Start a legal consulting firm by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your legal consulting firm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a legal consulting firm?
Once you have your law degree, costs for starting a legal consulting firm are cheap. All you need are basic utilities and legal structure, including an LLC (minimum), liability insurance, QuickBooks or some other accounting software, business cards, advertising or direct mail packages, and a website.
Your startup costs should be no more than $5,000, and in some cases, much less.
What are the ongoing expenses for a legal consulting firm?
Ongoing expenses for this type of business are minimal and are limited to utility costs, insurance premiums, labor costs, and other basic business expenses.
Who is the target market?
Preferred clients for this type of business are large corporations that have a need for outside consulting, cost control, litigation mitigation services, or that want to reduce legal liability and exposure.
The worst types of clients would be small businesses or self-employed individuals who cannot afford the services of a consulting firm.
How does a legal consulting firm make money?
Legal consulting firms make money by charging hourly or flat-fees for legal consulting work.
How much can you charge customers?
Fees depend entirely on the industry you’re serving. Some consultants charge $100 per hour with minimum billable hours while others charge a flat fee for a project. On average, you may charge between $100 and $500 per hour (depending on your positioning, experience, etc.) or between $1,000 and $10,000 per project.
As a general rule, large companies spend, on average, 0.1% of total revenue on litigation costs. Use this as a guide to determine your own fees and position your company as a cheaper alternative to litigation.
How much profit can a legal consulting firm make?
Profit for a small firm averages between $60,000 and $100,000 per year. This is for a one-person consulting firm. A small team can bring in up to $500,000 per year, with a medium-sized consulting firm bringing in up to $5,000,000 in revenue per year.
How can you make your business more profitable?
Making the consulting firm more profitable is usually a matter of specialization.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Legal Consulting Firm Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your legal consulting firm is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a legal consulting firm. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Legal consulting businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your legal consulting business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Certificate of Occupancy
A legal consulting firm is generally run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a legal consulting firm.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your legal consulting firm will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a legal consulting firm
Promoting a legal consulting firm can be done one of several ways. One of the easiest ways is to use referral marketing or networking. A business that is concerned about preventing lawsuits before they happen also has revenues and assets that are worth protecting. Choose your networking events accordingly.
Direct mail is another effective method for getting clients. Contact your list broker and get names of corporations that have previously paid for legal consulting services. Then, mail them your offer and follow up until they become clients.
How to keep customers coming back
Specialization in this industry is important. Rather than take on all types of clients, focus on a specific industry. For example, you could specialize in the healthcare industry, financial industry, or in retail. Because many industries have unique legal challenges, specializing will make you a sought-after expert.
For instance, the healthcare industry is plagued by a confusing web of regulation related to HIPAA and compliance with the national Affordable Care Act. Understanding these (and other related) laws will make you stand out in a sea of generalists. It will also help you better serve your clients.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Legal Consulting Firm In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is ideal for lawyers who want to leave their law firm or break out of the traditional or conventional role of a law firm.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a legal consulting firm?
Day-to-day responsibilities vary based on the type of consulting your firm chooses to do. Some consulting firms, for example, help design compliance departments while others act as mediators. Others provide preventative council about employment law and related issues.
Days are typically spent meeting with clients, giving advice, and drafting various legal plans for clients.
What are some skills and experiences that will help you build a successful legal consulting firm?
This business' success depends on its legal team. Because of this, business owners who start a legal consulting firm are almost always lawyers themselves. A law degree is almost always necessary. If you have no degree, start with a law-related field like criminal justice, legal studies, or political science. The Law School Admissions Test (LSAT) is next, followed by law school and a Juris Doctor (J.D.) degree.
Experience in business, with a master's degree in business administration (MBA) is extremely helpful, but not required.
Finally, at least several years experience working with a law firm as well as a legal consulting firm will be a practical necessity so that you understand the industry and how it operates.
What is the growth potential for a legal consulting firm?
The industry, overall, is poised for growth as businesses are realizing the incredible cost savings for preventative legal council.
Growth potential for this industry is excellent. A small consulting firm can take on several clients and manage a small book of business. A large firm can employ several lawyers or several hundred lawyers. This business scales well as long as the firm hires qualified legal talent and legal aides. Administrative work is a big part of this business so hiring a skilled team of paralegals early on is important.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a legal consulting firm?
The most successful legal consulting firms start out as either law firms or start with a core team of lawyers. Aside from that, focus on getting a few “anchor clients” that consist of large corporate clients that can afford (and have a need) for your services.
How and when to build a team
Building a team is necessary as soon as you can afford it. Start with a small paralegal team, then add more lawyers when and as you can afford to.