How to Start a Law Business

Legal consultancy, law firm or law practice, whatever you choose to call it, starting a law business can be the next step in your career. Instead of operating like a freelance consultant, you can start your own legal practice. This type of company differs from other businesses, as you need to be well educated and experienced in the law field before you can consider starting your practice.

Lawyers who want to start their own law business need to meet the minimum requirements as set out by the Law Society of South Africa (LSSA). These are set out by Section 26 of the Legal Practice Act 18 of 2014 and expect prospective practice founders to:

• Have an LLB Degree;
• Must have completed all the practical vocational training (PVT) required; a
• pass the competency-based examinations or assessments.

Once these requirements have been met, you will need to approach the High Court to be enrolled as a Legal practitioner in terms of Section 24 of the Act. The High Court processes the application, and successful candidates are admitted and may apply to the Legal Practice Council. This council determines whether you are eligible to run your own practice and mandates a yearly registration fee. The annual contribution is R 345 (including VAT).

The Business Side of a Law Business

When it comes to the business side of a legal practice, the Legal Practice Council is the regulating body that sets the norms and standards for lawyers who want to run their own practices. They ensure that lawyers are professional and held accountable. This institution was formed due to provisions made in Section 4 of the Legal Practice Act, No. 28 of 2014.

The law states that any law entity may be established in both natural and juristic entity capacities. Lawyers are allowed to practice in their personal capacity in the form of a sole proprietorship, and they are only allowed to use their own name or their business name. Partnerships, on the other hand, may only be entered into between attorneys. You can also choose to establish an incorporated company, but this must be registered with the Companies and Intellectual Property Commission (CIPC). Both partnerships and incorporated companies may choose a name that includes one or all of the names of partners or directors. You may also use a derivative thereof, such as an acronym.

Business Planning

As with any other business, you will need to create a business plan, ensure you are compliant and set up your office. Here’s an outline of steps to follow:

1. Create a Business Plan

In your business plan, you will need to create your vision and mission statement.

Next, write what your legal services are and what they encompass. This step will also require that you understand your target market through a market analysis. Include the pricing for your services.

After you have an idea of what you will charge for your services, you can develop a financial plan that showcases your projected expenses and earnings.

2. Compliance and Legal Requirements

Opening a business according to the requirements of what it can or cannot be named, register the name with CIPC and apply for a tax certificate and VAT registration from the South African Revenue Service (SARS).

Additionally, lawyers also need to obtain a valid Fidelity Fund Certificate (FFC). This certificate is issued by the LPC and will entail a once-off fee of R 1 000. Additionally, if you open your own practice, the law dictates that you complete a certified legal practice management course, as required by Rule 27.9.

Lastly, it is a legal requirement to register your practice with the Legal Practitioners Indemnity Insurance Fund [LPIIF] for professional indemnity insurance. This protects the practitioner from damages claimed from you by clients or third parties, should there be an act, omission, or breach of professional duty in the course of your business. It also protects you from legal costs associated with a claim.

3. Find a Professional Office

Any practising lawyer or attorney needs to meet with clients in a private, professional environment. You will, therefore, need to set up an office space with a desk, vital equipment and perhaps a quiet, comfortable corner to have meetings with clients. Take accessibility to your office into consideration when you either invest in a property or rent a space.

Along with the equipment, remember to factor in costs for Internet access and any software such as management tools, accounting software or even software that is solely used by lawyers.

You may start out with only yourself, but plan for other staff, such as cleaners, receptionists, paralegals, and junior attorneys.

4. Set up Bank Accounts and Trust

You can set up a business bank account with any bank that you feel gives you the best service. Research which banks will give your legal practice the best offering.

Remember to also set up a trust account to keep client funds that are not yet earned. Interest earned on the amount may be deposited into a different bank account, but the law requires that accurate records be kept relating to this account.

A firm needs to appoint a compliance officer in terms of the Financial Intelligence Centre Act No. 38 of 2001 (FICA). You also must register your firm as an accountable institution on the FICA online portal. Keep your proof of FICA registration because you will need to submit it annually.

Appearing in Court

If you are an attorney specialising in litigation, prospective advocates must apply to do so to the registrar of the Division of the High Court. According to Section 25 and Rules 19 and 20 of the LPA Rules, an individual who will appear in the High Court, the Supreme Court of Appeal or the Constitutional Court need to apply. They will then be issued a certificate that states that they are licensed to do so. This certificate must be submitted to the LPC.

Any lawyer who has practised for less than a year to apply.