How Expensive is it to Start a Solo Law Practice?

Share with Other Business Owners:

Over the weekend, an “enterprising” individual made some very interesting tweets about how expensive it is to start a business. This was in reaction to an interview that Kamala Harris did with Oprah, where she is promoting a tax policy that would increase the small business startup tax deduction from $5,000 to $50,000. This lawyer said that it wasn’t possible to start a solo law firm for less than $5,000.

So I wanted to break-down all the costs that it would take to start a law firm, using my current model and tech setup. Now, granted I’m not a first time law firm owner and I advise other lawyers on starting and running their law firms. So I know what works and doesn’t.

If you want to start a law firm on a shoe-string budget, here’s what I would do:

Start a Virtual Law Firm

The first thing I would do is pick a practice area where I can work from home. This means no office rent.

For the first couple of years and maybe the entire lifespan of your law firm, you can be completely virtual – no office space. If you want later on, you can add a co-working space for relatively cheap, but you don’t have to have this.

There’s another advantage: as you look to scale your law firm, you can easily find great talent that isn’t local to you. Set your systems up to be virtual from the beginning and it’ll be so much easier.

Second advantage: the home office deduction. Using the simplified method, you could deduct $750 off your taxes for a 150 square foot home office. Assuming you end up in the 22% tax bracket, that’s a savings of $165 a year.

Cost: $-165

Outfitting A Home Office

Assuming that you don’t already have a home office, which many attorneys are going to have, then we need some basic office furniture.

I recently switched from a regular desk to an adjustable standing desk. This is more than suitable for most home offices, as long as you are a little bit handy to put it together. It’s currently $189.99 with a $10 off coupon on Amazon (prices can change).

You’ll also want a comfy office chair. Here’s an office chair I got recently when I upgraded after my last one of like 20 years was falling apart. It’s comfy and that’s all that matters to me. The one I got is currently unavailable, but similar chairs range from $80-200.

If you are trying to do this on a bare bones budget, that’s really all you need for furniture in your office. You may want to decorate and fancy things up, but that can wait until you have the revenue coming in.

Cost: $0-400. Total running cost thus far: $-165-235 .

Technology for Your New Solo Firm

This is where you are going to spend some cash. After all, the computer is how we do our work and then we need all the systems to make it work.

First, if you are going bare bones, you can likely use a laptop that you already have. But let’s assume that the only computer you have is from your current employer and you have to buy one of your own.

Just get a laptop. Don’t even bother with a desktop. This way you can easily work from home, from a client’s location, in court, or from a local coffee shop (or in my case, pizza joint).

The first decision on the laptop is Mac or PC. This is a personal choice for most lawyers – legal software is going to work on both. Personally, because I do so much Fractional CFO work, and we all know finance runs on Excel, I prefer a PC where Excel just works better.

The price range for computers is pretty big, depending on what you want. For example a 2024 MacBook Air is currently $1,449. This is probably the high range of the laptop you’ll want.

You can get a Dell XPS 15 starting at $999. We are going to use this as a price point for this discussion. About $1,000 for the average laptop. Remember, we are going shoe string budget here – we can upgrade after we get the revenue coming in!

Cost: $0-1,000. Total Running Costs: $-165-1,235.

Computer Accessories

There are several computer accessories that I recommend for all lawyers: Dual monitors, an upgraded microphone, and a webcam. Also, an external keyboard and mouse because working on the laptop keyboards aren’t great (and for those of us that do lots of spreadsheets, having the 10-key number pad is critical).

• 2 Samsung 24-Inch Computer Monitors: currently $129.99 x 2
• Foldable Bluetooth Keyboard with Keypad: currently $39.89 (bonus: it can connect to three different Bluetooth devices, so you can also connect it to your iPad/tablet and cellphone)
• Logitech Wireless Mouse: currently $13.96
• Logitech Blue Snowball USB Microphone: currently $39.99
• Logitech Full HD 1080p Webcam: currently $69.99
• USB Hub: currently $9.99 (no need for a docking station, these hubs replace those!)

That’s it. Literally, that’s all you have to have for computer accessories to get started on a new solo practice. Remember, you can add more or upgrade as you get revenue flowing in the door. And honestly, you probably already have most of this in your home office.

But if you don’t, then know it’s going to cost you about $450.00 to get the accessories you need.

Cost: $0-450. Total running cost: $-165-1,685.

Software for Your New Virtual Solo Law Firm

It’s easy to go on a spending spree with the software/SaaS/cloud services with a law firm. You are likely used to having a full suite at your fingertips, but seriously, you don’t need all that right now.

You’ll want to grab a subscription to either Microsoft Office or Google Workspaces. Both have business basic plans starting at $6 per month. But you’ll want at least the next step up, so you get desktop apps in Microsoft and higher security in both. Let’s call it $12/month if you pay annually or $15/month if you pay monthly. That’s maximum $180 for your initial email and docs.

Make sure you have a domain so your emails look all professional and things. Microsoft and Google will both host your email, but you’ll need to buy a domain. You can usually buy new domain names for like $10/year with a basic dot com. If you want a specialty ending like law or legal, those are way more expensive at like $150/year. Don’t do this — mostly because everyone defaults to dot com and it is less confusing for everyone.

You’ll also want an Adobe Acrobat subscription. Because we do way too much in Adobe. The Pro subscription also has two features that you’ll need as a lawyer: e-sign and redaction tools. This is $19.99 a month.

Cost: $430. Total running cost: $265-2,115.

Software You Can Skip Your First Year

So, your first year in practice, there’s a lot of software you may want but you can likely skip. Let’s run through some:

• Calendly. Microsoft and Google both have scheduling software built-in. Also, I prefer TidyCal anyways as a one time fee of $39 vs the monthly recurring for Calendly.
• Practice Management Software. This is going to be controversial, especially since I work with software suites such as MyCase and Clio. But as a solo in your very first year of practice, you don’t know what you want out of your practice management software. And you’ll have a few enough files to keep organized in Google Drive or in OneDrive. You can use task management systems that are either built-in to Google or Microsoft or free ones like Asana or Clickup.
• Zoom. I know I use it in my practice, but you can use Microsoft Teams or Google Meet for your video conferencing. If you really want later, you can switch over.

Legal and Finance Costs for A New Solo Firm

Now, we aren’t going to want to be operating as a sole proprietorship. We want an LLC or PC (or some variation thereof, depending on your state bar requirements – looking at you California who doesn’t allow LLCs for law firms). In Georgia, this registration is $50 per year.

You will not want to put your home office as the registered agent on this filing. So you’ll want to hire a registered agent. This usually ranges from $50-250 a year. However, you may have a relationship with another firm that is willing to serve as your registered agent and some CPAs also offer this service.

Also, you’ll want to grab a post office box near you so that people can mail you stuff and not to your home address. This is going to be around $120 a year.

Most local counties or cities will also require that you have a business license. This is usually a function of your revenue and number of employees (at least here in Georgia). Georgia usually also has a flat fee that you can per attorney of $400 so you don’t have to report or open your books up for an audit of your revenue.

Costs: $620. Total Running Cost: $885-2,735.

Banking and Finance

From there, you can get an EIN from the IRS for free. And then you can setup a business checking account. Most banks have a very basic business account with no monthly fees, especially if you maintain a small minimum balance.

If you are going to need an IOLTA now or in the future (not all states require IOLTAs for all law firms but some do, so check your state bar requirements), then make sure your bank is on the approved list of banks and offers IOLTA accounts.

You want this at the same bank as your primary business account. Also, I recommend to make it easier on you to also use the one where you do your primary personal banking.

If you’ve got good personal credit, I’d also recommend that you go ahead and get a business credit card. This will likely end up on your personal credit report as you’ll be guaranteeing it. But get that card right away so you can keep business expenses separate and also start building up a higher limit.

Finance Software

I didn’t mention QuickBooks or Freshbooks or other accounting software up above. Because honestly, you can get away with not having it as a solo your first year. You can use a Google Sheet or Excel Workbook to keep track of all your finances. It’s not ideal, but you can do it if you are working on a shoestring budget. Then when you get the revenue going, you can start using an accounting software.

Hint: Make sure that you keep DETAILED records of everything going in and out of the IOLTA. Make sure you have your client name on everything so that you can sort and easily see the balances in that account. This can get you in trouble quickly if you aren’t prepared for it. And if you have a practice that deals with the IOLTA a lot (thinking personal injury, real estate, family law, or practices where you take up-front payments like criminal law) then you may want to get that accounting or practice management software sooner than later.

Accepting Payments

Now you have to figure out how you are going to accept payments. The good news is that there are lots of options out there for a first year solo, and it’s all going to depend on how much money you run through them.

For a first year on a zero-based budget, I’d recommend that you start with PayPal or Stripe. They don’t have the best processing fees, but they also aren’t going to hit you with monthly fees when you don’t use them. For the first year, let’s do this and then we can upgrade later to things like LawPay when you have enough monthly transactions to make it worth it.

Since this price is a function of collecting revenue (COGS) and not an expense that you have to front, I’m not including it in the running total here.

Malpractice Insurance

This is going to be scary for a lot of people. But it doesn’t have to be. First year malpractice insurance is not that bad because you don’t have a lot of prior cases to insure. Many insurers can provide this for about $1,500 a year.

Cost: $1,500. Total Running costs: $2,745-4,595.

Marketing Costs for a New Law Firm

Marketing costs can be all over the place for a new law firm. You can invest a lot or little, letting this expense grow as you get more revenue.

Social Media Marketing

First things first, I suggest every lawyer market their new firm through LinkedIn – this is free. Setup your personal and a company profile. Make sure you are connected to everyone you know. Then post about your new firm. Make an announcement that you’ve got a firm and then remind everyone at least weekly if not daily that you are there. Focus on your personal profile as that tends to get better traction than the company profiles.

Second, post on the other networks where your potential clients and referral sources will be. I’m loving Threads right now, but also Facebook groups and Twitter/X. Other attorneys have had great success on TikTok as well.

The cool thing about these are that all the social media sites are free. You can get on there, show your expertise and attract clients without having to pay a thing. Just talk about what you know, what’s a lawyer to hate about that?

Cost: $0. Total Running costs: $2,745-4,595.

Website for New Solo Lawyers

Honestly, most potential clients aren’t going to find you because of your website. But when they are referred to you by someone else, they are going to check you out. So I suggest that you have at least what I call a resume site — think a basic website with the same content as your LinkedIn bio, a services page to tell people what kind of cases you take, and a contact page (plus the associated legal pages – privacy, terms and conditions, ADA accessibility – total $500).

You can get website hosting for as little as $1 a month for your first year with IONOS. There you can host a WordPress website where you can get free designs that you can customize and fill in your information. PS use my referral link here and IONOS will plant a tree for you AND also give both of us a special little reward/treat.

As time goes on, and you work on your pitch and practice area, you can add more pages, like a blog. One of the great things about WordPress is that it is easily expandable as you grow. It’s also relatively user friendly if you are a DIYer and don’t want to invest a lot of money your first year on a professionally designed website. Another alternative is SquareSpace, but I don’t have as much experience over there.

Cost: $500. Total Running costs: $3,245-5,095.

Paid Ads

Many lawyers will go their entire career without paying for an ad. Others will do this on day one. Your first year, however, I suggest that you skip the paid ads and rely on your personal network and referrals. Once you have the revenue coming in, then you can take some of that to reinvest in paid ads.

Cost: $0. Total Running costs: $3,245-5,095.

Logo and Other Branding

No clients are going to pick you because of your branding. Seriously, it’s an ego thing, especially your first year.

If you really want to create a logo, go play around in Canva to see what you can create on your own. After you start getting some clients and revenue, then spend some time on your logo and branding.

Business Cards

People still use business cards? The surprising answer is yes, but you don’t need a box of 2,000.

First, you can limit your use of business cards by connecting with people on LinkedIn right away. That helps you stay top of mind, since you’ll be regularly posting about your law firm and practice areas. And you’ll be able to see their posts, maybe being able to offer up help for their issues.

Second, you can use a virtual business card. I have HiHello on my phone, where potential contacts can get a QR code to download my info. In return, they can give me their info. So awesome for the random meetings when you aren’t carrying business cards.

I do, however, recommend that you get at least some cards. If you are a litigator, you know that you need them to give to people like court reporters and opposing counsel. Even for us non-litigators and transactional lawyers, you will always run across old-school individuals that don’t want the digital connections; they want that physical card.

I recommend Moo – using my link, you can get 25% off your order. And you can get a package of 50 cards for as little as $21. Using the LinkedIn and HiHello methods above, I can make that box of 50 last a whole year, even with conferences and other in-person networking events.

Cost: $16. Total Running costs: $3,261-5,111.

Miscellaneous Costs for a New Practice

Legal Research

Legal research, especially when you are accustomed to the Westlaw and Lexis subscriptions, can be costly. And what you are going to want to spend is going to depend dramatically on your practice areas, geographic region, and resources that your bar provides.

For example, the Georgia Bar gives attorneys access for Fastcase. Another free research source is Google Scholar.

A common resource on the paid side is Practical Law which is focused on business lawyers, both transactional and litigation. It’s about $350/month. But this is something that you may want to put off until you are sure that you need it – at least, until you have a client that will make it worth it.

Cost: $0. Total Running costs: $3,261-5,111.

Legal AI

AI is coming a long ways, and as a new solo, you’ll be asking lots of questions. Just remember to always fact check every single thing that comes out of it so you aren’t the next one making headlines for making up cases.

ChatGPT is a good resource. Start with the free version and see if it works for you.

For the business lawyers, GC AI is another really good tool that I’ve used in my firm. It’s $250/month, so I probably wouldn’t recommend it for a new solo before the clients start paying some bills.

Cost: $0. Total Running costs: $3,261-5,111.

Bar Dues and Continuing Education

Every lawyer, including you as a new solo, will have to pay your bar dues. Let’s just call that an average of $300 per year.

As for continuing education, did you know that there is a lot of free CLE available? Check with large law firms, who will often do free CLE as part of their marketing efforts. Several other providers will let you watch live for free and then charge you for on-demand CLE.

And then watch your network on the social media sites. Many will post about upcoming CLE opportunities that are free or low cost. And then conferences. The Georgia Supreme Court will even put some free webinars on every year. Presenting at a CLE and sometimes even writing for bar publications will get you CLE credit and also help establish you as an expert for marketing purposes. So be creative if you want free CLE, it’s out there.

Also, tip: try to get your first year’s CLE done before you leave your last law firm. Did you know that many state bar associations will let you carry over hours from one year to the next? In Georgia, I can carry over a full year’s worth of CLE. So before you leave a firm that pays for your CLE or even provides it in-house, get this year’s and next year’s CLE out of the way.

Cost: $300. Total Running costs: $3,561-5,411.

Personal Expenses to Consider but Not Law Firm Expenses

There are a variety of personal expenses that you may want to consider. However, these are not technically law firm expenses but are going to impact your decisions to go out on your own. The first category is replacing your employee benefits.

Health Insurance as a Solo

Oh, one of the biggest scary costs for a lawyer that is looking to go solo is going to be health insurance.

As a solo, this isn’t technically a law firm expense – it’s a personal expense that goes on Schedule 1 of your tax return, not Schedule C for a single-member LLC taxed as a pass-through entity.

Check out your state bar to see if they have any group discounts. Also, when you expect to take a dramatic hit on your income in the first year of solo practice, you may consider using the ACA Healthcare Exchange and using a premium tax credit to reduce your monthly costs.

Retirement as a Solo

Honestly, in your first year, you may not be putting a lot away into retirement. Especially if you are doing everything on a zero based budget.

However, if you can stretch it, I highly recommend at least an IRA. This year you can contribute up to $7,000 into an IRA. Sure you aren’t going to be retiring on it, but at least you are putting something away. And there is some current tax benefits to contributing to a regular IRA. But if your income bracket is lower than normal this year, send it over to a ROTH to take advantage of the lower rates now versus later.

If you do really well in your first year, you may consider a SEP or Solo 401k, which will allow you to put higher amounts away for retirement.

Cell Phone, Home Internet, Etc

There are certain costs that you may be able to deduct at least part of as a business expense. Things like home internet (because we need those blazing speeds to do these webinars and video calls) and cell phones especially when we load up the apps to work from anywhere may become at least partially deductible. You’ll want to talk with a CPA to review.

Tax Advice

Speaking of a CPA, I highly recommend that you get with a CPA for tax advice. Now that you have your own business, things are more complicated. There are random tax credits that you can take advantage of. Like a Qualified Business Income Deduction.

You also won’t have withholding on your paycheck. So you’ll want to work with your CPA to get estimated payments submitted on time and in the proper amounts.

Did you know that the CPA expense is also deductible? Cool.

So What’s It Cost to Start a Solo Law Practice?

If you are trying to bare bones budget a solo law practice, you could reasonably expect to spend $3,561-5,411 in the first year.

The good news is that many of these costs can be spread out over the course of the year, so you can wait until you start getting some money rolling in before you have to pay the cash over. You can get another 30 day float by using a business credit card, as well.

Now, I will acknowledge that practicing law like this will not be preferable to lots of lawyers. You will want to trade-off the cash for making it easier – things like practice management software, hiring staff/paralegals/associates, engaging business experts, and marketing automation.

But the good news is that you can take the money you are making from your clients and reinvest it into your new solo law practice to make things easier without racking up a lot of debt.

Because once you start to grow, how awesome will it be to not have to fight the cash flow of paying off debt and then being able to brag that you built an awesome firm never taking on any long-term debt!

Grow Revenue, Save Expenses

As you get the revenue coming in, you could cut costs above by converting your monthly subscriptions to annual subscriptions. Many software/cloud services will give you a 15-25% discount for paying annually instead of monthly.

It’s also one of the areas I recommend to many clients when they are looking to save money – do a technology audit. Because as you grow, you’ll add services or seats. But maybe you aren’t using them anymore and you can cut them. Or get more out of your current software suite (ie ditching Zoom for Teams or Meet).

But I also caution you against being too cheap — penny wise and pound foolish. As you can afford it, invest in the office accessories or software that will help you grow revenue. Outsource what you don’t like to do or aren’t good at. And don’t forget about the concept of buying back your time so you aren’t working 80 hours a week every week.

What Does This Mean for the Tax Proposals?

Currently, the tax code allows a $5,000 tax deductions for startup costs and $5,000 for organizational costs if the total is under $50,000.

Solo law firms are relatively cheap on the startup costs, with most of the above costs mentioned above moving into operational costs.

As a result, Kamala Harris’s tax proposal to increase the deduction to $50,000 would have little effect on a lawyer branching out on their own.

But it would impact those that want to buy a law firm. Those expenses are going to be much higher, as you are paying attorneys and financial experts to do due diligence and legal agreements, perhaps even a broker for finding the law firm. That’s where the higher limit would really help lawyers starting (or buying) a law firm.

Share with Other Business Owners: