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Opening a Law Firm in California

Congratulations on taking the leap to start your own law firm. With some guidance, preparation, and a big dose of motivation you can do what it takes to build a prosperous practice.

Factors to Consider when Opening a Law Firm in California

The first big decision you’ll need to make is what type of entity you want to form. In California, you have two options: Sole Proprietorship, or Professional Corporation. A sole proprietorship does not have to be registered with the state, has pass through taxation, and is generally less expensive to maintain. These are important benefits, especially for young attorneys with limited funds. The disadvantage is that it does not provide limited liability for your personal assets, meaning that if you are sued – your personal assets are at risk.

A Professional Corporation provides limited liability for the owner’s personal assets, but there are more guidelines when it comes to maintaining a corporate entity, including meetings, minutes, keeping separate finances, issuance of shares, bank accounts, and tax returns. You will also need to pay $800 per year for maintaining your corporation.

Next, you’ll need to choose a name for your firm. The process can be more challenging than you think because if your entity is a Professional Corporation, the name must reflect the profession, and not be misleading or similar to an already existing business. If you operate a Sole Proprietorship, you’ll need to file a Fictitious Business Name Statement if your business name does not include your last name nor portrays the nature of the business.

Even after you decide on a name that falls within proper guidelines, you’ll need to determine if it is actually available. The Secretary of State will likely reject your application if the name is too similar to an existing entity.

Once your business has a name, you’ll want to secure a professional liability insurance policy. You’ll need this insurance before conducting any business such as client meetings or phone calls, otherwise the insurance may not cover dealings with the client.

Depending on your location within California, you may need to file business permits in several cities or counties. This requirement allows local governing agencies to have a record on file for individuals and companies that do business within their borders.

Open up your bank and trust accounts.

Under California law, any money received or held on behalf of your client must be held in trust, separate and apart from the business’s finances.

Set up your office space, whether traditional or virtual.

Attorneys will small budgets may opt to work from home, and meet clients in public places. Another option may be to rent a desk in a co-working space several times a week. Whichever route you decide to take, make sure you have a business mailing address, phone answering service, a place you can use for meetings, and the technology you need.

Once you have handled the issues above, it is time to start meeting clients and taking on cases.