Starting a new law firm Part 1 - What do I need to consider?
There are currently approximately 10,000 law firms in England & Wales, and despite increasing consolidation, that number has remained the same for some time. Although mergers have reduced the number of practising law firms, those numbers have been replaced by new firms springing from the mergers where firms determine not to continue with all of the people and/or work types that were previously provided. We are also seeing a spate of niche specialist spin-offs from existing firms, and also individuals setting up on their own not too long after qualifying.
Planning is the key to setting up effectively. There is much for any new business to consider, add in the regulatory aspects of the law and that planning becomes even more important. Right from the outset, we help firms with our top considerations for starting a law firm and to include many of them in formal documents – either for the SRA recognition process; obtaining professional indemnity insurance; obtaining funding; but most importantly for the ongoing success of the new business.
Many of the matters noted below are required for SRA recognition, but they should not be viewed as a means to that end. There is a reason that the SRA want such matters to be considered, it is to safeguard the future of the firm and therefore protect the clients. If that is the case, the business planning, continuity planning and financial forecasts are fundamental and should be used as live documents, continuing to be used to help firms to achieve their objectives.
Top considerations for starting a law firm
- Professional indemnity insurance
- SRA recognition process
- Tax authorities
- Companies House
- Business plans/continuity plans
- Financial forecasts/cash requirements
- COLP/COFA and compliance support
In the next article, we will address a number of the above considerations in more detail.
It is worth noting that we have been approached by a number of firms after they have received SRA recognition, asking us to become their accountants. When they describe the difficulties they faced during the process and then understanding that we could have helped them to streamline it all, they commonly wish that they had worked with us right from the start of the process. The lesson they have learned the hard way is that as much planning as they have put in themselves, there is no substitute for experience.
Andy Poole, legal sector partner, Armstrong Watson
Andy works exclusively in the legal sector advising law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services. Further information can be found at: www.armstrongwatson.co.uk/legalsector
This article is a general guide to the issues that we see in practice. It is not a substitute for professional advice which takes account of your personal circumstances. No responsibility can be accepted for any loss occasioned by any person acting or refraining from action on the basis of this article.
The legal sector team advises law firms throughout the UK on strategic, structural and other business improvement issues as well as providing efficient accounting, tax and SRA accounts rules services.
The Law Society has partnered with Armstrong Watson, who provide accountancy services to law firms throughout the whole of the north of England.