopreneur and makes you liable for all business obligations.
2. Corporation: This structure is available for both solopreneurs and two or more lawyers looking to form a law firm. A corporation is a unique legal entity that is given limited liability and owned by shareholders.
3. Partnership: This structure is the most common for two or more lawyers who choose to start a law firm together. In a partnership, the formation costs are low. Both parties share profits and equal liability for each other’s actions.
4. Limited Liability Company: This structure is similar to a corporation in terms of liability, where members are protected from personal liability for the acts and debts of the company. But, members are treated differently when it comes to taxes. Members can also opt to be taxed as a partnership).

Before deciding your legal structure, be sure to check your jurisdiction guidelines as they may have additional requirements. For example, only certain states allow one shareholder to form a corporation while others require two or more stakeholders.

Getting a bank account

Most firms starting out will need three business bank accounts at minimum—checking, savings, and a separate Interest on Lawyer Trust Accounts (IOLTA). It’s wise to keep all these accounts together in the same financial institution to easily keep track of your funds.

While the first two you may have already heard of and use in your day-to-day life, an IOLTA account is a type of bank account from which any interest earned on the account is collected and forwarded to the state bar (usually to funds for social justice). Lawyers are not allowed to collect interest on money held in trust for their clients.

IOLTA accounts are designed to keep client funds separate from your typical business or operating account—where you are allowed to accrue interest. Lawyers also can’t deposit their own funds into an IOLTA account, except to pay service charges. This is why you should use a separate checking account or designated credit card to cover fees—so there’s no risk of accidentally touching client money.

Most major financial institutions offer the ability to open an IOLTA while specific jurisdictions (such as New Jersey) have a two-stage IOLTA/Trust account. As always, be sure to check the requirements in your own jurisdiction.

Without the right business accounts, you risk inaccurate bookkeeping, messy records, and potentially violating compliance.

Purchasing insurance

There’s no one-size-fits-all insurance plan when it comes to law firms. Each firm has its specific needs depending on their clients, employees, areas of practice, and more. 

We’ve compiled a list that should cover most of your insurance needs when you’re first starting your law firm. But depending on your practice area, it’s important to look into additional plans.

• General Liability Insurance & Property Insurance: This type of insurance will protect you from most types of lawsuits—it covers property damage or personal and advertising injury caused by your service, business operations, or yourself.
• Professional Liability Insurance: Also known as legal malpractice insurance, this is the most important type of insurance for any law firm. This covers suits that may arise from misinterpretation of the law, bad advice, missed deadlines (statutes), conflict of interest, or disgruntled clients looking to sue.
• Cyber Liability Insurance: Lawyers often deal with sensitive client information, making them a target for hackers. This type of insurance covers cybercrimes, including social engineering schemes where the hacker tries to trick a lawyer into sending funds to a fraudulent account or hijacking the email of an attorney and directing clients to send funds someplace illegitimate.

These four types of insurance are part of the basic package that every lawyer starting their own law firm should purchase. If you plan on employing others such as a virtual legal assistant, you’ll also need to purchase the following:

• Employment Practices Liability Insurance (EPLI): EPLI insurance protects your firm from potential employee-related claims and should be purchased by any lawyer who plans to employ even a single employee. Solopreneurs will not need to purchase this type of insurance.
• Workers Compensation Insurance: This type of insurance covers your firm if employees ever sustain injuries at work (whether they’re in the office or at the courthouse) and is required for employers in just about every state.
• Directors & Officers (D&O) Insurance: This protects the personal assets of you and your spouse in the event a competitor, vendor, customer, or other party decides to sue you personally for actual or alleged wrongful acts in managing a company.

Confirming all licensing and compliance requirements

The last step in making it official is completing the licensing and compliance requirements needed to legally start your business.

A business license is essential to identify your business, keep track of your finances for tax purposes, and operate legally. Additionally, in certain jurisdictions, you may need a state tax identification number, trade name registration, and zoning approval (if you plan to open a physical office). These can vary from the state, city, and district level so be sure to check your own jurisdiction for additional requirements.

If you plan on employing help, you’ll also need an Employer Identification Number (EIN), although this is not required for sole proprietors. You’ll also need a federal license if you practice in a federally regulated field such as security, broadcasting, or transportation.

These requirements seem daunting, but thanks to technology streamlining the application process, registering for most of these will only take a few minutes.

Final thoughts

If, by the end of your article, your head is swimming and overwhelmed with all the “official” paperwork you need to take care of, that’s perfectly normal.

Take a deep breath and give yourself a few days to map out your plan. Break each section down into more manageable tasks instead of trying to rush yourself through them. Knowledge is power. Using this guide as your starting point will help equip you with the information you need to officially start your law firm.