The inherent complexity of business contracts, consumer protection laws, and regulations in many (if not all) industries means that lawsuits are a natural part of doing business. The risk of those lawsuits necessitates council and advisory firms to help contain costs and defend companies against claims. This is what a legal consulting firm can help with. By acting as a consultant, rather than a traditional legal firm, your company would be able to advise companies’ legal departments and draw up compliance plans that meet local, state, and federal regulatory guidelines. You can also advise companies with no legal department, lowering their legal costs.
Ready to turn your business idea into a reality? Tailor Brands is our top recommendation because it guides you through every step of the process with hands-on support.
Tailor Brands ($0 + State Fees)
Start a legal consulting firm by following these 10 steps:
- Plan your Legal Consulting Firm
- Form your Legal Consulting Firm into a Legal Entity
- Register your Legal Consulting Firm for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Legal Consulting Firm
- Get the Necessary Permits & Licenses for your Legal Consulting Firm
- Get Legal Consulting Firm Insurance
- Define your Legal Consulting Firm Brand
- Create your Legal Consulting Firm Website
- Set up your Business Phone System
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.
Exploring your options? Check out other small business ideas.
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 will you name your business?
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
Luckily we have done a lot of this research for you.
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
If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.
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.
What are the costs involved in opening a legal consulting firm?
Once you have your law degree and have passed the bar exam, 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.
Want a more guided approach? Access TRUiC’s free Small Business Startup Guide – a step-by-step course for turning your business idea into reality. Get started today!
STEP 2: Form a legal entity
One crucial aspect that cannot be overlooked when starting your legal consulting firm is the importance of establishing a solid business foundation. While sole proprietorships and partnerships are the most common entity types for small businesses, they’re a far less stable and advantageous option than LLCs.
This is because unincorporated business structures (i.e., sole proprietorships and partnerships) expose you as an owner to personal liability for your business’s debts and legal actions, while LLCs protect you by keeping your personal assets separate from your business’s liabilities.
In practice, this means that if your legal consulting firm were to face a lawsuit or incur any debts, your savings, home, and other personal assets could not be used to cover these costs. On top of this, forming your business as an LLC also helps it to appear more legitimate and trustworthy.
Ready to Turn Your Business Idea Into a Reality?
Tailor Brands is our top recommendation because it guides you through every step of the formation process with hands-on support — from paperwork and compliance to devising a detailed plan to help you achieve your business goals.
Note: If you’re interested in more information before getting started, we recommend having a look at our How to Start a Business guide (DIY) or our in-depth Best Business Formation Services review (for those opting for a professional service).
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 through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
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.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business’ expenses all in one place.
- Build your company’s credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.
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.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
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.
Service Agreement
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.
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.
Find out what types of insurance your Legal Consulting Firm needs and how much it will cost you by reading our guide Business Insurance for Legal Consulting Firm.
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 already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
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 regulations 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: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites – full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.
Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2024 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it’s fair pricing.
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.
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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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:
- Funding
- Events
- Guides
- Support
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.