How should you structure your law firm? With the information in this article, you’ll be able to make the right choices.
In 2017, BDO Australia released a report on law firm structures. In it, they quoted a law firm business leader who said:
“Ten years ago, law firm managing partners would have said that law firms would largely stay the same. That’s completely changed.”
That leader was right. While the general structures behind law firms haven’t changed much, the tools that you use have. New technologies, such as automation, influence how you structure your firm. So too do changing client demands.
The business models within law firms are now evolving to meet the digital age.
That’s why it’s more important than ever to closely consider your practice structure before you form it. Such influencing factors may cause you to make a different decision than you would ten years ago.
In this article, we examine the various forms of law firm structure that are open to you. We’ll also explain what you need to do to register your new firm.
The Different Law Firm Structures
The majority of lawyers work within private practice.
Anybody who wishes to work in this sector must pay close attention to their business structure. There are rules to follow for each that you need to understand.
In NSW, there are five potential structures for you to choose from.
Structure #1 – Law Firm
As defined under the Legal Profession Uniform Law (NSW) (Uniform Law) act, a law firm is one of the following:
A partnership between at least one lawyer licensed to practice in Australia and at least one foreign lawyer.
A partnership between multiple Australian lawyers.
It’s the simplest structure, which may be why it’s one of the most common. A sole practitioner may also structure their business in this way.
In both cases, the new firm must provide The Law Society with notice that they intend to offer legal services.
Structure #2 – Chambers Practices
This is an interesting structure as it often mirrors the law firm structure.
A Chambers Practice is still a group of professionals who operate either a small or solo law practice. In most cases, these professionals are lawyers. However, they may come from other sectors.
The big difference is that the Uniform Law does not consider a Chambers Practice a law practice.
Each member pays a license fee, which gives them access to their own room within the Chambers Practice. They will also share some common facilities with each member. However, this is not a partnership in the same sense as a law firm.
Structure #3 – Incorporated Legal Practices (ILP)
This structure is more akin to larger corporate structures. This means there are a number of conditions that you must meet to form an ILP. These include the following:
The business must act as a company in accordance with the Corporations Act. Alternatively, it must receive approval to act as a corporation by the Council. This means complying with section 114 of the Uniform Rules.
An ILP must provide notice of its intention to perform legal services in accordance with section 104 of the Uniform Rules.
These services extend beyond the following:
In-house services that pertain to the ILP or any related entities.
Services that do not require the aid of an Australian lawyer.
There is nothing in the Uniform Rules that prevents the ILP from forming.
Essentially, this structure allows a corporation to engage in legal practice. However, this practice must extend beyond in-house services for the corporation itself.
The ILP must inform The Law Society of its intention to practice at least 14 days before it starts doing so. It must also provide notice within 14 days of ceasing to practice.
Structure #4 – Unincorporated Legal Practices (ULP)
A ULP is very similar to an ILP, barring the incorporated status.
It must meet the same criteria in terms of extending beyond in-house services. It must also follow the same rules in terms of confirming its intentions to start or stop practicing.
Section 6 of the Uniform Law defines the criteria that a ULP must meet beyond this. But again, the main difference is the incorporation status of the group or partners.
Status #5 – Community Legal Service
As the name implies, this structure is best suited to those who’ll provide law services related to the community.
To apply this structure, your practice must either provide services directly to the community or operate a centre for it.
It must also work on a non-profit basis.
Generally speaking, such practices provide services to those who have some sort of disadvantage. For example, a Community Legal Service may provide legal advice to somebody who otherwise couldn’t afford it.
Alternatively, this structure relates to firms that serve the public interest in their work.
Law Firm Registration
The above covers some of the things you will have to do to register your law firm.
However, individuals who wish to practice must also register their intentions. On the federal level, your name must be on the Register of Practitioners. The High Court of Australia website provides the information needed to make this application.
Beyond this, each state maintains its own Register of Practitioners. Your name must be on the state’s list before you can practice law in that state.
Generally speaking, this register will confirm if you’re a barrister or some other form of practitioner. This means it defines what services you’re able to provide in the state.
On a more basic level, anyone applying to be a practitioner must complete an appropriate law degree at an Australian University.
Selecting the Right Structure
You face a difficult choice between these five structures.
Beyond that, advancements in technology and business practices may affect your decisions.
Your choice will also depend on the type of services you hope to provide and to whom you’ll provide them.
This is where Bottrell Business Consultants can help. We can work with you to figure out which of these structures works best for your intended practice.
For a free consultation, call our team on 02 49 336 888 today.