So, you have made a bit of a name for yourself, mastered your craft and have amassed a book of potential clients. Working from home is actually quite pleasant and you don’t miss that commute.
You want to strike out on your own, but what are your options?
Essentially, you have 3: start your own firm, join a firm as a fee sharing solicitor, or become a freelancer.
Option 1 – Start your own firm
You might want to have a look at this post on How to Start a Law Firm.
The first thing you would need to decide is whether you want to be fully regulated by the Solicitors Regulation Authority, or skirt around regulation.
The choice will largely depend on whether your firm will conduct reserved activities. If so, you will need full authorisation and regulation.
If you have no intention to conduct reserved activities, but you need the legitimacy that full regulation brings, you can of course opt into regulation.
In fact, this was the only option for solicitors until relatively recently. It is only since November 2019 that solicitors have been able to practise through unregulated businesses.
Some practical considerations:
- Regulation can be expensive and time consuming. Compliance needs investment and has the potential to distract you from lawyering. Not to mention the other ‘back office’ functions often taken for granted in a big law firm setting.
- The insurance market for professional indemnity insurance can be a lottery, with some new firms struggling to get insurance at all, and existing practices having to cross their fingers each year at renewal time.
- Even though you may not technically need full SRA regulation, commercial clients are likely to value the comfort of buying a regulated service.
- If you practise through an unregulated business you’re still subject to the Code of Conduct for Individuals – so you won’t entirely escape from the SRA.
- The Money Laundering Regulations may still apply in a non-SRA regulated firm.
- If you take on staff you may become a manager as much as a lawyer.
- Exit from a regulated firm can be difficult. You either need somebody to take it off your hands or face an eye-watering run-off policy premium.
Option 2 – Become a Fee Sharing Solicitor
A fee sharing solicitor works as a consultant under the umbrella of a law firm, without taking on any of the management responsibilities or wider risks associated with ownership.
In this way you can benefit from the flexibility of working for yourself without the stress of running a law firm.
Lots of virtual law firms have popped up over the past decade. We often get calls from solicitors wanting to find out which are some of the best virtual law firms (and they do vary in quality and fee split!). Talk to us if you want to pick our brains.
If you can bring work and have decent experience (and a clean record), you will be in demand. But if you are planning on going down the fee sharing route, you need to do your research. Make sure those that run the firm share your values and will suit your clients.
Can they cross refer legal work from their other self-employed solicitors? Do they have a business development function?
Do they have effective risk and compliance systems and controls? If they are a bit loose there’s the potential for your name to be associated with a firm with regulatory issues.
You will inevitably sacrifice some of the control of truly working for yourself. You will have to be prepared to work within strict systems, both procedurally and IT-related. If you aren’t one to follow someone else’s rules this might be a non-starter.
Some virtual firms give you high levels of support and access to meeting rooms, whilst others will expect you to be self-sufficient.
And although you won’t have strict targets to meet, there is always a minimum amount of billing that will be expected.
But the earning potential can huge. Imagine what it would look like to take home the majority of the bills you currently issue.
You should also not discount working as a consultant for a ‘traditional’ firm. Although the fee split will significantly less, it is likely to be more of a familiar way of working.
Option 3 – Become a Freelance Solicitor
Another relatively new type of lawyer, the freelance model is yet to make its mark. It was launched as a way for solicitors to set up in practice without all the hassle of running a sole practitioner law firm.
It does certainly have the potential for being a low overhead legal business. If you work with a small number of repeat clients, you can see the attraction.
Unlike working through an unregulated business, a freelance solicitor can conduct reserved activities so long as ‘adequate and appropriate’ insurance is in place.
One of the models that the SRA anticipated was the Chambers style but for solicitors. It hasn’t yet taken off, but you can see the potential for a physical or digital platform for solicitors working in the gig economy.
A freelance solicitor is a true sole trader, so you can’t operate through a limited company which makes insurance absolutely critical.
Unfortunately, the insurance market for freelancers is not well established (although we do know of at least one provider out there).
You also can’t employ associates, so will be the sole fee earner.