Five Legal Ethics and Regulation Considerations When Starting a New Practice

I recently started my own practice. There’s a lot to do and a lot to think about—but seeing as I practice in the area of professional responsibility, one of my foremost concerns was ensuring my new firm would comply with Law Society requirements.

From my recent experience, here are five things to think about from an ethics and professionalism perspective if you are opening your own firm or solo practice:

  1. Transferring clients: If you are leaving a firm, discuss which (if any) clients you wish to bring with you as soon as possible. Importantly, you cannot unilaterally decide that certain clients are coming with you—and your firm can’t unilaterally decide that certain clients are staying with them. The client has the choice of who will represent them going forward.

Rule 3.7-7A[1] provides that both the lawyer and the firm must “ensure that affected clients are given reasonable notice that the lawyer is departing and are advised of their options for retaining counsel”, and “take reasonable steps to obtain the instructions of each affected client as to whom they will retain to act” in their current matters.

How does this work as a practical matter? Sit down with the principal or managing partner of your current firm and review the list of clients you wish to bring with you. Ideally, you can cooperate to prepare a joint letter or email to those clients that informs them that you are leaving to start a new practice, and that they have three choices for their representation going forward: (i) you represent them in your new practice; (ii) the firm continues to represent them, with a new lawyer assuming responsibility for the file; or (iii) they could retain someone else entirely.

The Commentary to rule 3.7-7A is clear: “The client’s interests are paramount. Clients must be free to decide whom to retain as counsel without undue influence or pressure by the lawyer or the firm.”

  1. Updating your information: There are a few regulatory matters that cannot wait. Inform both the Law Society and your professional liability insurer (g. LawPRO) of your new practice; update your contact information; and arrange to assume responsibility for paying your annual fees and insurance premiums (if your previous firm was paying them and you’re leaving any time other than year-end, you may have to reimburse them on a pro-rated basis).

These steps do not take long, but the consequences for failing to take them can be serious (believe it or not, I have seen a law society seek to discipline a lawyer for failing to update their contact info—and you certainly don’t want to lose your errors and omissions coverage!).

  1. Trust accounting: This is an aspect of running a practice that seems to scare many lawyers. If you are one of them, start off by asking yourself whether you actually need a trust account. I know a few sole practitioners whose practice are such that they would be using a trust account strictly to get a deposit on fees, and who decided the low risk (with their particular clients) that their fees would not be paid when invoiced was not worth the administrative hassle of meeting all the regulatory requirements associated with trust accounts. Of course, there are areas of practice where a trust account is necessary for other purposes, and depending on your client base you may not be so comfortable without having a deposit in trust from which to pay your bills. But as a starting point, consider whether a trust account is necessary.

This column will not be detailing all trust accounting requirements—you should carefully review your law society’s by-laws, rules, and guidelines as you set this up. By way of example only, in Ontario, lawyers are required to report to the Law Society that they have opened a trust account, and to direct their financial institution to remit any interest earned on the account to the Law Foundation of Ontario.

From a practical perspective, one thing many lawyers learn the hard way is that all banking fees associated with your trust account should be paid through your general account. You may need to specifically instruct your bank to do this (and stay on top of your bank statements to make sure they are in fact doing so). It is irritating to have to spend time reimbursing your trust account (and appropriately documenting what happened) when a $2 bank statement or cheque-viewing fee is taken out of money in trust.

  1. Your new workspace: These days, you do not necessarily need to enter into a long-term commercial lease for your office space. You might start out working from home; have a “virtual” office whereby you use the mailing address, reception services, and boardrooms in a shared space; sublet a vacant office or two from another firm; or join a law chambers. Regardless of your choice, be sure to consider how you will address both confidentiality and conflicts of interest.

If you are sharing space with other lawyers, be clear in your external communications that your practice is independent of your co-tenants (to minimize the risk of conflict of interest allegations). You should also be mindful of rule 7.6-1.1, which provides that lawyers shall not occupy office space with a person whose licence has been suspended—you could be committing professional misconduct if an office-mate is under administrative suspension, for example, without your knowledge (consider an office-wide policy that lawyer tenants need to inform others if they face suspension).

In any arrangement other than a private office suite, you need to be concerned about confidentiality. Make sure your office is sufficiently soundproof that the person next door won’t overhear your client calls. If using third-party reception services, inform them of their confidentiality obligations on your behalf (and confirm this in writing). Be careful not to leave confidential documents lying around for others in the shared space to see, and lock your computer whenever not in use so your clients’ information is not on screen if someone comes in to borrow a book (Windows users: the keyboard shortcut to lock your computer is ⊞ + L )

  1. Technology: Software plays a big role in any law practice, and you have to be careful to use it in a way that complies with your professional obligations. Find practice management software that enables you to run conflict checks, accurately track your time, bill and receive payments in accordance with conduct rules, and keep all financial and other records required by the Law Society (I use Clio with Quickbooks for my accounting, but there are various options out there).

Incidentally—and I can’t emphasize this enough—find a good bookkeeper who has experience working with lawyers and is familiar with your law society’s requirements and your chosen practice management software. Your books and records need to be in good shape; sooner or later the Law Society will look at them.

Finally, you are now responsible for your clients’ data security. Consider how you will store and manage your client files, with confidentiality at top of mind. Do not use the same password for everything or write your passwords on a post-it on your desk (if you can only remember one password, use an inexpensive password manager). Be sure to have an effective back-up system in place, in case disaster (or human error) strikes.

This is only a starting point, of course—many items on your new firm to-do list have important ethics and professionalism implications, such as drafting a useful engagement letter; preparing firm policies and procedures; and firm marketing. I may elaborate on these in future columns, if there is any interest. An upcoming column will also address contingency planning, which is especially important for sole practitioners and small firms.

As always, I’m happy to hear your thoughts and experiences with these issues in the comments below.


[1] Although I have linked to the Ontario version, they are the same in the Federation of Law Societies of Canada’s Model Code of Professional Conduct and in most jurisdictions across the country.


  1. Very good points, Brook. Another important point to note under the Law Society of Alberta Code of Conduct regarding space-sharing arrangements is the definition of “law firm” in Rule 3.3-1[7]. Law firm in defined to include “lawyers practising law from the same premises but otherwise practising law independently of one another.” This is an important consideration in matters relating to confidentiality and conflict of interest. Thus, lawyers practising independently in the same premises may fall foul of the conflict rule by the mere fact of their location in the same office premises.

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