Whether to start your own law firm is a huge, life-changing decision with many variables. The number one variable is: how much can you afford? Because there is an endless supply of vendors willing to waste your money once you decide to do it.
Be honest with yourself: can you afford to do it? Ideally you have a quarter million dollars in the bank, own your own home, have no dependents, and are prepared to take the biggest risk of your life. If you’re in this position, which would be great, my advice to you is this: get a regular job and buy a bigger house, because you could just as easily fail after spending all your money on your law firm and be in the same position you were in before, but with a zero in your bank account. Or worse, negative $200,000. On the other hand, if you and your new colleague are consistently billing 250 hours a month to paying clients at $250 per hour, you can do the math...if they all pay, that is over $60,000 per month. Just don’t forget to save for taxes, because it’s really easy to spend money you have without thinking that Uncle Sam gets a big portion too.
Your colleagues' finances
Ideally you are bringing in an associate so that you don't take on anyone else's partnership debts or worse, professional negligence claims. But if that is not workable, you are talking about partnership with another person. In that case, the colleague's finances are just as important as your own. Things to watch out for include the obvious, like gambling problems, drug problems, financial problems, and personal bankruptcies. But less obvious issues would be things like: is this the kind of person who pulls out a calculator at lunch to determine his share, or does he take a guess or estimate and not worry about it? You don't want to be accounting to your partner for the twenty-five cents that you spent on a post-it note last week. Basically, it's an issue of temperament and personality who you go into business with, and finding the right choice is a one in a million arrangement that can't be forced. That's one reason why there are so many sole practitioners out there.
Last updated: July 6, 2018
© 2018 Andrew G. Watters