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INSIGHT: A Blueprint for Opening a Law Firm During the Pandemic

July 30, 2020, 8:01 AM

Depending on your region, during the pandemic, your community is either continuing to walk the fine line between recovery and relapse or navigating the protocol guidelines for returning to “normal.”

Fortunately, in all scenarios, people need legal advice and assistance. Here are four steps to starting your new law firm in an unstable/pandemic economy.

Step 1. Strategizing

Do some self-analysis before you start your business. Write down your business and personal goals including how big you envision your law firm being in three to five years. You know the law, but what aspects of running a business are you confident about? What, if anything, makes you uneasy? What resources do you have?

Step 2. Create a Business Plan

Developing a business plan, including a competitive analysis and marketing plan, helps you think through all aspects of your new business. If you plan to get a bank loan or find investors, a business plan is a must.

Your business plan should address the specific challenges and opportunities you may face starting and running a business during a pandemic. Will you be a virtual business, for example? How will you meet with clients?

Step 3. Business Checklist

Next, you have a few structure and compliance tasks to accomplish.

  • Name your business. Most law firms use some form of the owner’s name such as “The Law Offices of Joe Smith.” Others incorporate their location into their name. Check with the secretary of state in the state your business is housed to make sure you can use the name.
  • Choose a legal structure. Because of the protections offered by the limited liability company (LLC) structure, many law firms choose to register as an LLC. Like a corporation, the personal assets of the owners are protected from risk in case the business is sued or has debt. Not all states, however, allow licensed professionals to form an LLC, since they don’t want them to escape personal responsibility for professional malpractice.

In these states, a law firm may be able to form a professional limited liability company (PLLC). In all states requiring PLLCs, notification, and approval of the state regulatory board for that profession must be obtained. The difference is only a license holder (in this case, an attorney) can register the company and there may be some limitations such as all, or at least half, the owners must be professionals. In any case, the business must register with the state and be in compliance with all documentation and fees.

Another option for law firms is to form a professional corporation. Professional corporations must have some official designation after the business name indicating either professional corporation (P.C.), service corporation (SC) or professional association (PA). Although the filing requirements vary by state, P.C.s offer professionals limited liability protections from the actions carried out by other owners in the business. This is not the case if the company was structured as a general partnership.

The P.C. does not protect an owner from their own negligence or malpractice. The professional who performs the service is not shielded by the corporation and therefore is personally liable in case of debt or lawsuit.

In most states, all or at least half the owners and shareholders of a P.C. must be licensed in the profession the corporation is engaged in; however, board officials such as treasurers and secretaries do not need to hold a license. In some states, such as California, professionals are required to form a P.C.

As far as taxes, P.C.s are considered C corps by the IRS. Like a C corp, P.C.s can also elect to be taxed as S corps, avoiding double taxation.

  • Obtain a business license. Whether you’re running your business from an office or your home, you need a business license from your city’s business development office.
  • Get a Federal Tax ID Number. Every business must have a Federal Tax ID number or employer identification number (EIN) from the IRS. The person who applies must be the “responsible party”—the person who ultimately owns or controls the entity.
  • Buying business insurance. Business insurance falls into several basic categories: 1) General liability; 2) Property and casualty (fire and burglary); 3) Umbrella for liabilities your other policies don’t cover; 4) Workers’ compensation, if you have employees. Also consider cyber liability and keyman insurance.
  • Hiring employees. Before you hire for your law firm make sure you’re aware of the laws and regulations involved with being an employer. The rules vary by state so check with your state’s Department of Labor. Then read this to find your ideal legal professional.

Step 4. Marketing During a Crisis

To find and keep clients while functioning under the fear of the coronavirus, try these strategies.

  • Establish your law firm as Covid-19 experts. Potential clients will have specific questions on how to handle legal issues caused by Covid-19 and possible economic downturn. Position your firm as an expert by creating content on your website with your clients’ biggest concerns in mind.
  • Offer virtual consultations. Offer all clients the opportunity to get advice without coming into an office or meeting in person.
  • Incentivize referrals. Offer clients incentives or discounts for referrals. Also, monitor any review sites (Yelp, etc.). Address negative reviews immediately.
  • Offer more than just legal advice. By partnering with other businesses, you can market your law firm as a one-stop shop. Think outside the box for consumer and business clients and offer additional services they may need.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Nellie Akalp is the founder and CEO of CorpNet.com, a trusted resource and service provider for business incorporation, LLC filings, and corporate compliance services in all 50 states. Akalp and her team recently launched a partner program for legal, tax, and business professionals to help them streamline the business incorporation and compliance process for their clients.

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