Setting Up in Practice and ABS Applications
Setting Up in Practice
The decision to set up a new firm, whether on a solo basis or with others, or move from a traditional style of practice to an alternative business structure (ABS), may be made for many reasons. For some it could be to be in control of one’s own destiny, perhaps influenced by the frustrations of working for others in the past. For others it might be the best way to continue in practice after the failure of a previous firm or an unplanned departure from it.
Whatever the reason, it is in most cases going to be decision made for pragmatic and business-focused reasons, similar factors will need to be considered and individuals, firms and prospective firms will need to satisfy the requirements of the Solicitors Regulation Authority (SRA) before they can commence practising.
Whether setting up in practice or changing your practice structure, Infolegal can assist you to make the application, put in place the necessary processes and systems, create business plans and financial projections and, having successfully set up or changed the mode of practice, provide support, information and services designed to help you make the most of your new firm..
Infolegal has considerable experience of setting up dozens of new law firms over the past few years and Info can assist individuals and firms with all types of application.
Even though the SRA has taken steps to simplify the authorisation process, there are still a considerable number of separate requirements which can make the process seem a daunting one for anyone not familiar with it. Those applying to set up a new practice, for example, will need to determine the correct structure for their practice – recognised sole practice, partnership, limited liability partnership (LLP) or limited company – and whether they want to operate as a traditional practice or an ABS as well as having to put in place business plans, obtain PII and set up bank accounts. For those already in practice, but who plan to move to a different structure, they will need to have thought through how in reality this is to be achieved and what implications it will have upon the way in which their services are delivered.
Dealing with the SRA
Most solicitors will look to go down the SRA route in order to become a newly authorised practice. However, it should be borne in mind that this is not the only option available and you may be able to practise under authorisation from another regulator if it better suits your purposes. The structures in place under the Legal Services Act 2007 mean that the SRA is just one of the “frontline” regulators which is able to authorise and then regulate law firms, but it is not the only one, and, depending upon the nature of the work they wish to do, solicitors have the option to choose regulator.
Other options will depend on which of the reserved legal activities the new firm will be providing, so that a conveyancing and probate practice might choose to be recognised by the Council for Licensed Conveyancers or a litigator might choose to operate under the regime in place at the Bar Council. It is likely, however, that the great majority will opt for the SRA regime as being the one most obviously relevant to solicitors’ practices.
What is more, you should also be aware that you no longer need to be an authorised firm or recognised sole practitioner (RSP). You can practise as a freelance solicitor provided that you meet the relevant criteria for doing so. You can find out more about practising as a freelance solicitor by going to the SRA Guidance Note “Preparing to become a sole practitioner or an SRA-regulated freelance solicitor“.
The Need for a Business Plan
Recognising the financial risks of setting up any new business, law practice or other, your first very important step should be to develop a business plan.
Thought needs to be given to the services that you will be providing and to whom the services will be provided. Thought may need to be given as to restrictions in place from your practise with a previous firm – for example, might you risk legal action if you seek to contact former clients from any previous firm for whom you have worked ?
Your business plan will also need to set out your likely fee income and the financing arrangements you will have in place while you wait for the work done from your starting date to be paid for, as well as providing a budget for the expenses that will arise for you to start your practice. Most importantly of all, you must not allow your excitement and enthusiasm for your project to mask the very real financial challenges that you will be bound to face – including how secure a new source of work is, how soon your bills will be paid and how great a loan might you require to fund the start up, from where that loan will come and on what terms?
In other words, you business plan needs to address:
- the legal services you intend to offer,
- from where you intend to offer them (e.g. your own office, shared accommodation or your home),
- an estimate of the likely amount of work, income and other plans for funding the practice,
- where your work will come from and how you will promote your practice,
- how you will deal with risk and details of any contingency plans that you have,
- who you will be working with and what they will do, and
- how you will deal with SRA compliance.
In addition, you will need to:
- put together a realistic cash flow forecast otherwise you will not be able to predict how much money you are going to need to keep the practice running whilst you build up clients,
- obtain professional indemnity insurance,
- ensure that the legal vehicle through which the practice will operate is in place, and
- putting in place the various other ancillary processes such as accounts, registration for tax and VAT, health and safety considerations, ICO registration, bank accounts and so forth.
Find Out More About Setting Up in Practice
For more information on setting up in practice please contact Infolegal either by telephone on 0203 371 1064 or by email at email@example.com, and we will be delighted to assist you.
You can also download our guidance on setting up in practice using the link on this page.