Open a Law Practice
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How-To Kit
Open a Law Practice
Adapted from materials by Robert A. Dawid in Michigan Basic Practice Handbook.
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Step-by-Step Guidance

Step 1: Determine whether you are ready to start your own practice.

  • Evaluate your own goals, legal skills, marketing skills, business skills, and financial resources. Use the Self-Assessment for Starting Your Own Law Firm to assist you.
  • It is crucial that you have sources of business before you venture out into your own practice. If you are a new lawyer, or if you are new to a geographical area, you must seriously consider whether you have sufficient business contacts to start your own practice right away.
  • Calculate your start-up expenses and make sure you can cover them. Use the Law Practice Budgeting Worksheet to guide you.
  • Consider the time commitment your new practice will require and whether this is the right move for you, your family, your lifestyle, and your finances.
  • Talk to other lawyers who have started their own practices, preferably in your specialty area. You may be able to avoid several pitfalls or growing pains by simply finding out what they are and taking steps to avoid them.
  • Use the Checklist for Opening a Law Practice to assist you in covering all planning bases before you make your move.

Step 2: Decide on your legal structure.

Before starting to practice (or advertising your practice), you must choose an organizational structure for doing business: (1) sole proprietorship, (2) general partnership, (3) professional service corporation, or (4) professional limited liability company (PLLC). Consider using the services of a professional accountant to determine which organizational structure is best for your new firm. See the How-To Kit Choose a Business Entity for Your Law Office.

Step 3: Prepare a business plan.

A business plan can help you focus your ideas and create a roadmap to success. A business plan describes your practice in detail, defining how you will operate, your marketing strategies, your competition and your financial structure. See the How-To Kit Create a Business Plan for Your Small Law Firm.

Step 4: Comply with governmental registration, deposit, and filing requirements.

As an operating business, a corporation, and/or an employer, you must satisfy several governmental filing requirements related to startup and taxes. You must also file certain quarterly and annual reports. See the Law Firm Business Filing Requirements Table. To avoid inquiries from the IRS, it is important to reconcile your tax records. If you have employees, you must also file documents for new hires.

Step 5: Establish a reliable accounting system.

An accurate accounting system is important to determine the profitability of your business, to set fees, to control costs, and to file employment and other tax returns.

Step 6: Open bank and trust accounts.

A key task in starting a practice is opening the bank accounts and trust accounts that the firm will use. See the How-To Kit Open an IOLTA Account.

Step 7: Purchase insurance.

Types of insurance you should consider purchasing for your new practice include malpractice, business, health, life, vehicle, liability, property, and disability. You should purchase malpractice insurance immediately.

Step 7: Outfit your office.

You will need to select your office space and purchase furniture, office equipment, and supplies. You will also need to furnish your library. See the Checklist for Opening a Law Practice and the Law Office Technology Checklist.

Step 8: Market your practice.

Whether you work in a law firm or on your own, the ticket to success is the ability to attract new business. It is important to develop a marketing strategy. See the How-To Kit Create a Marketing Plan for Your Small Law Firm.

Step 9: Establish a docket control system.

In many legal malpractice insurance application forms, attorneys are asked to explain their internal docket control system. This is done for good reason—a poor docket control system can lead to missed dates and liability exposure.

Step 10: Establish your billing methods and develop fee agreements.

By and large, charging an hourly fee for time expended on handling a matter is the most common billing method. However, there are various other billing methods that lawyers use as marketing tools or in response to client demand.

Step 11: Staff your office.

Hire the best qualified staff possible at the most reasonable salaries.

Step 12: Develop standard office procedures.

The more systematized your office is, the smoother it will run and the less time it will take to perform repetitive tasks. Create standard office procedures for as many tasks as possible.

Step 13: Establish a privacy policy.

Under Michigan’s Social Security Number Privacy Act, MCL 445.81 et seq., lawyers and law firms must have in place a privacy policy regarding social security numbers.

Step 14: Develop a document retention policy.

A law firm, including a solo practice, is ethically obligated to have a document retention policy or plan. See the How-To Kit Develop a Client Record Retention Policy for the Law Office.

Step 15: Screen for client conflicts.

You are ethically charged to avoid client conflicts. See the How-To Kits Avoid Conflicts of Interests with Current Clients and Avoid Conflicts of Interests with Former Clients.

Step 16: Develop loss-prevention safeguards.

Incorporate safeguards to protect against unexpected or criminal losses, including, but not limited to, locking up currency and checks, keeping current inventories of equipment and supplies, reviewing bank statements and verifying signatures on cancelled checks, having a backup system for your computer, and having adequate building security.

Step 17: Keep refining your practice.

Once you are settled and your firm begins operating smoothly and profitably, continue thinking of ways to improve your practice and the quality of service being delivered to your clients.

When to Use

This How-To Kit explains how to open a new law practice, whether you are a recent law school graduate or a seasoned veteran going out on your own. The kit includes valuable planning and business filing checklists, sample fee agreements, and links to pertinent online resources.

Using these materials is not a substitute for the lawyer’s independent judgment, drafting, and research.

Other Resources

Books

Other Helpful Links

Additional Practice Guidance

Start-Up Expenses

To determine your start-up expenses, first determine how many months it will take to begin earning income. An average business plan will require at least six months of income reserve to cover all overhead expenses and any costs advanced to clients. A longer period of time may be appropriate, however, depending upon your type of practice; for example, a contingency civil practice starting with new cases might not see fees for over one year. Calculate your monthly overhead and multiply it by the number of months you believe it will take until you start receiving a stable attorney fee income.

Monthly overhead expenses should include at least the following:

  • rent
  • parking, if applicable
  • phone/Internet
  • staff salaries, if applicable
  • insurance (malpractice, business, health, vehicle, liability, equipment, disability, and worker’s compensation)
  • supplies
  • marketing
  • client file expenditures (calculate an average monthly cost)
  • postage/overnight mail
  • accounting services, if any
  • service fee contract expenses
  • bar association dues
  • continuing legal education classes
  • business development expenses
  • ongoing library expenses

In addition, your initial expenditures should cover outlay for office furniture, office equipment, and start-up supplies. You should also be prepared to have additional financial resources available if unforeseen expenses arise.

Initial Registrations and Filings

To begin operating a business, you will need to do the following:

Tax Requirements

Deposits

As part of an ongoing business, your new firm must make the following fund deposits for state and federal taxes: (1) FICA (Social Security and Medicare) and income tax withholding; (2) state sales and use tax and state income tax withholding; (3) federal and state unemployment deposits (form 940 and form UIA 1020); and (4) corporate or individual estimated tax deposits (if you anticipate a profit). Federal deposits may be made electronically by way of the Electronic Federal Tax Payment System.

  • FICA and Income Tax Withholding. Most firms make the FICA (Social Security and Medicare) and income tax withholding deposit monthly. If you are not required to deposit electronically, the IRS will send you monthly deposit slips to complete and forward with the deposits. Detailed information is contained in a form entitled “Circular E,” which the IRS mails to employers. Circular E is also available on the IRS website. Search for “Circular E.” The employer must also withhold federal income tax based on the W-4 form completed by the employee. While the employee’s share may be taken out of his or her gross pay, the employer is responsible for reporting and forwarding both shares. Penalties for even minor errors are severe because deposits reflect monies being withheld from employee paychecks. Because deposit rules are complex and penalties are severe, many small employers make deposits on the same day they distribute payroll.
  • State Sales and Use Tax Withholding. These taxes are deposited quarterly or monthly, depending on the size of the gross receipts. Use tax is paid if, for instance, you order office supplies from out of state and are not charged state sales tax.
  • Federal and State Unemployment Deposits. Employers must make quarterly deposits of 0.8 percent of the first $7,000 of each employee’s wage if the employer’s federal unemployment tax is more than $500 for the calendar year. See IRS form 940. Higher rates may apply depending on the status of your unemployment account. In Michigan, state unemployment tax (Michigan forms 1017 and 1020) is paid on the first $9,000 of each employee’s wages. Reports are due April 25, July 25, October 25, and January 25. The unemployment tax rate is experience based. New employers are assigned a rate of 2.7 percent for their first three years. After that, the rate depends on the number of unemployment claims made against their account. Employers who do not file returns are assigned a penalty rate equal to the maximum possible tax rate.
  • Corporate or Individual Estimated Tax Deposits. Law practices operating as corporations typically report little or no corporate taxable income because profits are distributed to owners as salaries to avoid the 35 percent corporate tax rate applicable to law firms. If corporate income tax is $500 or more, penalties are imposed unless quarterly estimated tax deposits are made. The same rules apply to individuals receiving pass through income from an S corporation. Deposits may be made electronically or on deposit coupon 8109 (also used to make FICA/withholding and federal unemployment deposits). Partners, members of limited liability companies treated as partnerships, and sole proprietors should file individual estimates to pay tax on their share of the partnership or proprietorship income.
  • Michigan Business Estimated Tax Deposits. If your firm grosses less than $350,000 annually, you will probably not be subject to the Michigan Business Tax. MCL 208.1101 et seq., repealed by 2011 PA 38 and 39. (Repeal is effective when the last credits or carryforwards under the Michigan Business Tax have been claimed by taxpayers with certificated credits who have elected to file under the Michigan Business Tax.) 2011 PA 38 and 39 enacted a corporate income tax of 6 percent. Unlike the Michigan Business Tax, the corporate income tax will be levied only on businesses organized as C corporations. Consulting a certified public accountant is highly recommended to make sure that you are complying with the tax codes.

Quarterly Reports

The following tax-related information must be filed quarterly:

  • FICA. The FICA form (form 941) is due April 30, July 31, October 31, and January 31. The quarterly report states all FICA and federal income tax withheld from employee gross payroll. The quarterly return should correlate with the FICA deposits being made monthly. If total quarterly liability is under $2,500, payment may be made with the return rather than through tax deposits. However, employers who delay payment of payroll taxes often have difficulty reserving enough money to cover a large check.
  • State Unemployment Tax. In Michigan, you must disclose the names and wages of your employees on a quarterly basis using UIA form 1017.

Annual Reports and Returns

The following tax-related information must be filed annually:

  • Forms W-2 and W-3. Each employee must receive a W-2 and a W-3 form by January 31 of the following calendar year. You must file a copy of the forms W-2 and W-3 (the transmittal form) with the Social Security Administration by February 28 of that same year. In Michigan, state W-2 forms are included with the annual sales, use, and withholding tax return due on February 28.
  • Federal Unemployment Tax Returns. You must file form 940 if you paid total wages of more than $1,500 in a calendar quarter or had one or more employees for some part of a day in any 20 different weeks. If you have filed all of your state unemployment tax returns on time and paid the tax, you can use form 940EZ. The federal and state employment taxes are coordinated.

    The federal unemployment tax is 6.2 percent of the first $7,000 of wages paid to each employee. A credit against this tax is allowed for unemployment payments paid to the state. The maximum credit is 5.4 percent. Therefore, if you have filed and paid state unemployment taxes on time, your federal rate will be 0.8 percent. If you paid your state unemployment taxes late, you will be entitled to only 90 percent of the amounts paid late.
  • Federal Income Tax Returns. Corporations, partnerships, and limited liability corporations must file federal income tax returns reporting income earned by the entity. Calendar year corporations file form 1120 by March 15 of the following year. Calendar year partnerships and limited liability corporations taxed as partnerships file form 1065 by April 15 of the following year. Sole proprietors report practice income on the schedule C filed with their form 1040.
  • Federal Forms 1099-MISC and 1096. Law firms are also required to file forms 1099-MISC and 1096 (the transmittal form) annually if they make payments of $600 or more to unincorporated entities for services. Examples include referral fees paid to other attorneys, payments for bookkeeping services to an unincorporated entity, or expert witness fees to unincorporated entities. These returns are due February 28.
  • State Business or Corporate Income Tax Returns. As discussed earlier, the Michigan Business Tax, MCL 208.1101 et seq. was repealed by 2011 PA 38 and 39. In its place, the legislature enacted a corporate income tax of 6 percent. Unlike the Michigan Business Tax, the corporate income tax will be levied only on businesses organized as C corporations. Consulting a certified public accountant is highly recommended to make sure that you are complying with the tax codes.
  • State Annual Reports. For corporations, Michigan requires the filing of an annual statement. MCL 450.1911 and .2707(3). In addition to this annual statement, PLLCs must file an annual report by February 15 each year. MCL 450.4909. The Michigan Department of Licensing and Regulatory Affairs (formerly known as the Department of Energy, Labor and Economic Growth), Corporations, Securities, and Commercial Licensing Bureau, will automatically send the annual reports and statements before the filing date. Failure to file the Michigan annual statement (and the additional annual report for PLLCs) for two consecutive years results in the corporation losing its good standing. MCL 450.1922, .2707(2), and .4909(4).
  • Personal Property Tax Returns. This return reports the cost of personal property used in your business and is filed with your local governmental entity, which will typically send you a preprinted form.

Reconcile Tax Records

The IRS performs a number of computer reconciliations on your returns. To avoid inquiries from the IRS, it is important that you reconcile the following:

  • If you practice as a sole proprietor, the total amount reported on form 1099-MISC is compared to the gross amount reported on schedule C.
  • The amounts reported on form W-3 for taxable wages, Social Security wages, Medicare wages, and related withholdings should equal the sum of the amounts reported on the quarterly forms for the calendar year.
  • If you report wages of $1,000 or more on form 941, the IRS will check whether form 940 is filed.
  • The IRS compares the record of federal tax liability reported on form 941 with the actual tax deposit amounts and dates.
  • The IRS will ask the state of Michigan to verify that the amounts reported on form 940 that are paid to Michigan’s unemployment fund are accurate.
  • An accounting system adequate to withstand an IRS audit should be able to provide a detailed list of all expenditures that total the expense lines on the tax return. The original receipt or other documentation should support each payment. Your books should be able to reconcile total wages and payroll taxes deducted on the tax return with forms 941 and other payroll tax returns. Payments recorded on individual client billings should show up in a cash receipts journal. Be able to document the source of deposits in all accounts—both business and personal.

If you advance client costs (as most personal injury practices do), the IRS will treat them as loans to the clients so that a deduction is not allowed until client reimbursement is received or the case ends and the amount is uncollectible.

A helpful report on what the IRS looks for when auditing attorney returns is called IRS Market Segment Specialization Program (Audit Techniques Guides). The document was intended for internal IRS training but is available under the Freedom of Information Act (FOIA). You can access it at http://www.irs.gov/businesses... . It is also available from many tax services or from the IRS ((202) 622-5164) under a FOIA request. You may send a written request to the IRS at the following address: Reading Room, 1111 Constitution Ave., NW, Washington, DC 20224.

Documents for New Hires

All employers must complete Immigration and Naturalization Service (INS) Form I-9, Employment Eligibility Verification, within three days after hiring a new employee. The form must be retained for three years after the employee’s hire or for one year after employment is terminated, whichever is later. 8 USC 1324a(b)(3). The I-9 form is available from the U.S. Citizenship and Immigration Services (a division of the Department of Homeland Security) website.

Information about new hires must also be reported to the Michigan New Hire Operations Center to aid in the collection of child support. The New Hire Reporting website has more information on the process, and a downloadable version of the reporting form.

Accounting System

An accurate and reliable accounting software program is the least expensive and best way to minimize the time spent practicing accounting rather than law. Some firms may still keep paper books, but most have gone to easy-to-use accounting software packages. These programs make the preparation of reports required to prepare payroll and tax returns easy and fast. Several software packages are available. Quickbooks by Intuit is one of the programs most commonly used by lawyers. Even with a software-based accounting system however, supporting documentation should also be kept and regularly updated. For example, the firm should be able to support expenditures with a vendor invoice. Credit card expenditures should be supported by the credit card statement plus a receipt or invoice. Bank statements should also be retained along with documentation supporting any wire transfers you might make.

Bank and Trust Accounts

Law firm bank accounts are the subject of intense scrutiny and must be given serious consideration. Generally speaking, lawyers must segregate client funds from the firm’s general account. MRPC 1.15(d). Commingling client funds or third-party funds with lawyer funds will amount to professional misconduct. You should set up the following accounts for your practice:

  • A General Account. This is the firm’s general operating account consisting of firm monies.
  • An Interest on Lawyer Trust Account (IOLTA) Account. This trust account is intended for all client funds that cannot earn income for the client in excess of the costs incurred to secure such income while the funds are held. As of October 18, 2005, the old bright-line rule of $50 interest threshold was eliminated. MRPC 1.15(e), as amended, contains a list of factors a lawyer should consider in determining whether a client’s funds should be deposited in an IOLTA or non-IOLTA account. The Michigan State Bar Foundation monitors the fund. The Michigan Supreme Court has ordered that the depositing bank must remit interest on the IOLTA account, less reasonable service charges, to the Foundation each quarter. The Foundation regulates the establishment of the account, filing forms, and signature cards. See the How-To Kit Open an IOLTA Account.
  • Other Trust Accounts. Trust accounts that exceed the maximum interest amount of IOLTA accounts must be placed in a segregated interest-bearing account for a particular client or a pooled interest-bearing account with a subaccounting of all interest on each client’s funds. A lawyer must never withdraw trust account funds for personal or business use. If a lawyer is entitled to trust account money because it had been earned and billed, the lawyer must first transfer the fees from the trust account to the general account and then draw from the general account.

When making disbursements from a trust account, make sure that (1) deposited funds being drawn from have cleared, (2) the disbursement has been authorized by the appropriate person, (3) the disbursement has been posted to the client’s trust account and the client’s file documents the disbursement, and (4) the client has been notified of the disbursement and has been given sufficient time to object.

Effective September 15, 2010, lawyers must maintain all trust accounts in approved financial institutions. MRPC 1.15A(a). The State Bar will periodically publish a list of approved institutions. MRPC 1.15A(c). The lawyer must notify the financial institution in writing that an account is a trust account for purposes of this rule. MRPC 1.15A(a)(2). The institutions must agree to notify the Grievance Administrator and the lawyer within 5 banking days if a trust account is overdrawn. The requirements for the overdraft report are stated in MRPC 1.15A(d). Upon receipt of a request for investigation, the lawyer must submit to the Grievance Administrator within 21 days a full and fair explanation of the cause of the overdraft and how it was corrected. MRPC 1.15A(f). The financial institution may charge the lawyer for the reasonable cost of providing the reports and records required by this rule, but those costs may not be charged against the principal, interest, or dividends earned on the trust account. The costs cannot be borne by the clients. MRPC 1.15A(e).

Malpractice Insurance

Most professional liability policies are written on a claims-made rather than on an occurrence basis. A claims-made policy covers all claims when made, while an occurrence policy applies when the act or omission occurs during the policy period. When purchasing a claims made policy, obtain full prior acts coverage, which will cover acts and omissions that occurred before the inception date of the policy. Do not allow your malpractice insurance to lapse. If there is a gap in coverage, even for a few months, most carriers will not insure on a full prior acts basis.

Office Space

You should consider the type of office space you will need, the location, and the square footage requirements (typically 400–600 square feet). Your office type should also reflect your clientele. For example, a business law clientele may expect more elaborate space and furnishings than a juvenile law clientele.

Your office should be easily accessible to your clients and should allow you easy access to the courts if you are a litigator. Parking availability should be considered for both staff and clientele. If you are starting out as a small firm or as a sole practitioner, consider sharing office space.

Your space considerations should include the following:

  • office access during off-hours
  • bathroom facilities
  • air-conditioning and heat (and whether they stay on during evening hours and weekends)
  • janitorial services
  • carpeting, wall, and window covering maintenance
  • parking at fixed prices
  • right of first refusal of additional space in the building if you expand
  • accessible electrical outlets
  • electricity (and whether it is billed separately or included in the rent)
  • building security

Nonwindow office space will be considerably cheaper than window space. Attempt to negotiate a short-term lease with a renewal option because the growth of your practice may require moving in the future.

If you are considering an office share arrangement, see the How-To Kit Establish an Office Sharing Arrangement.

Furniture

Do not underestimate the impact a neat and well-furnished office will have on your clients, no matter what your specialty area. All clients expect a certain degree of professionalism from their lawyer. Further, your office personnel expect a pleasant work atmosphere. If your office is not attractive, you may not attract the type of clients or staff you desire. High-quality used furniture is often your best bet. Look in the classified ads of your local newspaper for used equipment or locate used furniture outlets in your area. Also, check into estate sales, bankrupt or closing businesses, and legal publications for furnishings.

Office Equipment

Your start-up office equipment will include computer hardware and software, a printer, a smartphone, a copier, a tablet (as necessary), and dictating equipment (as necessary). You can look into the cost of leasing a computer but will probably find that the long-term cost exceeds the price of simply buying it new. For an overview of the technology to consider when starting a law practice, see the Law Firm Technology Checklist. For specific recommendations on computer equipment, see the following buying guides: Desktop Buying Guide, Laptop Buying Guide, Computer Accessories Buying Guide, Printer and Scanner Buying Guide, Smartphone Buying Guide, and Tablet Buying Guide.

Supplies

Supplies ordered by mail catalog or on the Internet are usually cheaper than those bought through a local office supply store. Start-up supplies should include file folders and notebooks, stationery, envelopes, legal pads, pens, pencils, highlight markers, hole punches, staplers, staple removers, tape and tape dispensers, paper clips, copying machine dry ink, copy paper, printer cartridges, diskettes, divider tabs, address labels, telephone message pads, and rubber stamps.

Library

Your library should initially include the minimal amount of research materials necessary to practice your area of law effectively. If you are located close to a law library, you should consider ordering only those materials you frequently need. Your local bar association may also have a library you can use. The Internet is, of course, an extremely valuable research tool. ICLE maintains Michigan Law Online (MLO), a free Michigan primary law resource included in ICLE’s Basic and Premium Partnerships. Michigan Law Online includes the following:

  • Michigan Supreme Court opinions from 1942 to the present
  • Michigan Supreme Court orders from 1966 to the present
  • Michigan Court of Appeals published opinions from 1965 forward (since the inception of the Court of Appeals)
  • Unpublished court of appeals cases from 2003 forward (as PDF files)
  • Current Michigan Court Rules and amending orders from 1995
  • Current Michigan Rules of Evidence and amending orders from 1995
  • Michigan Rules of Professional Responsibility
  • Links to other Michigan primary law resources, such as the Michigan Legislature’s website.

Fee based services for caselaw and statutes include LexisNexis or Westlaw. Michigan statutes, passed bills, enrolled bills, joint resolutions, and introduced bills and resolutions are available online from the Michigan Legislature.

Docket Control

A good docket control system consists of checks and balances. This may include recording a date in two or more places, such as in a desk calendar and in a computerized docket program.

When mail comes in, all calendar dates should be immediately noted in all places where entries are made. The pleading, correspondence, or other calendaring data sheet should then be stamped and initialed to show that the calendaring entry system has been made and by whom. Highlight or emphasize important dates, such as statute of limitations dates. Prepare a list of crucial dates on all cases and make it available to all members of the firm.

If your firm handles cases with complicated calendaring dates, prepare a calendar worksheet that ensures all dates are being correctly entered into the calendar by all personnel in your firm.

Use a tickler system to remind yourself and all firm personnel of important upcoming dates. For example, tickle an expiration of a summons two weeks, one month, and two months before the expiration. It is too late if you remember an expiration date on the day it occurs if service has not yet been made.

Do not rely entirely on office staff to be aware of important dates and to enter them into the calendar. If an important date is missed and you are sued for it, it will be no defense that your office staff made the mistake. The responsibility rests with you.

When scheduling appointments, court appearances, or other attorney activities, calendar the time of the appointment separately, and then calendar travel time and the expected time period the appointment will take. This allows other staff personnel to know the length of time you will be unavailable when scheduling other appointments and handling phone calls.

There are now many good docketing software packages on the market. Determine which of the following features are suitable for your practice:

  • date calculator
  • scheduling conflicts alert
  • single or multiuser system
  • automatic reminders
  • periodic reports
  • per-case calendaring reports
  • entry searching
  • printing calendars and reports
  • timekeeping system

Whatever system you establish, make sure that all office personnel are fully trained on the system and realize how important calendaring is to your law office operation.

Billing Methods

Before you write a fee agreement, read MRPC 1.5 regarding fees. This rule governs the language of the fee agreement, your responsibilities to the client under the fee arrangement, prohibited and allowable fee arrangements, how fees may be calculated, and how payments and disbursements must be made.

Always memorialize your fee agreement in a written contract or engagement letter. The engagement letter should clearly set out the method for billing and the payment terms.

There are many types of attorney fee arrangements. You must choose the method that best serves you and your clients. Following is a list of attorney fee arrangements:

  • Hourly Fee Billing. The hourly fee billing method is the most common of billing procedures. If you use this method, get in the practice of immediately recording your time with sufficient detail to justify the time being billed. See the sample hourly fee agreement.
  • Contingent Fee Billing. A contingency fee allows the attorney to receive a percentage of the proceeds from a case. No fee is paid if there is no recovery. Carefully check the requirements of MCR 8.121 for a valid contingent fee agreement. In general, the maximum contingent fee rate is one-third of the recovery. MCR 8.121(B). Contingent fees are prohibited in domestic relations or criminal matters. MRPC 1.5(d). A fee agreement may also provide for a hybrid hourly rate/contingency fee agreement. This type of arrangement may combine an hourly rate or flat fee with a contingent fee. See the sample contingent fee agreement.
  • Fixed-Fee Billing. Lawyers using the fixed-fee billing method charge a fixed or flat rate for a particular service or group of services offered. Many clients prefer this method because they know what to expect and are not tied to paying for all of the hours a lawyer puts into a case. Refer to your ethical rules to determine if the fee may be set during any stage of the retained service.
  • Blended-Rate Billing. Blended-rate billing is used mostly in large firms employing experienced attorneys and younger associates. The firm bills clients on a preset hourly rate regardless of the attorney performing the work.
  • Incentive Billing. The incentive billing method sets the final fee as dependent on the outcome of certain factors that occur during the representation. For example, the client may agree to an additional fee contingent on a favorable outcome or on early disposition of the case. Clients may prefer this results-oriented billing because it encourages particular outcomes.

For past-due bills, your firm should have a system for generating reminder statements. Most work should be billed within 30 days of performance, payable in 30 days. Reminder statements should be mailed 60 days after the initial billing. For further discussion, see Attorney Fee Agreements in Michigan.

Staff

Major factors to consider in hiring an office staff will be your cash reserve, office space, and case load. If finances are limited, consider hiring the smallest number of personnel needed to operate the office.

Keep in mind that if you are computer-efficient, you may be able to decrease significantly the load on your support staff through automation and generating work on your own.

As a new employer, take great strides to make your firm a good place to work. Happy employees will reflect well on the firm. Treat your employees with respect, and they will do likewise. The best measurement of your success as an employer is to have dedicated employees who provide many years of service to your firm.

As employees in a law firm, all professional and nonprofessional staff must be trained to maintain client confidences. See MRPC 5.3 regarding an attorney’s ethical responsibilities concerning nonlawyer assistants. The attorney-client relationship and the nature of specific legal matters must be protected from the public at all times. Needlessly discussing cases within the office should be discouraged, especially in common areas where other clients may be located.

Standard Office Procedures

Prepare forms for routine letters, pleadings, contracts, and other often-used documents. Incorporate the forms into your computer system, and prepare them so modifications can be made to fit the particular client or legal matter. Modifiable client form letters can be prepared for almost every stage of a lawsuit, such as the following:

  • initial contact
  • preliminary investigation
  • lawsuit filing
  • forwarding interrogatory questions
  • forwarding prepared interrogatory answers
  • deposition notification and preparation conference
  • mediation notification
  • mediation results
  • settlement conference notification
  • trial notice and preparation conference
  • settlement offer letters

Create standard procedures for as many office tasks as possible. This will allow for consistent staff training and a dependable routine. Procedures may be established for tasks such as phone answering, appointment and deposition scheduling, accounting and billing procedures, interoffice memoranda and mail distribution, calendaring and docket entries, prioritizing workload, and handling emergencies.

Create job descriptions for each employee in your firm. This lets the employee know what is expected and provides you with an instant training manual for new hires.

Prepare checklists for such things as multidate calendaring entries, tax filing requirements, file opening and closing procedures, and office supply ordering.

Social Security Number Privacy Act Compliance

Under Michigan’s Social Security Number Privacy Act (MCL 445.81 et seq.), any “person” who obtains one or more social security numbers in the ordinary course of business must create a privacy policy. MCL 445.84. A “person” includes a corporation or other legal entity. MCL 445.82(e). Any lawyer regularly practicing in the probate or family law areas will frequently obtain social security numbers in the ordinary course of the business for the purpose of filling out court forms, such as the verified statement (when a divorcing couple has minor children) or a sworn statement to close the unsupervised administration of an estate.

Under the act, this privacy policy must at a minimum

  • to the extent practicable, ensure the confidentiality of the social security numbers;
  • prohibit unlawful disclosure of social security numbers;
  • limit who has access to information or documents containing social security numbers;
  • describe how documents containing social security numbers are disposed of; and
  • set penalties for violations of the privacy policy.

MCL 445.84(1). This privacy policy must be published in an employee handbook, procedures manual, or similar documents. MCL 445.84(2).

Improve Your Practice

After your practice has been established for a while, spend some time thinking about how to improve and develop it. Here are some suggestions:

  • Consider updating or adding to your hardware and software to save time, improve efficiency, and provide greater access to information.
  • Purchase equipment that increases your availability to clients and business contacts, such as a cell phone or laptop computer with built-in wireless card and ethernet connection.
  • Improve your office space or furnishings.
  • Join a bar association law practice management section. You will learn efficient and effective ways to operate your law firm as a profitable business.
  • If you are not computer literate, consider taking a computer course. Relying solely on support staff and outside sources will place you at a disadvantage compared to your colleagues.
  • Continue to nourish and expand your sources of business. If you do not, your business will experience a perhaps slow, but steady decline.
  • Be sure to keep updated in your practice area. Attend continuing legal education courses routinely. Read advance sheets and legal periodicals. Read books authored by the leaders in your field. Join a legal organization that concentrates on your specialty area and read its publications.
  • Continue to strive to be a highly reputable attorney by providing top-quality service to your clients, maintaining high legal ethics and good character, publishing in your field, and becoming an organizational leader in your area of the law.

ICLE gratefully acknowledges LexisNexis, provider of the LexisNexis services, for resources used in preparing ICLE books, supplements, and how-to kits.

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