Law firms are a costly business in the legal industry. Opening up a law firm and maintaining its services is challenging and involves quite a lot of money. These costs depend on the law firm’s size, location, and practice area.
One of the apparent costs is the Bar Association fees. There are bar associations at the local, regional and national levels. These associations issue a license to the lawyers to practice within their jurisdiction, investigate malpractice and protect the rights of lawyers. Attorneys have to pay a particular amount annually to bar associations as membership fees. For instance, if a lawyer fails to pay the dues, the bar association is entitled to revoke the license of the respective lawyer.
However, this article will discuss a law firm’s five most common and essential expenses aside from the ABA costs.
Salaries of employees in an assigned location
Every law firm has to ensure that all the lawyers have paid their dues to their employees on time, including office space where they will work. Law firms employ people with different skill sets to perform jobs, typically from 8 am to 5 pm on business days.
Generally, law firms have an HR department, a finance department, and numerous other departments to ensure the efficiency of their business. They have to pay salaries to those they employ in these departments.
In addition to paying their employees in these departments, law firms are responsible for paying the rent or mortgage of the location where their employees work.
Hardware related costs
Why? Because law firms have to maintain a proper working space fully equipped with hardware, so everyone works efficiently.
Essential hardware includes laptops or desktop computers, printers, consumables (ink, paper), fax machines, landline phones, backup cloud drive, etc.
The cost of hardware depends on the area of practice of a law firm. Generally, law firms have to invest in hardware at the initial level of setting up a law firm. Additionally, they must invest in hardware maintenance or buy new products with updated technology.
Furthermore, the cost of ink, paper, and other consumables is part of the law firm’s day-to-day logistics, including maintaining a working space and library. Ultimately, they have to pay all the essential bills for the working space for them and their employees.
Law firms require access to numerous software for proper functioning. For example, all law firms have to carry out legal research. Legal sites facilitate lawyers in legal research by providing a database of precedents of higher courts of a particular jurisdiction, relevant legislative instruments, and other relevant content required by lawyers.
Legal firms have to pay subscription fees to these legal research software. Similarly, law firms have to pay for other software, such as accounting software, law practice management software, anti-virus, etc., to carry out their businesses.
The larger the law firm, the more significant these costs get.
Law is very competitive, and thousands of law firms offer similar services to clients.
In order to attract relevant clients, law firms have to invest in the marketing sector. To market their services, law firms generally maintain websites to provide information about their services. For example, hiring a marketing firm to engage with the latest SEO practices so the law firm stays on top.
Similarly, law firms advertise their services on different social media pages, websites, and relevant sites, and these marketing services are not cheap.
Law firms often pay for various services and products on behalf of the client. These case expenses include; court filing fees, witness fees, laboratory fees, deposition, medical record expenses, etc.
Law firms pay these fees and costs upfront and bill the client for reimbursement.
These costs can also go under a contingency agreement, where the law firm is paid after the case settles and pays out.
It is essential to be realistic about the costs of owning a law firm by preparing a budget and maintaining an account of the day-to-day logistics and annual expenses. Keeping a clear record of the costs will be very helpful in the long run because it will allow you to improve your business efficiency and profit.