- Instructor: Attorney Bob Schaller
- Lectures: 10
Choosing the Correct Legal Structure.
Lawyers starting a law firm must decide which legal structure is right for them and their law firm? They have gone to law school and taken all the classes required to graduate and passed their state’s bar exam. Now what? Many of these lawyers have worked for a firm for a while and then decided it is time to be their own boss. Some have just passed the bar and want to start their own law firm right away.
Most lawyers do not know how to start a law firm and did not take a class in law school dedicated to starting a law firm. Few schools offer a class in starting a law firm. Even if available, law students may not have taken the class because they did not think they would have wanted to start a firm in the future.
Once a lawyer decides to start a law firm, the lawyer needs to determine which legal structure would be best. The legal business structure that the lawyer selects may not affect the day-to-day operations and running of the business, but there are certainly concerns that the lawyer needs to address when choosing the business structure. There are several structures to consider: sole proprietorship, partnership, limited liability company, and professional corporation. It is important to consider each business structure and decide which one is right for the lawyer and the new law firm.
Each business structure has advantages and disadvantages. Some structures require more work and money to start and some require little money and little work to start. Does a lawyer want to be able to form a law firm right away with little paperwork, or does the lawyer prefer a structure that requires the formalities of government filings, recordkeeping, and expensive fees to start?
Liability exposure is probably the most important issue to consider with each business structure. Can a lawyer tolerate personal assets being exposed and unprotected? These are definitely things to keep in mind when determining what business legal structure is right for a new law firm. This section does not discuss the tax consequences of each legal business structure. The tax consequences are discussed elsewhere.
Each legal structure is discussed separately below. Focus is placed on advantages, disadvantages, liability issues, and other factors. Next, consideration is given on how to create or form the legal structure selected.
