Washington Lawyer - April 2019 - 26

Said another way, small firm lawyers eat what they kill. Said still another way,
are you ready to be an entrepreneur who happens to be a lawyer?
Think about the kinds of problems you want to solve as a small firm lawyer.
In the Washington metropolitan area (more than 6 million people in 10 cities),
it is very challenging for a small firm to handle more than one practice area
effectively. The more narrowly focused you can be in selecting the kinds of
problems you will solve, the more effective you will be.
The prospective client has come to expect a specialist when searching for a
lawyer. When you are narrowly focused within a practice area, it is much easier
for you to be an expert in solving clients' problems. Your marketing initiatives
will also be more productive, and we will explain why later in the marketing
discussion.
Drilling down on the kinds of problems you want to solve will influence where
you want to locate your office. If you are going to be defending criminal cases
in D.C. Superior Court, you may want your office within a few blocks of the
courthouse. If you are going to be helping new tech startups, you might want
to be in a WeWork location.

If you don't have
a plan, your decision
making will be driven by
how much money you have in
your operating account.
That is a short-sighted
way to try to develop
a law firm.

Starting your own firm will be challenging, frustrating, never boring, and
possibly one of the most rewarding experiences you'll ever have. But take time
to think along the way. It's more than just checking off items on a to-do list.
And speaking of checklists, we have provided one for you on the next page.
You will notice that it includes the creation of a business plan. That's because
a small law firm is indeed a business. More on the business plan later, but if
you want to get started, you can request the small firm business plan
template and workbook from the D.C. Bar Practice Management Advisory
Service (PMAS).

THE NAMING GAME
One of the first decisions you'll make is what to name your firm. D.C. Rule of
Professional Conduct 7.5 deals with firm names and letterhead. You will also
want to give Rule 7.1 a read before you settle on a name. The D.C. Bar does
not approve name choices; however, if you have questions about the ethics
of your name idea, call the Bar's Legal Ethics Helpline (202-737-4700, ext. 1010).
The PMAS can also answer questions about the practical aspects of your
name idea.

The more
narrowly focused
you can be in selecting
the kinds of problems
you will solve,
the more effective
you will be.
26 WASHINGTON LAWYER

APRIL 2019

A single lawyer should not use "group" or "associates" in the firm name because
that suggests you are more than one lawyer. A single lawyer may use "firm" in
the name as indicated in Legal Ethics Opinion 332 issued by the Legal Ethics
Committee of the D.C. Bar.
Once you have chosen your firm name, you will need to decide whether you
want to create an entity for your firm. This is a substantive legal issue beyond
the scope of this article. Know that you do not have to create an entity. A single
lawyer can function as a sole proprietor who then files his or her income and
expenses on Schedule C of the federal tax return and the appropriate schedule
for the state tax return. Know also that in the District of Columbia and most
jurisdictions, the entity does not protect the lawyer from professional liability
claims. You can always start out as a sole proprietor and then become an entity
in the future if there is a benefit to be had.

TAXES & FINANCIAL RESPONSIBILITIES
If you decide to function as a sole proprietor, you will likely be liable for estimated taxes. That is a good discussion to have with a tax advisor for small businesses. The IRS has a webpage devoted to estimated taxes for self-employed
small businesses. Most commercial tax preparation programs like TurboTax and
TaxAct have premium versions that include those calculations.
Once you have decided on a business name and whether or not you will be an
entity, you may then obtain a federal employer identification number (EIN) from
the IRS website.
After obtaining your EIN, it's time to open a commercial checking account for
your firm. It's important to keep firm income and expenses separate from
personal income and expenses. And if you have created an entity, it will need
its own commercial checking account.
Lawyers sometimes refer to this account as the operating account or business
account. Earned fees - compensation for work performed - will be
deposited into it. When a client hires you to solve a problem, you create a fee
agreement, go to work, solve the problem, send a bill, and get paid - those
are earned fees, and they go into the firm's operating account or business
checking account.

http://dcbar.org

Washington Lawyer - April 2019

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