Owning and managing a law firm is difficult and managing that law firm through the stages of growth and eventual lawyer succession can be even more grueling. There is a range of financial and legal considerations that go into successfully and efficiently establishing and expanding your law firm and planning for its future. For many law firms, the challenges that impede growth – including the costs of forming a practice, acquiring new clients, and expanding into new markets – can become overwhelming and lead to stagnation. This is when many firms reach out to law firm consulting attorneys.
At NC Planning, our team of law firm consulting attorneys understand how to drive revenue and respond to the evolving demands of a growing law practice. Through our counsel, we have helped lawyers acquire and sell practices, establish their own start-up firm, develop succession plans for lawyers including lawyer buy-sell agreements, partnership agreements and others. To learn more about how we can help, consider contacting our Cary office at (919) 900-4720 or our Raleigh office at (919) 568-3681 today.
Considerations for Solo Practitioners and Law Firm Start-Ups
Establishing a solo practice or law firm start-up can have notable advantages. You will be able to design your business model, curate your work culture, and choose the clients that you represent. These benefits come at a cost, however, as creating a law firm practice is an undeniably complicated, time-consuming, and arduous process. For this reason, many attorneys seek outside legal and financial counsel to minimize their risk during the process. We offer the business acumen and entrepreneurial know-how to help lawyers establish and grow their law firm, specifically handling matters related to:
- Creating an executive summary that outlines the mission statement, core values, and primary goals of your firm
- Conducting preliminary market analysis to identify ideal client demographics and pinpoint direct and indirect competitors
- Identifying targets, priorities, and key performance indicators (KPIs)
- Ensuring compliance with the Administrative Rules of the North Carolina State Bar
- Reviewing and negotiating commercial lease agreements
- Securing malpractice insurance and other liability protection
- Crafting ownership operating and lawyer partnership agreements, employee agreements, and other relevant contracts
- Incorporating your professional practice based on the rules set forth in Chapter 55B of the Professional Corporation Act
Law Firm Employee and Ownership Planning
After completing the necessary legwork to create a law firm, it is time to consider how your practice will be managed. Law firms, by nature, are complex and fast-moving. They require the implementation of creative solutions, strategies, and systems to run efficiently. As an attorney, you likely want to focus your attention solely on your clients, which is the heart of your practice.
While clients are a crucial component of your practice, your firm requires focused management on its biggest resource – its people, as well. Our law firm consulting attorneys have worked closely with lawyers to identify areas of opportunity and offer solutions to optimize efficiency and productivity on ownership and team structuring. The following are common practice management areas that may require support:
- Lawyer employment agreements
- Attorney compensation and equity arrangements
- Attorney succession and partnership planning and agreements
- Law firm buy-sell agreements, disaster and other planning
Buying or Selling a Law Firm
The acquisition or sale of a law firm is an intricate, extensive process. Such high-level transactions require careful attention to detail, business expertise, and compliance with relevant state and federal law. As a lawyer, you may consider buying another firm for the purpose of expansion – acquisition offers a valuable opportunity to reach new markets. On the other hand, you may be looking to sell your existing practice due to a career switch, relocation, or retirement, for example. Either way, there are many considerations and legal requirements that must be accounted for throughout the process. At NC Planning, we’ve helped lawyers in a number of transactions involving buying or selling a law firm and provide assistance with the following matters:
- Navigating the due diligence process by organizing financial statements, lease and debt agreements, and titles to assets as part of closing
- Crafting key documents such as letters of intent, purchase agreements, promissory notes, employment agreements, Of Counsel agreements, and others
- Coordination of closing procedures with lenders, buyer/seller counsel, and others
- Reviewing compliance with ABA Model Rule 1.17 on the Sale of Law Practice
- Minimizing tax liability with deal structures
For many lawyers, managing their practice, ensuring smooth operation of their business, and representing their clients is more than a full-time job. With little extra time to dedicate to other activities, tax planning can easily fall in the list of priorities. Unfortunately, this can severely hurt the law firm’s bottom line. Through proactive income tax planning, it is possible to identify deductions, leverage investments to your advantage, and establish systems to reduce your tax burden. As corporate counsel and financial advisors, our law firm consulting tax planning services include:
- Identifying deductions including unreimbursed business expenses, asset purchases, and other annual deduction opportunities.
- Leveraging fringe employee benefits and charitable donations to minimize tax liability
- Timing asset acquisition to optimize tax benefits
- Adjusting your AGI to increase tax savings
- Strategic structuring of business entities for efficient tax planning
Law Firm Succession Planning
Succession planning is a key aspect of minimizing your risk and improving employee retention. This planning refers to the process of identifying key positions in your firm and identifying the individuals, internally and externally, who will be able to seamlessly fill those roles in the event of an unexpected vacancy. Whether it is due to a new job opportunity or a sudden illness, for example, employees exit a law firm for several reasons. It is important to prepare for these unforeseen circumstances. Succession planning also involves training existing employees so they are equipped to assume leadership positions in the firm, therefore increasing employee morale and retention.
Choose the Right Consultants and Attorneys for Your Practice
As an attorney, you understand the importance of choosing the right legal counsel for your needs and goals, both immediate and long-term. The right attorney will identify critical areas of improvement and missed opportunities to set your practice up for success. They will work closely with you as a trusted advisor to ensure the success of your business, negotiating on your behalf and upholding your interests at every step. The wrong attorney will fail to treat your practice with the utmost respect, resulting in costly missteps. The right attorney will value your business and work to understand your vision.
To choose the right law firm consulting attorney, consider their ability to address all your current and potential needs. Does their firm have a certified CPA on their team to handle complex financial and tax-related issues? Do they use an interdisciplinary approach to ensure that all business matters can be handled in-house? Will you be able to work with this attorney long-term? How long have they been offering consulting services to law firms? These considerations will help you make a well-informed decision regarding your legal counsel.
How NC Planning Will Help You Plan for the Road Ahead
For many, owning and operating a law firm practice is incredibly rewarding. To reach and sustain your envisioned level of success, however, strategic planning is required. At NC Planning, our team of law firm consulting attorneys works closely with solo practitioners, law firm start-ups, and established practices to implement processes and solutions that reduce risk and optimize success. To see if we are a good fit for your practice, consider scheduling a consultation by contacting our Cary office at (919) 900-4720, or our Raleigh office at (919) 568-3681 today.