- Step 1: Start with the bar where you'll practice
- Step 2: Choose the work and the clients
Starting a law firm means running a legal practice and a small business at the same time, and the order of the steps matters. Be admitted where you'll practice, decide which work you'll take, set up the business and its bank accounts, have a client trust account ready before any client pays in advance, and then start billing for the work you've done. This page covers that order. It isn't legal or ethics advice: your state bar and a lawyer who advises law firms can answer questions about your own practice.
Step 1: Start with the bar where you'll practice
Admission and licensing questions go to the bar of the state where you plan to practice. In California, for example, the State Bar's admissions page (page checked October 31, 2026) says: "Working as an administrative arm of the California Supreme Court, the State Bar oversees all activities required for admitting attorneys to the practice of law in the nation’s most populous state."
Check your state bar's rules on registration, continuing education and any notice it needs when you open your own office.
Step 2: Choose the work and the clients
Pick the practice area you know and the clients who need it: who they are, how they find a lawyer today, and how they expect to pay. Decide your fee model for each kind of matter, such as hourly, a flat fee for a defined task, or a monthly retainer. Your state's rules cover how fees are set and put in writing, so check them before you draft your engagement letter.
Step 3: Set up the business
Choose a business structure, a firm name and an office arrangement, then register the business and open its operating account. Ask your state bar which business forms and firm names it allows for a law practice. For the general business steps, read our guides to choosing a business structure and opening a business bank account.
Step 4: Open a client trust account before you take an advance payment
In the US, the American Bar Association's Model Rule 1.15 (page checked October 31, 2026) says: "A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property." On money paid upfront, it says: "A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred."
The ABA's rules are model rules, so check your own state's version.
In California, the State Bar's client trust account guidelines (page checked October 31, 2026) say: "California law requires attorneys who handle client funds or funds entrusted by others to hold them in one or more interest-bearing bank accounts labeled as a “trust account,” or words of similar import." On who is responsible, they say: "Solo practitioners are the “designated licensee.”" They add: "The designated licensee must be a signatory on the account and is responsible for performing or supervising the monthly reconciliations."
Step 5: Keep three accounts apart
Run the firm with an operating account for money the firm has earned, a trust account for client money, and your personal account. Move money from trust to operating only when the fee is earned, as the rule above describes, and keep a ledger for each client so every transfer can be traced.
Step 6: Record time and bill earned fees
Record time on the day you do the work, describe each entry in words the client will understand, and bill on a fixed day each month. On Billed's features page, the "Bill For Tracked Time" feature says: "Easily create invoices for the tracked time and get paid." Billed's invoice software page says: "Set a due date on each invoice so your client knows when to pay." It also says: "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."
Use invoices for fees you've earned. How advance payments and trust transfers are recorded is a trust accounting question for your state's rules and your accountant.
Worked example: hours needed to cover overhead
Sample figures, not any firm's actual costs:
- Monthly overhead (office, insurance, software, dues): $3,000
- Hourly rate: $250
- Hours you need to collect to cover overhead: $3,000 ÷ $250 = 12
- If you collect 80% of what you bill, hours you need to bill: 12 ÷ 0.8 = 15
Those 15 hours only cover costs. Your own pay is extra, so plan the rate and the hours together.
Step 7: Find the first clients
Tell your network what you now handle, ask lawyers in other practice areas for referrals, and ask your state or county bar about its lawyer referral service. Lawyer advertising has its own rules, so check your state's version before you publish ads or a website. Building the website has a guide of its own.
When this guide isn't for you
If you're joining an existing firm, or you'll practice outside the US, this page doesn't cover your steps and rules. This page doesn't give legal or ethics advice; ask your state bar or a lawyer who advises law firms.
Related Articles
- How to Choose a Business Structure
- How to Open a Business Bank Account
- Guide to Retainer Invoicing
- Invoicing Software for Lawyers
- How to Invoice as a Lawyer
Frequently Asked Questions
Do I need a trust account before my first client pays?
If a client pays fees in advance, ABA Model Rule 1.15 (US, page checked October 31, 2026) says: "A lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses incurred." Check your own state's version of the rule.
Who looks after the trust account at a California firm?
The State Bar of California (page checked October 31, 2026) says: "Solo practitioners are the “designated licensee.”" It adds: "Firms with two or more licensees must determine one “designated licensee” for each trust account."
Where can a California lawyer open an IOLTA?
The State Bar of California (page checked October 31, 2026) says: "Under Business and Professions Code section 6212, attorneys may only open an IOLTA at an IOLTA-eligible financial institution."
How many hours do I need to bill to cover my costs?
Divide your monthly overhead by your hourly rate, then divide by the share of billed time you expect to collect. With $3,000 of overhead, a $250 rate and 80% collected, that's 15 billed hours before you pay yourself.