How to start your own law firm

Starting your own law firm can be an exciting next step in your legal career.  Whether you want to start enjoying the financial fruit of your own labour, have a better work-life balance, or you want to practise in a legal field that you’re passionate about, it is important to know what the process entails before you take the exciting leap of opening your own firm.

Of course, starting your own law firm presents its own set of challenges, concerns, and uncertainties.  That is why we have decided to take a look at the practical steps involved in starting your own law firm in South Africa.  We hope this will be useful to you and help you and your new law firm succeed.

Steps for starting your own law firm

The entire legal profession in South Africa is governed by the Legal Practice Act No 28 of 2014 (LPA).  Section 4 of the LPA establishes the Legal Practice Council (LPC) to function as a body corporate with full legal capacity and exercise jurisdiction over all legal practitioners.  Therefore, naturally, any legal practitioner who pursues the establishment of his or her own law firm needs to consult the LPA and the LPC to ensure that all statutory requirements are complied with and all the prescribed steps have been taken.  Finally, you also need to ensure that you keep an eye on the financial implication of opening and operating your own firm.

We have divided the process into the following three steps:

1. Practical preparation step
2. Statutory step
3. LPC step  

1. Practical preparation step

This is an important first step in your journey to establishing your own firm.  Before you start the process, you need to have the following:

1. Decide whether you are practicing as a sole proprietor or as a registered limited liability company
2. If you decide to register a company, you must register the company with the Companies and Intellectual Property Commission (CIPC)
3. Have a physical address for operations
4. Have a postal address
5. Have an e-mail account
6. Have a fax number
7. Have all the details of the auditor you have appointed
8. Design a letterhead for your new firm
9. Appoint a compliance officer in terms of the Financial Intelligence Centre Act No. 38 of 2001 (FICA) and register your firm as an accountable institution in terms of FICA on its online portal.  Remember to keep your firm’s proof of FICA registration safe as you will need to submit it to the LPC on a yearly basis.
10. Open a business and trust bank account.  Once your trust account has been opened, it will only be activated once you submit your Fidelity Fund Certificate to the bank.  

1.1 Opening a trust account

Section 86 of the LPA states that every legal practitioner (referred to in Section 84(1) of the LPA) must operate a trust account.  This trust account must be at a bank with which the Fund has made arrangements as provided for in Section 63(1)(g) of the LPA.  Any money held by a legal practice on behalf of any person must be deposited therein as soon as possible after it has been received.  Keep in mind this is a separate bank account from your business banking account which your law firm will also need.  Interest accrued on trust accounts may be deposited into a separate trust saving account for the purposes of investing the interest.

Section 87 of the LPA sets out further financial requirements.  Stating that a trust account practice must keep proper accounting records with information and particulars of the following:

• Money paid and received on its own account;
• Any money received, held, or paid on account of any person; and
• Money invested in a trust account or other interest-bearing account referred to in Section 86, and any interest on money so invested which is paid over or credited to it.

Additionally, Section 87 of the LPA states that the LPC, the Board, or its nominee may inspect the accounting records of a law firm.  This is done at their cost, however, should they find that the provisions of the LPA have not been met, they will write up the accounting records of the law firm.  They will then recover the cost of the inspection and the writing up of the accounting records from the practice.

This is why it is important to ensure that you comply with all of the financial requirements set out by the LPA.  Therefore, when it comes to how to start your own law firm it is important to appoint a good auditor.  A good auditor will ensure that your law firm complies with all of the above trust account requirements.  New law firms must appoint an auditor who is registered in terms of the Auditing Profession Act, 26 of 2005, and who practices as an auditor.

Once you have completed all the practical preparation steps above, the foundation of your new law firm has been laid down and you are ready to move to the next step.

2. Statutory requirements

In terms of the LPA, if you want to operate a law practice for your own account you must:

1. Be admitted as an attorney by the High Court;
2. Be enrolled to practice by the LPC;
3. Operate a trust account;
4. Be in possession of a Fidelity Fund certificate;
5. Keep the required accounting records; and
6. Have completed a Legal Practice Management Course (LPMC), approved by the LPC. 

2.1 Fidelity Fund Certificate

This is required in terms of Section 84(2) and (3) of the LPA which states that no legal practitioner or person employed/supervised by that legal practitioner can receive or hold funds/property without a Fidelity Fund Certificate (FFC).  This provision applies to deposits taken on account of fees or disbursements concerning legal services to be rendered.  Receiving and holding funds or property is something legal practitioners are often required to do, therefore it is vital to obtain an FFC.

In order to obtain an FFC in terms of the LPA and its Rules, legal practitioners must satisfy certain requirements.  These requirements set out by the Legal Practitioners Fidelity Fund website, are as follows:

• Proof of completion of an LPC-approved LPMC course, subject to the provisions of Rule 27.1 of the rules which allows you to obtain your first FFC prior to completing the LPMC.  Note that you will need to complete the LPMC within one year of the date of issue of your first FFC.
• The annual contribution of R345.00 (incl. VAT), as stated by Section 54(b) of the LPA and Rule 3.1 of the Rules, is payable by applicants to the Council for the issuing of the certificate.
• The completed application, which also includes the Attorney's Insurance Indemnity Fund risk questionnaire and details of your auditor.
• Timely submission of the trust account audit report/s, of all practices in which you are either sole practitioner/partner/director, approved by the Council.

The completed paperwork must be submitted with a once-off Fidelity Fund contribution of R1,000.00.  This amount is subject to change and is best confirmed with the Legal Practitioners Fidelity Fund or the LPC.  You can apply for your FFC through the Fidelity Fund Certificate application portal here.

2.2 Complete a legal practice management course

This step forms part of the legal requirements for operating your own law firm and is covered in Section 85(1)(b) of the LPA, which states that every legal practitioner, practising for themselves either alone or in partnership for the first time, must complete a legal practice management course.  This course must be approved by the LPC and must be completed within one year from the date that your first FFC is issued to you. 

These legal practice management courses are often referred to as practice management training (PMT).  They are designed to equip legal practitioners with the necessary skills to efficiently manage their legal practice.  These courses cover topics relating to marketing, management, finance, technology, and strategic business management. These PMT courses will usually have attendance and assessment requirements, like assignments and quizzes to complete.

These PMT courses are a legal requirement for starting a law firm.  However, beyond that, they will provide you with indispensable skills for running your law firm which will help to ensure that you and your law firm are successful.

3. Legal Practice Council step

Once you have completed all the above steps, the last step is to submit certain information to the LPC for approval.  This includes the following:

• Certified ID copies of the legal practitioner(s) and candidate attorneys within the proposed new law firm.
• The proposed name of the law firm, with business cards and the letterhead.  The letterhead must clearly set out the details of all practising legal practitioners within the firm.
• The address of the law firm and where it will operate from.
• The law firm’s fax number and postal address.

All this information is given so that the LPC can ensure the new law firm complies with the standards set out in the LPA and its Rules.  This information is submitted with the completed application to the LPC.

4. Financial implications

The process of opening your own law firm is not a costly exercise.  However, below is a list of basic expenses that you will need to plan for:

1. Registration of your company with CIPC;
2. Activation of your business account at your elected bank;
3. Payment of the LPC’s annual fees;
4. Registering a post box;
5. Practice Management Training course; and
6. Purchasing basic stationery, a printer and a computer.

These are the basic steps on how to start your own law firm in South Africa as required by the LPC in terms of the LPA and its Rules.  However, it is always a good idea to build relationships with colleagues who have already gone through the process of opening their own law firm in order to share information, soundboard, or even to get some inspiration along the journey.