I have spoken with a law school classmate of mine recently about whether he might be interested in starting a law firm in Minneapolis, MN with me. The basis for the discussion ultimately resulted in a decision that, when starting a law firm, it is probably best to not have a partnership at first, but, rather, an office sharing arrangement.
My friend is currently practicing law in a town within 100 miles or so where am going to start a law firm in Minneapolis. There is an obvious logistical problem for him in terms of leaving a practice and starting over in an area where he can’t bring any clients with him from his current law firm. Furthermore, he has the risk of leaving a practice and going out on his own. In other words, starting a law firm with me is not such a good gig for him. But, I can tell he is interested. So, we began discussing what it would take to start a firm together and make it work.
At the beginning, unless both attorneys have a self-sustaining law practice or a fairly stable “book of business”, it would be tough to partner-up right away and start a firm. For instance, in my case, my friend has clients in Minnesota already and I do not. Therefore, who do you think will have more work to do and more money to make for the firm right away? That’s right: my friend. This may be a good deal for me, but it certainly wouldn’t be for him.
What is the answer to this problem? The office-sharing arrangement. This arrangement would mean that my friend and I would not form a partnership, but, instead, invest in an office together and set up different law firms within the same building. We each would have our own separate corporate forms (LLC, Corp., sole proprietorship, etc), but we would share office space for purposes of helping with overhead. In fact, this is the arrangement that my old firm had with another well-established firm in town.
Office sharing allows attorneys and their new law firms to keep law firm overhead much lower. It can be a great thing. It allows attorneys to share rent costs, secretary costs, utilities costs, and other general costs. Think about it: it would be wonderful to only pay 1/2 of the $1000 a month lease on a building or 1/2 of the receptionist’s salary. As I said, my old firm had this arrangement. I can also tell you that my old firm brought in several million dollars a year in revenue. To me, that is pretty good money, and yet we were still in an office-sharing arrangement. Of course, my old firm owned the building and was making money in rent from the other firm, but that is a pretty good arrangement as well.
The office-sharing arrangement would also give both of us the benefit of having another attorney around to bounce questions against. This can be huge for battling isolation. I can’t tell you how often I asked questions of other lawyers in my old office just to get their thoughts. To be honest, that is one of the things I miss most as I practice law on my own. The ability to have another attorney listen to your thoughts on strategy or other case issues can be extremely helpful.
Now, there are also ethical considerations that come into play when sharing an office with another lawyer. My friend and I would need to make sure that we did not hold out to the public that we were somehow only one law firm. We would want our names to be different and have it clearly established that, although we are in the same building, we are not the same law firm. We would need to use our own malpractice insurance, letterhead, business cards, etc.
At the end of our discussion, we determined that an office sharing arrangement would probably be in our best interest. If we later felt more secure with our practices, it might turn out that we would want to develop a partnership. To be honest with you, I haven’t thought enough about why we might want to partner-up. Perhaps hiring an associate and sharing salary costs? I’ll put that one on the back burner for the moment.
Starting a law firm means making correct initial decisions about how your firm is going to survive and grow. An office-sharing arrangement can be a great way to save money at the beginning on law firm overhead. I’m always thinking about money and how to save it. Sharing an office is certainly a great way to do that. I’ll keep you posted on what my friend and I ultimately decide. Even if my friend doesn’t leave his firm, the same benefits of office sharing can be applied to any attorney in town.