A law firm is usually a partnership between lawyers who have come together to offer their expertise to clients under one name. These joint owners share the profits of the company as well as the risks. The primary goal of law firms is to advise clients on legal matters and represent them in court. Large law firms usually have separate litigation and transactional departments. The transactional department advises clients and handles necessary legal work and the litigation department represents clients in court.
Many associates can work in a law firm for a short or long period and after years become partners and have rights to the management of the company. The legal role that someone may have in a law firm is partner, associate, ‘of counsel’ attorney, contract attorney, summer associate, paralegal, legal assistant, legal secretary, or receptionist.
TYPES OF LAW FIRMS
- Sole Proprietorship: In this type, a single lawyer is solely responsible for the profits and losses of the company.
- General Partnership: When two or more lawyers share profits and liabilities, they are in a general partnership.
- Professional Corporation: In this kind of law firm, stocks are provided to the lawyers in the same way as business corporations.
- Limited Liability Company: The law partners here, are not directly liable to third-party creditors.
- Limited Liability Partnership: In this type, the shareholders are not liable for any act of negligence of any other owner.
PRACTICE AREAS
Law firms deal with a wide variety of problems that may not be restricted to a specific area of law. Smaller firms tend to specialize in particular fields of law as labor law, tax law, criminal defense, and personal injury, while larger ones may be composed of many specialized practice groups. If a legal professional wants to remain in the competition he has to familiarize himself with various growing fields of law. The conventional fields are not the only place to increase revenue. A law firm earns more clients if it specializes in new fields and establishes its credentials. Some areas of law which are developing appear below:
*Mergers and Acquisitions: This area is becoming more and more significant for law firms as it aims to increase profits, clients and reach the top of the competition.
*Intellectual Property Law: An Intellectual Property Company can earn enormous revenue as it includes trademarks, patents, and copyrights that protect authors who produce novel creations.
*Arbitration: This field of law gives an alternate dispute resolution to contending parties and this way of finding a speedy solution becomes more and more popular.
*Technology Law: A law firm that specializes in this field will have more profits as it can support a global population that wants to solve problems that are related to the development of technology.
*Media & Entertainment Law: This law domain is growing rapidly as it involves broadcasting rules, advertising, and cyber laws.
EXPENSES OF LAW FIRMS
Being a part of a law firm brings a lot of profitability, although, costs are an inevitable part of legal practice. When a new law firm is been created it requires professional expenses such as licensing and continuing legal education. Legal services require various expenditures for work done on behalf of clients. Some of these costs are paid by the clients while others from the company. These are necessary aspects of legal service and may include court filing fees, witness fees, laboratory fees, and deposition expenses. Some other expenses of law firms involve:
| Payroll | Library/Books/Subscriptions |
| Rent/Mortgage | Marketing materials |
| Utilities | Equipment/Maintenance |
| Human Resources | Service contracts |
| Office supplies | Printing |
Furthermore, law firms have tax responsibilities. The company’s taxes depend on many factors including the entity type, the number of owners, the financing, and the location of the practice. The taxes vary because of the different ways in which law firms hire employees, how they pay their partners and how they save cash. Law companies have unique tax filing requirements that have to comply with, depending on the formation. Income and employment tax rates have risen in recent years and they can prove tricky for new law partners especially when taxable income varies from quarter to quarter or when the law firm has offices in multiple states. On the other side, a law firm partner can structure his ownership in ways that can lead to tax savings and be prepared to deal with financial issues.
Conclusion
In conclusion, running a law firm requires a lot of skills and especially administrative capabilities. Law professionals that dedicate time to build the firm as a business, become adopters of technology, have standard procedures and processes in place for all matters, and understand their finances are the most suitable for the creation and maintenance of a successful law firm.
