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The Real Cost of Setting Up a Law Firm: Is Going Alone the Right Move?
Setting up your own law firm can be an attractive proposition. You control your practice, build your own brand and decide how you want to work. But independence comes with a commercial reality that is easy to underestimate: running a law firm involves considerably more than advising clients and generating fees.
From regulatory authorisation and professional indemnity insurance to technology, compliance and financial administration, establishing a firm requires investment, infrastructure and ongoing management. It also brings responsibility for the systems, controls and decisions that keep the business operating effectively.
For experienced lawyers considering their next move, the question is not simply whether you can set up your own firm. It is whether building and running the entire business is the best use of your time, expertise and capital.
Regulatory and compliance costs
A new law firm must meet the Solicitors Regulation Authority’s (SRA) authorisation and regulatory requirements. Depending on its structure and activities, costs may include application and authorisation fees, annual regulatory fees, practising certificate costs and any relevant professional memberships or accreditations.
Professional indemnity insurance (PII) is another significant consideration. Premiums depend on factors such as practice areas, projected turnover, claims history and the firm’s risk profile. New firms may also face minimum premiums, detailed underwriting requirements and additional costs associated with financing their cover.
Compliance is an ongoing operational commitment, not a one-off expense. Firms need appropriate policies, procedures and controls covering areas such as anti-money laundering, sanctions, data protection, complaints handling and regulatory reporting. Depending on the business, they may also need external compliance advice, training, file reviews and audit support. Any applicable Economic Crime Levy obligations must also be assessed.
These requirements are essential to operating a compliant practice. The commercial consideration is how much they cost to establish, maintain and manage, and how much of your time they consume.
Technology and operational infrastructure
A modern law firm needs reliable systems to manage matters, protect confidential information and deliver a professional client experience.
That may include case management software, secure document storage, email, telephony, electronic signatures, cybersecurity, legal research tools and business continuity arrangements. AI-enabled tools can improve efficiency, but they also require appropriate safeguards around confidentiality, accuracy, data processing and professional supervision.
Then there is the financial administration. Firms holding client money must have appropriate accounting systems, banking arrangements, reconciliations and the resources needed to meet the SRA Accounts Rules. Depending on the firm’s arrangements, this may require a dedicated cashier, external accounting support and an accountant’s report.
Premises create another set of costs. Rent, service charges, utilities, equipment and meeting facilities can quickly add up. A remote-first practice may reduce these commitments, but still needs secure devices, appropriate working arrangements and the facilities required to handle confidential client work.
Individually, these costs may appear manageable. Together, they represent a substantial investment in running the business before considering the time spent managing it.
For an experienced lawyer, that time has an opportunity cost. Every hour spent sourcing software, managing suppliers or overseeing administrative processes is an hour that could otherwise be spent advising clients, developing relationships or generating fees.
The responsibility behind the business
Running a law firm means taking responsibility for more than the quality of the legal advice it delivers.
The firm must have appropriate governance, financial controls, risk management and compliance arrangements. Its compliance officers, the Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administration (COFA), where applicable, have defined responsibilities under the regulatory framework. The precise obligations depend on the firm’s structure and the roles individuals hold.
For owner-managed practices, these responsibilities can sit alongside fee-earning, business development and people management. That can create competing demands, particularly when the firm is small and resources are limited.
Founders must also consider what happens if circumstances change. Illness, retirement, incapacity or an unexpected closure can raise complex questions about client matters, client money, staff, insurance and the orderly transfer of work.
Planning for succession and business continuity from the outset is therefore important. These are not simply administrative details; they are part of building a sustainable professional practice.
Regulatory and policy developments should also be monitored. Changes to the treatment of client money or client accounts, for example, could affect banking, accounting, safeguarding and insurance arrangements. Any potential changes should be assessed against the rules and proposals in force at the relevant time.
An alternative: the new-model law firm
Setting up independently is not the only way to gain greater control over your legal practice.
A new-model law firm such as Nexa offers a different approach: combining the infrastructure and regulatory framework of an established law firm with greater autonomy over how you build and develop your practice.
Rather than establishing every operational function yourself, you may be able to access established systems and support covering areas such as compliance, professional indemnity insurance, technology, financial administration and day-to-day operations.
The precise arrangements depend on the platform and its terms. However, the underlying principle is straightforward: you can pursue the commercial opportunities of building your own practice without necessarily having to build the entire law firm around it.
For experienced lawyers, that can mean devoting more attention to clients, relationships and business development, rather than managing every aspect of the underlying infrastructure.
It can also change the financial equation. Instead of funding and maintaining all the systems required to operate a separate firm, you pay for access to an established platform under an agreed commercial arrangement.
At Nexa, the proposition is built around professional independence, commercial opportunity and the infrastructure to support a successful practice.
Comparing the options
Going independent and joining a new-model firm each have advantages. The right choice depends on your ambitions, existing client base, financial position and appetite for responsibility.
Before deciding, consider:
Commercial terms: What are the set-up costs, ongoing expenses, fee-sharing arrangements and payment terms?
Insurance: What cover is provided, what are its limits and exclusions, and who is responsible for any excess?
Regulatory responsibility: Which obligations sit with the firm, the platform and the individual solicitor?
Client relationships: What control do you retain over your relationships, client service and professional reputation?
Brand and business development: Can you develop your own brand, use the platform’s identity or combine the two?
Operational support: What technology, compliance, financial administration and practical assistance are included?
Exit and succession: What happens to your practice, client matters and financial arrangements if you leave or retire?
A meaningful comparison should consider the total cost of each model, including your time and management responsibilities, rather than looking at individual fees in isolation.
Build your practice. Choose your model.
For some lawyers, establishing a separate firm will be the right decision. They may want complete control over the business, the ability to employ a team or the opportunity to build an independent firm for the long term.
For others, the greater opportunity lies in building a successful practice without taking on every responsibility associated with running a law firm.
The important distinction is between being independent in how you practise law and being responsible for every aspect of running the business. Those two things do not have to be inseparable.
For experienced lawyers with established expertise, valuable client relationships and ambitions for the next stage of their career, a new-model platform may offer a compelling alternative.
At Nexa, the aim is to provide the standards, infrastructure and professional framework of an established law firm, with the ownership to build your own practice.
The question is not simply whether you can set up your own law firm. It is whether you need to, and whether there is a better way.
Are you ready to learn more, download our brochure.