{"id":11821,"date":"2010-10-11T21:55:43","date_gmt":"2010-10-12T02:55:43","guid":{"rendered":"http:\/\/law.marquette.edu\/facultyblog\/?p=11821"},"modified":"2010-10-11T21:55:43","modified_gmt":"2010-10-12T02:55:43","slug":"starting-a-law-practice-on-a-tax-return-and-a-credit-card","status":"publish","type":"post","link":"https:\/\/law.marquette.edu\/facultyblog\/2010\/10\/starting-a-law-practice-on-a-tax-return-and-a-credit-card\/","title":{"rendered":"Starting a Law Practice on a Tax Return and a Credit Card"},"content":{"rendered":"

\"\"<\/a>In my last blog entry<\/a>, I discussed the reasons why lawyers make the jump from firm life to solo practice and also the reasons that hold them back.\u00a0 Many lawyers I have talked to have cited the start-up costs as a prohibitive barrier to entry.\u00a0 They also talk about the income they are giving up.\u00a0 I will briefly discuss the income issue and then focus on the startup costs.<\/p>\n

Say you are earning $100,000 a year at your current firm job.\u00a0 If, as a solo, you bill at a very competitive rate of $150 an hour, you would need to bill and collect 667 hours in the course of a year to make $100,000.\u00a0 That translates to 13 hours a week.\u00a0 <\/p>\n

If you bill at $200 an hour, you\u2019re down to 10 hours a week.\u00a0 Even if your firm picked up health insurance and now you have to pay the COBRA you are still only adding 1-2 hours a week of billable time to the equation.\u00a0 Both a lawyer friend of mine and my accountant told me that $90,000-$100,000 of gross revenue was a realistic goal for the first year, and I tend to agree, although I should warn you that this is only based on a very limited amount of anecdotal evidence, and of course there are no guarantees.\u00a0<\/p>\n

Back to the topic at hand, when you are running your own business, you obviously don\u2019t get to keep everything because of the overhead you need to pay.\u00a0 So let\u2019s talk about what you need to pay for overhead the first year.\u00a0 I think a practical approach is to \u201cfront\u201d the overhead costs and pay yourself most of what you make the first year.\u00a0 In other words, have your first year of overhead in hand on day one.\u00a0 This will eliminate a large amount of stress because from day one you will only be going in an upward direction.\u00a0 By the end of the year, you should be able to know enough about your practice to set up a budget and take a draw.<\/p>\n

I am listing what I believe to be the essentials to have a professional, polished look but not break the bank.\u00a0 These are rough numbers, but they are pretty consistent with my experience.<\/p>\n

The self explanatory bare essentials, and what you can expect to pay for them:<\/p>\n

    \n
  1. Business cards and stationary:\u00a0 $1000<\/strong><\/li>\n
  2. Laptop: $1000<\/strong><\/li>\n
  3. Printer\/Fax\/Copy machine combo: $500<\/strong><\/li>\n
  4. Cell phone service:\u00a0 $500<\/strong><\/li>\n
  5. Paper, folders, general office supplies: $1000<\/strong><\/li>\n
  6. Malpractice insurance: $2500<\/strong><\/li>\n
  7. Dedicated fax line: $500<\/strong><\/li>\n
  8. Internet Access: $1000<\/strong><\/li>\n<\/ol>\n

    The bare essentials that require some explanation:<\/p>\n

      \n
    1. Corporate formation set-up documents and associated legal work: $1000 <\/strong>(unless this is the type of work you do).\u00a0 I don\u2019t recommend doing this on your own if you are, say, a criminal defense attorney.<\/li>\n
    2. Office Space:\u00a0 Some people try to get away without having an office at first.\u00a0 Other people sign on to a multi-year high-end office lease.\u00a0 I think both approaches are unwise.\u00a0 For a number of reasons, your best bet is to office share with another firm the first year.\u00a0 First, the firm will probably let you sign up for something noncommittal like a month-to-month or a one-year sublease.\u00a0 Second, you may have access not only to an office, but a conference room and practitioner books as well.\u00a0 Third, after the members of the firm get to know you, they will likely send business your way.\u00a0 Given the current market, you should be able to find a lot of suitable options for $500 a month or less.\u00a0 So over the course of your first year, you should plan on spending $6000<\/strong> on office space, but no more.\u00a0 Again, I would not commit to more than a year because you do not know what your space needs will be after the first year.<\/li>\n
    3. Software:\u00a0 It is well worth your money and time to invest in accounting software and to learn how to use it.\u00a0 For $500<\/strong>, you should be able to get a program that does your books and also allows you to make time entries, and then creates bills.<\/li>\n
    4. Website:\u00a0 I think this is well worth the money.\u00a0 Clients expect you to have them, and having one sends a message that you are established, professional, and in this for the long haul, all things clients want to know.\u00a0 They are excellent marketing tools as well.\u00a0 I wouldn\u2019t count on a website to get you clients, but instead, website content can help a client make a final decision about whether or not to hire you.\u00a0 Also, with a website package, you can get an email address like mine, bnistler@nistlerlaw.com<\/a>, as opposed to bnistler at yahoo or hotmail dot com.\u00a0 Again, it\u2019s a more professional and polished appearance that clients and other lawyers will take note of.\u00a0\u00a0 Finally, websites are like cars — you can spend a lot of money on them if you want to, but the most important thing is that they work.\u00a0 I would start with a brochure-type website, and not spend more than $2000<\/strong> on it.<\/li>\n<\/ol>\n

      When I tally the numbers, this comes to about $17,500<\/strong> in start-up costs.\u00a0 That may sound like a lot of money, but by comparison it\u2019s about the current cost of one semester of law school at most private universities.\u00a0 In short, it\u2019s the kind of money you can put together with a tax return and a credit card.<\/p>\n","protected":false},"excerpt":{"rendered":"

      In my last blog entry, I discussed the reasons why lawyers make the jump from firm life to solo practice and also the reasons that hold them back.\u00a0 Many lawyers I have talked to have cited the start-up costs as a prohibitive barrier to entry.\u00a0 They also talk about the income they are giving up.\u00a0 […]<\/p>\n","protected":false},"author":95,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ocean_post_layout":"","ocean_both_sidebars_style":"","ocean_both_sidebars_content_width":0,"ocean_both_sidebars_sidebars_width":0,"ocean_sidebar":"","ocean_second_sidebar":"","ocean_disable_margins":"enable","ocean_add_body_class":"","ocean_shortcode_before_top_bar":"","ocean_shortcode_after_top_bar":"","ocean_shortcode_before_header":"","ocean_shortcode_after_header":"","ocean_has_shortcode":"","ocean_shortcode_after_title":"","ocean_shortcode_before_footer_widgets":"","ocean_shortcode_after_footer_widgets":"","ocean_shortcode_before_footer_bottom":"","ocean_shortcode_after_footer_bottom":"","ocean_display_top_bar":"default","ocean_display_header":"default","ocean_header_style":"","ocean_center_header_left_menu":"","ocean_custom_header_template":"","ocean_custom_logo":0,"ocean_custom_retina_logo":0,"ocean_custom_logo_max_width":0,"ocean_custom_logo_tablet_max_width":0,"ocean_custom_logo_mobile_max_width":0,"ocean_custom_logo_max_height":0,"ocean_custom_logo_tablet_max_height":0,"ocean_custom_logo_mobile_max_height":0,"ocean_header_custom_menu":"","ocean_menu_typo_font_family":"","ocean_menu_typo_font_subset":"","ocean_menu_typo_font_size":0,"ocean_menu_typo_font_size_tablet":0,"ocean_menu_typo_font_size_mobile":0,"ocean_menu_typo_font_size_unit":"px","ocean_menu_typo_font_weight":"","ocean_menu_typo_font_weight_tablet":"","ocean_menu_typo_font_weight_mobile":"","ocean_menu_typo_transform":"","ocean_menu_typo_transform_tablet":"","ocean_menu_typo_transform_mobile":"","ocean_menu_typo_line_height":0,"ocean_menu_typo_line_height_tablet":0,"ocean_menu_typo_line_height_mobile":0,"ocean_menu_typo_line_height_unit":"","ocean_menu_typo_spacing":0,"ocean_menu_typo_spacing_tablet":0,"ocean_menu_typo_spacing_mobile":0,"ocean_menu_typo_spacing_unit":"","ocean_menu_link_color":"","ocean_menu_link_color_hover":"","ocean_menu_link_color_active":"","ocean_menu_link_background":"","ocean_menu_link_hover_background":"","ocean_menu_link_active_background":"","ocean_menu_social_links_bg":"","ocean_menu_social_hover_links_bg":"","ocean_menu_social_links_color":"","ocean_menu_social_hover_links_color":"","ocean_disable_title":"default","ocean_disable_heading":"default","ocean_post_title":"","ocean_post_subheading":"","ocean_post_title_style":"","ocean_post_title_background_color":"","ocean_post_title_background":0,"ocean_post_title_bg_image_position":"","ocean_post_title_bg_image_attachment":"","ocean_post_title_bg_image_repeat":"","ocean_post_title_bg_image_size":"","ocean_post_title_height":0,"ocean_post_title_bg_overlay":0.5,"ocean_post_title_bg_overlay_color":"","ocean_disable_breadcrumbs":"default","ocean_breadcrumbs_color":"","ocean_breadcrumbs_separator_color":"","ocean_breadcrumbs_links_color":"","ocean_breadcrumbs_links_hover_color":"","ocean_display_footer_widgets":"default","ocean_display_footer_bottom":"default","ocean_custom_footer_template":"","ocean_post_oembed":"","ocean_post_self_hosted_media":"","ocean_post_video_embed":"","ocean_link_format":"","ocean_link_format_target":"self","ocean_quote_format":"","ocean_quote_format_link":"post","ocean_gallery_link_images":"on","ocean_gallery_id":[],"footnotes":""},"categories":[36],"tags":[],"class_list":["post-11821","post","type-post","status-publish","format-standard","hentry","category-legal-practice","entry"],"_links":{"self":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/11821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/comments?post=11821"}],"version-history":[{"count":0,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/posts\/11821\/revisions"}],"wp:attachment":[{"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/media?parent=11821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/categories?post=11821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/law.marquette.edu\/facultyblog\/wp-json\/wp\/v2\/tags?post=11821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}