|Oregon State Bar Bulletin OCTOBER 2008|
Lawyers start their own law office because they want to or have to or both. The Oregon State Bar 2007 Economic Survey reported that there were 11,111 lawyers with a quarter of them practicing in a one-lawyer office, especially outside of Portland. These numbers continue to grow. Today, there are 424 newly admitted Oregon lawyers from the July 2008 bar exam. No one forgets the feeling of pride in achieving this long cherished goal that demands untold hours of devoted study during law school and bar prep, and, too frequently, a mortgage-sized debt of student loans.
What awaits this newest group of Oregon lawyers? Most will stay in Oregon. Some will begin their law career in a position at an Oregon firm or public agency. Some with great pride and nervous optimism will open up a new law practice, either joining law school classmates in new partnerships and small firms, or opening a sole practice. Still others may start out in an Oregon firm or agency and quickly find that meeting billable hours requirements or expected work load is onerous, tedious, frequently devouring evening and weekend hours, and diminishing quality of life for the lawyer and for the lawyer’s friends and family. After a couple of years, the call of starting a new firm may become impossible to ignore.
When starting up a law practice, it is nice if a lawyer has a number of years of practice, a small book of business, adequate savings for business and personal expenses for the first year, a spouse or domestic partner with a good paying job and liberal health benefits, and if truly fortunate, wealthy relatives desiring to help with start-up costs and inevitable early cash flow troubles. Those lawyers are lucky indeed and are reading another article. This column is for those joining the ranks of Oregon attorneys needing to start their law practice on a shoestring.
But wait! A simple glance in the newspaper shows that it is a difficult down economy. A down economy affects more than just lawyers looking to open their new practice. Start-up law practices may be in a more ideal position in comparison to firms struggling with bloated overhead. The new start-up can find negotiating leases for office space is more favorable, and should check for newspaper ads and signs posted in office windows. Businesses that may have ramped up the physical amenities too quickly may be now selling reasonably new office furniture and equipment at a fraction of what they paid. Lastly, when clients themselves have less money to spend on legal services, the lawyers who can provide legal services at a lower cost emerge as the winner of the clients. And to state the obvious, having clients is point.
Financial considerations are a difficult area for many lawyers starting up. Ideally, you need enough money or income source for you and your family’s living expenses for one year. Especially during times of economic uncertainty, you will be relieved to have more than a 30- to 90-day cushion of funds. If you wish you had a 30-90 day cushion, you will need to line up some steady-paying job, even if it means you litigate by day and drive a cab by night.
You must be able to meet the most important initial business expenses: your mandatory Oregon State Bar dues, and if you are in the private practice of law in Oregon, your mandatory Professional Liability Fund Coverage premium. If you do not pay them, you will be suspended from the practice of law. For this reason, many lawyers budget to pay the entire year at the beginning of the year so that no matter how bad finances get, they do not risk discipline sanctions for not meeting their obligation.
If you select a business entity, you will have a filing fee for the Oregon Secretary of State. If you have an office, you should wisely set aside money for the first two months and last month of rent. You may be able to find just want you need in the way of government surplus equipment and office furnishings in Oregon at http://www.oregonsurplus.com. Or you may already have a good computer with word processing software and a good printer, but you will still need to purchase office supplies like paper, file folders, stationery, business cards, postage and paper clips and staples. You may not have a fax machine or copier, but you will still need to pay for faxes and copies even if you use the local copy shop or the online fax service such as Internet Fax to e-mail service at www.efax.com.
You may decide to use your cell phone and find your cell phone plan needs upgrading. The expectation of privacy of a cell phone is less than land line calls, and your client may appreciate you informing him when you are talking over your cell phone. The ABA Comment Number 17 to the Model Rule 1.6 Confidentiality http://www.abanet.org/cpr/mrpc/rule_1_6_comm.html makes the point that the client may require the lawyer to implement special security measures not required by Rule 1.6 or may give informed consent to the use of a means of communication that would otherwise be prohibited.
You will have business expenses that quickly add up and become monthly or semi-monthly expenses. You need to be prepared for not having money coming in for the initial 90 days, as in this scenario: Within 30 days you get a client; at 60 days work is completed and client billed; and at 90 days the client pays your bill — within 30 days of the billing date.
Should you try to obtain a small business loan? Should you try to get a line of credit on your home? Should you borrow against your 401k plan? Should you set aside a credit card for making purchases and taking cash advances? You will find it is almost impossible to get a loan from a bank for starting your law practice unless you have a cosigner with excellent credit. Be cautious before taking on any additional debt when your ability to repay it is not established. Your circumstances
may allow you to approach your parents and ask for an advance on your inheritance or a loan. You might decide your best option is to try to decrease your financial expenditures and try to line up other income sources.
You might try to do some contract lawyer work, which is working for another lawyer on a specific project, like performing legal research and writing. Oregon Women Lawyers (OWLs) has a contract lawyer referral service that can help you find out about contract lawyer opportunities.
You may be able to perform legal research and writing without having to purchase Professional Liability Fund coverage if: your work is reviewed and supervised by another attorney with PLF coverage; you make no strategy or case decisions; you do not hold yourself out to any client as an attorney; you sign no pleadings or briefs; you attend no depositions as the attorney of record; you make no court appearances as the attorney of record; you do not use titles of attorney, attorney at law, or lawyer on correspondence or documents; and you are not listed on the firm letterhead or in the firm name as an attorney or firm member unless retired and noted as retired or of counsel (retired). Consult the PLF Exemptions Guidelines for Law Clerks/Supervised Attorneys and for Retired and Of Counsel (Retired) which can be found on the PLF website. Additionally, see the PLF Practice Aid and Forms category entitled Contract Lawyering. Check the Oregon Women Lawyers organization Contract Lawyers Services at http://www.oregonwomenlawyers.org/services/ for help.
You may decide to run your law office out of your home, with a house/office combination, typically turning your living room into your reception area and your closest bedroom into your law office where you meet with your clients. Or you may have a law office at home and meet clients in their clients’ homes or in conference rooms that they rent by the hour.
Depending upon your geographical area of practice, you may have additional options such as a virtual office arrangement where you contract for the services desired — telephone answering, mail
service, meeting room facilities, fax services — most offering a variety of packages that can solve the office needs of most lawyers, or an executive office suite that offers the service of a general receptionist, access to a conference room and an individual office.
Office sharing makes sense for a number of lawyers in a variety of locations — a group of sole practitioners collectively rent space in an office building, sometimes sharing a receptionist and the lease of a copier so that services are affordable for each of the lawyers. If you decide to participate in an office sharing, see the PLF practice aid category Office Sharing. It has copies of the two Oregon formal ethics opinions regarding office sharing: 2005-50 Conflict of Interest Office Sharers and 2005-12 Office Sharing Firm Names.
Your physical location should make sense for the clients you wish to serve. If you are located in a larger city, you will have more choices. You will want to be located where your clients will find it convenient to come to your office. For example, will your clients need or desire to take public transportation to your office? Will your clients find adequate safe parking available close to your office? Will clients prefer having your office be in a downtown main street location or in a neighborhood? Check the Bulletin and your local bar association’s newsletters which frequently have classified ads for existing law firms that may have unused office space to rent.
Technology can enable you to sanely run a one-person law office with no secretary or paralegal. Voice recognition software gets better with each new version. Check out Nuance’s Dragon Naturally Speaking 10 Preferred. Although it is more affordable than paying for even a part-time secretary, it is more useful for straight-forward word processing, not fancy formatting, which you will still need to set up. If the idea of having to prepare pleadings is troubling, contact a PLF practice management advisor for pleading templates to help you with some of the tricky formatting.
Use your trustworthy law school computer until you can afford the computer you will need as the true workhorse of your practice. Performance and durability are the top features that should guide your search for your computer workhorse. If you intend to run Windows XP, you will need at least one gig of RAM as a bare minimum, but the cost to upgrade to the preferred two gigs of RAM is likely under $50. If you intend to run Windows Vista, then you will need at least two gigs of RAM, but it is best to have four gigs, and a 256 MB RAM video card. Vista is more sophisticated than XP and consequently demands greater memory. Note that there are networking issues that make IT consultants encourage offices to stick with XP rather than Vista. Dell offers some computers with XP installed and provides a disc with Vista for later conversion. ABA members are entitled to a discount with Dell Computers.
Should you go with a desktop personal computer or a laptop? Desktop PCs take up space for the CPU and separate monitor and usually require extra cords. With laptop computers you contend with one power cord when you need to be plugged in and recharging. If you require a bigger screen, get a docking station with a bigger screen. At the push of a button, you are undocked and ready to go mobile with just your laptop and power cord to work while waiting in court or in Starbucks.
Software for word processing is essential. Most clients and other lawyers will be using Microsoft Word or Corel WordPerfect. You may be interested in the free open source software suite called Open Office, which mirrors Microsoft Office, and is available at www.openoffice.org.
Software for tracking finances, your general account and your lawyer trust account is very helpful. Microsoft offers a free program called Microsoft Accounting Basic which can be obtained from the Microsoft website, www.microsoft.com or you may choose the popular QuickBooks which can be obtained at http://quickbooks.intuit.com, and there is a free 20-customer version that can hold you over until your account receivables begin.
This article would not be complete without mentioning ethical considerations. Many people think that lawyers should never hang their law shingle fresh out of law school and admission to the bar. It is difficult, but doable. Many people think that lawyers should not open their practice if they can barely afford the cost of business cards, let alone office rent. It is difficult, but doable. Should they do it, and can they do it? Let the answers to those questions be guided by the lawyer’s honest self-appraisal of compliance with Oregon Rule of Professional Conduct Rule 1.1 Competence, which states: A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.
ABOUT THE AUTHOR
Sheila Blackford is an attorney and has been a practice management advisor for the PLF since 2005. She is a member of the Solo/Small Firm Advisory Board of ABA TechShow 2009 and is serving on the 2008-09 Law Practice Magazine board as tech editor for the ABA Law Practice Management Section.