Image courtesy of H.Kopp-Delaney
With many large firms collectively tightening their belts over the last three years, it is no wonder that many new lawyers fresh out of law school are looking to open a solo practice. Even many experienced lawyers are jumping the law firm ship to venture out on their own.
- Keep more of your own money
If you are a partner or are planning to be one in the next few years, good luck. While many firms have spectacular office space downtown in modern high rises, that real estate comes with a steep monthly cost. As an individual with a financial interest in the firm, you share the burden of insurance, rent, and utilities with your partners. In some firms, these costs have become significant. While partnership does have its perks, opening a solo practice can mean substantially more money in your pocket, and your retirement plan (see #4). Solo practice costs can be much lower and you need not worry about unfunded pension obligations and other costs associated with bloated overhead.
- Be Your Own Boss
One of the most rewarding elements of opening your own solo practice is that you can be your own boss. You will have complete control over your income and will be challenged every day to stay cashflow positive. The upside is that you have no salary cap and that you are solely responsible for your success. Your income success is not in the hands of some arbitrary manager.
- Flexible Schedule
Another great perk of running your own show is that your schedule is super flexible. You’ll have much more family time and be able to work around competing obligations. You set your hours and the schedule of your workday, and once you have a routine, it should be easy to stick to.
- Increase your 401 (k) contribution
We have Congress to thank for this sole practitioner bonus. As long as your LLC has one member, you can contribute $17,000 on the employee side, and up to 25% of net income on the employer side, for a combined total of up to $50,000 a year to your individual 401 (k) pre-tax. If you are over 50 years old, you can contribute an additional $5,500 under the “catch up” provision.
- Refine your practice area
Finally, being a sole practitioner means you can focus your practice on areas of law you really enjoy. Further developing your mastery within specific areas of law will make you a stronger and more attractive option in the marketplace. Use this to differentiate yourself in your local market.