How to start a law firm in Victoria, Australia

Seeing as I did it, I’ve been asked a bit how do you start a law firm? Good question.  Like most lawyers, I hadn’t thought about it.  I guess I assumed some sort of virgin birth – it just appears one day.  I started my firm two years ago and it might be useful (for lawyers) (in Victoria) to set out the steps I took (this is not legal advice about your plans). If it helps even one lawyer to give it a shot, I will be happy.

I have an incorporated legal practice (ILP), which is a company.  You could also be a sole practitioner, or partnership etc – but this is about ILP. You should speak to an accountant first anyway. I’m not affiliated with any of the suppliers or vendors below.

What I did

1. Practice Management Course 3 days online $1,980-$2,200 (e.g Leo Cussen, LIV, College of Law).
2. ASIC incorporate company (you can buy off the shelf through a third party or do it yourself if you are comfortable filling out Form 201) $597.  You can also register a business name if it is different to your company name.
3. Apply for ABN.
4. Website and email domain (just search for buy domain). I think it was like $99 for two years. Then you need to use a website editor to make your website or you can pay someone to do it for you. I made mine first, and it was ordinary, then I got a developer to make one and it is much nicer. Alternatively, you might not want a website, and you can get a business email address from Google, if you are satisfied that client data security (and file formats like Google Docs…) will be sufficient.
5. Microsoft365 Business Standard $18.70 per month, and set up email client.
6. Apply for TFN.
7. Register for GST (if you think your turnover will be over $75k).
8. Business bank account.
9. Give the VLSB notice of intention to start providing legal services.  Then VLSB gives you an Entity Number, which you need for the other things below.
10. VSLB+C Principal practising certificate with trust $698, no trust $487 (I don’t have a trust account, and so I take the risk of not being paid, but who wants to run a trust account!).
11. LIV incorporated legal practice membership $free (call them, I can’t find the form online).
12. LIV lawyer membership $535. Scroll to the bottom for the PDF forms.
13. LIV Professional Standards Scheme membership to limit your liability for advice given in the course of your work x 2 (lawyer and firm) $360.
14. LPLC PI insurance premium is tied to your fees, and it’s unlikely you would know what your first year of fees will be, so you might pick the $19,999 estimate of fees you will earn in your first year $432.84 and then update it later if you earn more. Read the policy to understand what your are covered for – don’t step outside your lane is the main thrust of it.
15. If you are working from home to start with, notify your home insurer that you are running a no-customer business from there (or the insurance may be void) and don’t then go and hold client meetings at your dining table. Apparently this shouldn’t increase your premium, but it would depend on your insurer.

So that’s $4,529.54 and about one day of admin work (not counting the 3 day LPM course). In contrast, a firm will take care of most of the admin parts to join the partnership, but the journey is quite a bit longer and more painful.

You might also want to think about the non-exhaustive list of admin stuff below as well.

To start working

You would be ok with just laptop, monitor, phone, word processing software, email.

But then there are always other things:

• PDF software (I have Acrobat now after also being very happy with PDF Expert and PDF24), antivirus, cloud backup, website editor, domain registration, password manager, textbooks, printer.
• Later I got an IT consultant who is great value.  You want advice on data security that you probably haven’t thought about because it has always been done by an IT department.
• I used an Excel spreadsheet for bookkeeping for a year, then now I’m stuck with Quickbooks or Xero or something.  The spreadsheet was fine.
• Accountant. Ask them about their fees, because you might have lots of questions in your first year, and they might have different rates for tax returns vs advice. While I am a lawyer and I should know better, I was surprised at how much my silly questions to my accountant cost.
• Income protection and life insurance. Speak to a broker.
• Swanky new clothes – but not a suit because you don’t work in a firm anymore.

You might want to get legal practice management software if you will have lots of matter files and it can link in with billing software. I don’t have this but others tell me it is useful. You can expect that vendor sales managers will be reaching out to you 5 mins after updating your LinkedIn to sell you their product, so I’ll let them fill you in on the details.

Timing

If you start before 1 July, LPLC and LIV will make you pay for that financial year, and then again in June for the next financial year – only your practising certificate is quarterly pro rata. But if you have work ready to go, you might want to get started straight away.

You might need to have some money saved up as a buffer.  Some people probably try to do a soft start while in their notice period or something like that.

Fees

Work out if you will charge fixed fee or hourly rate (or both) and then work out what hope to pay yourself, plus tax and super, estimate of annual expenses, GST, and then add some profit, divide by your estimated number of working days in a year and your hours per day, to get an idea of an hourly rate. It may change as you start to work and get a feel for what is appropriate.

Don’t assume you will work 8 hours a day, 251 days per year. The rate will also be guided by your area of practice and your years of professional experience. What you were charged out at by a firm is not going to fly. A firm’s rate is attached to very experienced partners, a large insurance policy and a brand. You don’t have that (yet).

People also want to know your day rate.  You might cap it at 8 hours and take the risk on extra work.  You might discount the rate if you know you are getting blocks of dependable work. If you think there might be a lot of unknown hours (like negotiations), you might say no daily cap.  I see more barristers abandoning the daily cap lately, which is fair enough so long as you are providing value.

The VSLB+C has a lot of helpful guidance on fee estimates and cost disclosure.

Clients

Talk to your business contacts, and partners at former law firms (I doubt your current employer wants to hear about it), about how one day you hope to start your own shop and gauge their interest and take on any suggestions or guidance.  I was lucky enough to have work to start with. Renew Legal would be a very different story if I had just hung a shingle and hoped for business to walk in the door, like a cafe.

It’s nice to catch up with other consultants / sole practitioners to be reminded that this has all be done before and you’re going ok. My friend and I started a Melbourne consultants Christmas party, which now has a few members and you might want to join one day, too.

I didn’t get much interest from random approaches to potential clients until Renew Legal turned one and then magically I must have been around long enough.  I guess there’s some suspicion of new things, and the touch of desperation has gone.

Freelance work

There are freelance consultant job boards run by firms to (in part) provide secondees to their clients, to avoid cannibalising their own teams.  There are, for example, Pinsent Masons Vario, Plexus, HSF Teamsource, Corrs Orbit, Lawyers on Demand, MinterEllison Flex, In Counsel, Ashurst Advance, KWM Connexion, A&O Peerpoint, Axiom.  There are also smaller ones.  I think the hourly rate might be lower for some, but you might find a fixed term role with its associated certainty.

Downsides

Whether you think you need them or not, there is much to be said for having colleagues to talk with.

The where is the work going to come from 12 months from now feeling sucks.  All you can do it turn it into motivation, keep speaking to people and reminding them you exist and get to know their business and what they need.

No annual leave, sick leave, LSL or slacking off.  Obviously you still want holidays, will get sick and be sluggish, but this is all on you now.

Too much work.  Resist the temptation to say yes to everything that comes to you.  You need to have a bit of space in your week. The only thing new clients want to know is do you have the capacity to take on my work? and it is unhelpful to everyone if you say yes and it was really no. Most of us would have worked for partners that take on too much work and remember the effect it has on everyone.

Upsides

In charge of your own destiny. Bring in the work, get the profit.  RBA keeps putting interest rates up? Go and earn more money (this was what prompted me to go out on my own, after rates started going up every month from August 2022 immediately after we bought our house). Change your focus and chase different matters (skills permitting).  Diary control. Family friendly job. Better mental health. Enjoy, rather than dread, BD because it’s for you (and it’s nice talking to people when you work alone).  Finally, it’s fun to develop your work strategy for the year and pitch for that business.

I hope the 15 steps don’t seem like a lot, it was actually really easy.

Note: if you made it this far, you probably want to work for yourself.

This article is a summary and general overview of matters of interest. It is not comprehensive and does not constitute legal advice. You should also get accounting advice if you are thinking about this.

Liability limited by a scheme approved under Professional Standards Legislation