The Cost to Start Your Law Firm: Essential Expenses Explained

Starting your own law firm is exciting and challenging in equal measure. You need to consider the firm’s structure, what services you will provide and who will work with you. At the same time, you need to think about how you will win work and what tools you will use to manage the business and your client load. Use our guide as your comprehensive road map to navigate the process of starting your own law firm. Most important of all is to remember that your law firm is a business. It is simply a business that supplies legal services. To achieve success, you must ensure proper funding is in place. But how much does it cost to start your own law firm?

Law firm startup costs

Unless you are starting as a sole practitioner operating from home, you will need an office from which to practise. The number of people in your new law firm will help determine the office space you need. Your growth strategy will also inform your future staff requirements and the amount of office space you will need in the medium term. Learn lessons from those who have set up their own law firms before you before making strategic decisions.

The cost to start your own law firm is a crucial consideration, encompassing various factors such as business insurance, initial investment estimates, and careful financial planning.

You must also consider renting or buying office rooms and meeting space in a business centre. The costs will vary widely depending on the type of office accommodation you require and the geographic location of your office. Generally, city office accommodation is more expensive than country town accommodation. Office accommodation in London and Edinburgh tends to be the most costly.

The most up-to-date information available on the cost per square foot of office accommodation across a selection of locations in the UK is as follows:

London: £80–£100 per sq. ft., with areas like the West End commanding higher rates
Birmingham: £20–£37 per sq. ft.
Manchester: £27–£37 per sq. ft.
Liverpool: £22–£35 per sq. ft.
Newcastle: £18–£27 per sq. ft.
Cardiff: £30–£35 per sq. ft.
Edinburgh: £25–£35 per sq. ft.
Glasgow: £22–£30 per sq. ft.
Belfast: £18–£25 per sq. ft.
Derry: £18–£25 per sq. ft.

Storage King and Oktra have conducted recent studies on the cost of office accommodation in the UK.

Check out office adverts and speak to chartered surveyors to understand purchase and rental prices. Surveyors have a particularly good idea of what’s going on in the commercial office market and will be able to give you the price guidance you need.

Remember, too, that you will need to pay non-domestic rates. Make sure you factor in those costs, too. The landlord or marketing agent should be able to let you know how much the rates are.

Remember, when you are searching for office accommodation, if you intend to employ staff, they might seek flexible working. This might mean you do not need to rent or buy large office accommodation if all staff members work from home on a flexible basis.

Read: The Complete Guide to Working Remotely as a Lawyer

Furniture, furnishings and storage

Once you have decided on the location and acquired your law office, do you need to decorate it before you move in? If you do, factor that into your figures,

Before you move the staff in or invite clients to the office, you must provide office furniture and furnishings. You will need desks and chairs for yourself and any other lawyers, paralegals, and support staff. Your reception area should be inviting for clients and furnished accordingly. You have options on whether to buy office furniture or rent it. Much depends on your cash flow and whether the upfront costs of buying furniture and furnishings are within your budget. Remember storage costs for cabinets or cupboards to store any paper files! However, you can save on space and costs by choosing to be a paperless law office.

Operational expenses

Once you have secured your office and ordered the furniture and furnishings, you next need to deal with the services. Heat, light, water, etc., are crucial to operating any office, so you must ensure you get the best deal. Rather than going straight to a utility supplier, speak to energy brokers in your area and find out what deals they can find for you. An energy broker can source a supply deal much better than you can source from the utility company directly.

Remember, you will also need to arrange a waste disposal contract to deal with the day-to-day waste you build up during the regular operation of your new law firm. All these items must be factored into the cost of starting your own law firm.

Staff Salaries and benefits

Starting a new law firm requires staff unless you decide to work independently, which can be one of the most considerable overheads any law firm has to bear. It is important to establish the need for each staff member and to budget appropriately for them.

You should take into account:

The base salary
Performance bonuses
Employer’s National Insurance contributions
Pension Contributions
Paid holidays
Cover for holidays and sickness
Health insurance
Increased costs on annual salary reviews

These are just some of the costs you need to face when employing staff in your own law firm. You should also budget for cover for time off for maternity/paternity leave or other leave of absence.

In addition, you must be aware that flexible working options must be available for staff, and some might seek to work from home for some or all of the working week. This can impact on the office accommodation you choose.

Legal research and resources

Now that you have decided on your staff complement for your new law firm, you must consider which legal research and support resources you make available. Perhaps the best option is to start with free legal newsletters such as Lexology or Mondaq.

A range of resources are available for detailed information on specific legal topics. The following is a small selection:

Legislation.gov.uk

This is the official website for UK legislation. It provides free access to primary and secondary legislation across the UK, including up-to-date revisions and historical statutes.

Westlaw UK

Westlaw is a legal research platform in the UK. It provides comprehensive access to case law, legislation, journals, and commentary from top legal professionals. Lawyers benefit from its intuitive search functions and analytical tools.

BAILII (British and Irish Legal Information Institute)

BAILII provides free access to British and Irish case law, legislation, and other legal materials. It is an essential resource for lawyers seeking free legal resources.

These are just some of the many online legal resources available. Access to these resources comes with a subscription cost, so choose wisely to ensure the resource you are paying for meets your needs.

Concerned about costs here? Check out our guide to the top free legal research tools.

Marketing and client acquisition

Winning clients when you start up your own law firm can be challenging. You must build your brand and awareness and promote your services to the public. The best way to do this is by having an effective website to attract new clients. Your website must be effective, and you must capture potential leads. Your client onboarding process should be seamless. New law firms, in particular, face unique challenges in establishing their practice and navigating regulatory requirements.

Build a website to attract new business

Your website is your firm’s shop window to the world, and you must do it right. In terms of cost, you must understand that your website’s content and effectiveness will attract clients. Factor in the costs of a decent copywriter to work alongside your website design team. Unless you intend to provide regular content for your website, factor in the price of content provision on an ongoing monthly basis.

The website build cost can be anything from £1,500 to £5,000 or more, depending on the web design agency and the number of “bells and whistles” you want on your website. However, remember that it is content that will help your website be found in search.

You must also consider the recurring costs of hosting and support for your website, maintaining your domain registration, and making annual payments for website plugins that enhance your website’s functionality.

With 96% of potential clients using a search engine to find legal advice, it’s essential to maximise your law firm’s visibility. Clio customers have the advantage, with no additional cost. Using our easy law firm website builder, you can easily create your firm’s online presence while we handle desktop and mobile optimisation for you. Clio’s law firm website builder comes with everything you need to deliver a great first impression. There’s no need to pay extra for law firm website design or website development services.

Digital marketing and advertising

Digital marketing and advertising are sure ways to attract new clients and new business. However, you can spend thousands on digital marketing with very little return. Consider using your website as your base to get your message across. Leverage the content of your website on social media. It is important to develop a voice once you start up your own law firm, and how you present yourself is crucial.

Advertising

From an advertising perspective, Google Ads is an area to consider. You can use Google Ads to attract people to your website to interact with your law firm brand. However, you need to plan this carefully and have a landing page on your website that allows you to start off a relationship with the visitor and capture their contact details. If you fail to do this, it will be money wasted.

Also, you need to be careful not to be drawn into spending more than your budget. It can be easy to get carried away and spend more on ads without reviewing the results.

From a financial perspective, email marketing costs are relatively inexpensive. Simply choose an email marketing platform such as MailChimp, CampaignMonitor, Email Blaster, or one of the many others. Again, set your budget, provide excellent content, and keep in touch with your list on a regular basis.

However, be aware that there are solicitor advertising rules that you must follow.

Discover the best and most cost-effective law firm digital marketing strategies to attract and retain more clients online with our free law firm marketing guide.

Networking and client referral programmes

Of course, the tried and tested networking and client referral programs have always been available for years. You might tie into a local or national business network. Consider joining a host of local small business associations and networking groups. Find out which works best for you, and be careful not to spend time for no return.

You must also be very careful to comply with professional regulations about client referral programs.

Perhaps the best referral programmes are those where you have reciprocal arrangements with other solicitors where you pass clients to them for services you do not provide. They, likewise, pass clients to you where they do not carry out the particular type of work.

Law firm networks are particularly beneficial when you start up your own law firm. In Scotland, consider joining the HM Connect network. In England, consider joining Lawshare operated by JMW. Consider LawNet as your go-to network for lawyers.

Use technology to manage your firm

Effective legal software, particularly practice management software, is key to operating any successful law firm. Choosing the right technology for your new law firm is critical, and it is best to get it right the first time.

You need software that allows you to quickly set up and manage your clients and help you grow whilst dealing with the day-to-day matter management and important legal billing. In fact, it is always best to try before you buy, so why not try Clio for free before deciding on how much to spend on practice management software for your new law firm?

Financial planning and funding

Whilst it is essential to work out how much it costs to start a law firm, it is equally important to continuously manage and monitor the finances. Law firm financing is critical in establishing the financial foundation for starting and managing a legal practice.

You must choose a bank or finance partner who can match your needs in terms of rates and payment terms. Your budget must make provisions for repayment of capital borrowed plus interest over time.

Use your practice management software to keep your firm’s accounting in order all year round. With Clio, you can manage all your financials in one place, making it easy for you to find out where you stand at any point in time and for your accountant to prepare your year-end accounts.

Set annual budgets and review performance against these every month. Do not be afraid to adjust the budget whilst you go, but always keep the original budget to check overall performance.

If you understand how your law firm is performing, you will better understand the steps to implement continuous financial improvement.

Legal and regulatory considerations

When you start up your own law firm, you will assume the costs of your own practising certificate, regulatory fees and professional indemnity insurance. In England and Wales, the cost of an individual practising certificate is £307, and the regulatory fee set by the SRA is based on the firm’s turnover. For example, a firm with a turnover of £200,000 would pay an annual fee of £1,059.

The practising certificate fee in Scotland is currently £788 per annum for most solicitors. The Law Society of Scotland collects a levy, currently £547, payable to the Scottish Solicitors Complaints Commission. Newly qualified solicitors in Scotland (those with under three years PQE) qualify for a reduced rate of £394. In addition, there is an additional fee of between £500 and £700 for firms subject to anti-money laundering (AML) regulations.

In Northern Ireland, membership fees for solicitors vary depending on their role and status. Solicitors who wish to practise in Northern Ireland can contact the Law Society of Northern Ireland for details of the current practising certificate charges.

Of course, all law firms must have Professional Indemnity Insurance (PII) before providing legal services. If you are starting up your law firm, you must have PII in place before you take on clients and carry out any legal work. This is a critical cost of starting up your own law firm because it must be paid; otherwise, your law firm will never get off the ground.

In England and Wales, you must arrange your own PII cover, whilst in Scotland and Northern Ireland, the respective law societies operate on a compulsory Master Policy basis.

The costs of PII vary between 1% and 6% of fee income, and those involved in high-risk areas, such as conveyancing, can expect to pay more. The base cover is usually £2 million, but firms must always review this level if their transaction values exceed this figure.

Finally, once you ensure your new law firm is compliant with all regulatory bodies, you are ready to embark on the next stage in your professional career in your own law firm.

Learn from those who have gone before

Perhaps the best option for finding out the cost of starting your own law firm is to build on the experience of others. You will not be the first or the last to start your own law firm. Learn from others who have gone before. Understanding the costs involved is crucial to ensure you are well-prepared for the financial responsibilities.

If you want to know how to start your own law firm, Clio can help. Our guide includes the following:

Regulatory steps for starting your own law firm
How to create a law firm marketing strategy
How much does it cost to open a law firm (including professional indemnity insurance, essential costs, and more)
How to network and hire as a new firm
The process for setting up a law firm

If you’re thinking of how to start a law firm, this guide has all you need. Download your copy now.

Can you set up a law firm without being a lawyer?

In the UK, a non-lawyer cannot practise law or set up a law firm that offers legal services unless they have the necessary legal qualifications and meet regulatory requirements. However, non-lawyers can own or invest in a law firm through an Alternative Business Structure (ABS), a model introduced by the Legal Services Act 2007. This allows non-lawyers to co-own or manage law firms, provided they meet the relevant regulatory requirements.

How much does a lawyer cost in the UK?

The cost of hiring a lawyer in the UK varies depending on the type of legal service, the lawyer’s expertise, and the geographic location. Hourly rates can range from £150 to £500 or more, depending on the complexity of the case and the lawyer’s experience. For instance, specialist legal services such as commercial law or litigation will generally command higher fees than general legal advice. Fixed fees may also be offered for certain services like conveyancing or will writing.

Why are lawyers so expensive in the UK?

Lawyers’ services are often expensive due to several factors, including the extensive training required to become qualified, the complexity of legal work, and high operational costs such as office rent, insurance, and staff salaries. Additionally, legal work often involves risk, requiring thorough analysis, case preparation, and court appearances, all of which contribute to higher fees.

Can a solicitors practice be a limited company?

Yes, a solicitor’s practice can be structured as a Limited Company in the UK. Many law firms opt for this structure to benefit from limited liability, which protects owners’ personal assets. Firms operating as limited companies must still comply with the regulations set by the Solicitors Regulation Authority (SRA) or other relevant regulatory bodies, and they must hold appropriate Professional Indemnity Insurance.

Can a non-lawyer own a law firm in the UK?

Yes, under the Legal Services Act 2007, non-lawyers can own or invest in law firms in England and Wales through an Alternative Business Structure (ABS). This allows non-lawyers to participate in the ownership or management of law firms alongside legally qualified professionals, provided the firm complies with regulatory requirements.

We published this blog post in October 2024. Last updated: October 23, 2024.

Categorized in: Business

Contents

The wait is over…gain an edge with the latest report.