Guide to starting a practice

In association with 2 | Guide to starting a practice

Contents

1. Business planning ����������������5 4. Risk management ��������������12 • Business plan • Business continuity plan • Structure • Fraud and cybersecurity • Marketing, promotion and • Professional risk attracting business • Communication with clients • Practice and file management 5. Insurance and • Practice management course client protection ��������������������13 • Policy templates • The Master Policy for professional indemnity insurance • Additional cover 2. Finance and cashflow �����������8 • Client Protection Fund • Cashflow • Banking arrangements • PAYE/Real Time Information 6. Legal Aid ����������������������������14 (RTI) Registration • VAT • Making Tax Digital (MTD) 7. Practice unit options • Corporation tax and income tax and information ���������������������15 • Account management software

Checklist and contacts �����������19 3. Compliance ������������������������10 • Accounts rules • Anti-money laundering (AML) • Data protection and GDPR • Incidental financial business • Officers of the firm

You can read the relevant rules and guidance on our website. Where possible, this guide also provides details of where you can find more information.

 Rule Law Society of Scotland practice rule

 Guidance Law Society of Scotland practice guidance

 Info More information Guide to starting a practice | 3

Guide to starting a practice

Congratulations on taking the first step to setting up your own practice. While establishing your own firm can bring many rewards, it pays to spend time at the outset planning how your business will operate. You will want to ensure that your new practice complies will all relevant legislation, rules and regulations.

This guide is designed to help you start out on the right path by getting you to consider some of the main requirements and relevant points for starting and operating a legal practice in Scotland.

As you think about your new venture, one of the first considerations is to research the market you are entering and consider what will set your new firm apart from competitors.

The type of practice you form will affect how your business operates and develops. Are you planning to operate as a sole practitioner, a traditional partnership, a limited liability partnership or a limited company? It would be advisable to speak to an accountant and a corporate solicitor before making your final decision.

 If you want to talk to us before setting up, please contact our professional practice team on 0131 226 8896.

Eligibility

Before setting up a new practice, you need to know if you are eligible to do so. Under the Law Society’s rules, all owners of the business must meet the requirements to be a manager.

Scottish solicitors need to have: • A current unrestricted practising certificate • Held an unrestricted practising certificate while employed in the capacity of a Scottish solicitor for at least three years • Worked in the capacity of a Scottish solicitor for the 12 months immediately preceding your practice commencing.

The last two conditions may not apply if you are joining an existing practice unit.

If you do not meet one of these requirements but you feel your circumstances are in some way exceptional, you can seek a waiver. Please contact the professional practice team for more information.  Rule See Rule D2 The Law Society’s rules currently do not permit participation by unqualified individuals. 4 | Guide to starting a practice Guide to starting a practice | 5

1. Business planning

Business Plan govern your commercial relationship Customer service – Make sure your with each other. You should also colleagues not only understand your A business plan will help to establish understand your common law and marketing activities, but also appreciate how your firm will operate and what statutory duties to one and other as the role they can play. Whether it is you aim to accomplish. Banks will ask partners, members or directors. following up on leads or being polite to see a copy of this before you open See Section 7. and friendly on the phone/email, good an account. customer service is a key ingredient in attracting new business. Bullet points will highlight key ideas and make the plan easier to digest. Essential Marketing, promotion Use the Law Society brand – Using information includes: and attracting business the Law Society’s ‘Member’ logo lets • Your company details your potential clients know that you • An executive overview, including In your business planning, you will have are part of a regulated profession. The your unique selling proposition identified what services you are going to logo is available as a window sticker • Details of your business provide, your potential clients and how and electronically, and can be used management team and support much you are going to charge. How you on websites, literature, emails and – show key strengths, skills, promote your services will depend on letterheads. You should also update qualifications and management your chosen market. As with any new your ‘categories of work’ in the member experience of your partners and business, expect to pay more in the section of the website. This populates the any senior staff initial years as you establish your firm. Find A Solicitor function on the website, • The legal services you will offer, which can drive traffic to your website. your pricing structure, and the Channels – How will your clients find market for your services you? Channels include advertising Be proactive and refine your marketing • How you will attract new business/ in local newspapers, leaflets and activities as you go along. Use feedback the marketing and promotion you brochures, your office window, from your clients to point you in the will carry out website, activities on social media and right direction. • Your forecasts and budgets. networking/word of mouth. You do not have to use them all – work out where If you are leaving an existing practice to your clients are most likely to find out set up on your own, there are specific  Info about you and choose a combination rules on what is and is not permissible A business plan template can of marketing tools. in terms of approaching your existing be downloaded from the clients. Read Rule B3 for more Business Gateway website Message – Be clear about the value and information. www.bgateway.com benefits of the services you are offering, as well as listing what you do. Keep the language simple and jargon free – make  Rule and  Guidance it easy for your potential clients. See rule and guidance B3, which covers advertising, advertising Structure Brand – Whether you are promoting fees and mandates relating to your services from an office or online (or where your clients come from. If two or more are starting a practice, both), spend time getting your visual you will need to agree at the outset brand set up (logo, fonts, colour palette, what your relationship will look like, images etc). Make sure that your brand  CONTACT the ownership split and on what basis is consistently applied across your you will be remunerated. office, website, literature, letterheads, Email the Law Society’s marketing and so on. The key is to devise a brand department at [email protected] You will need to organise a partnership, identity that reflects how you want your for more details. LLP or shareholders’ agreement to clients to view your business. 6 | Guide to starting a practice

Communication Practice and Practice management with clients file management course

It is both a Law Society rule and good There are advantages, risks and If you have not previously done so (or practice to write to clients with certain challenges with whatever system you you haven’t been a manager in the information before carrying out a new choose to organise and store your preceding three years), you will need piece of work. Properly drafted, these files. It is important to understand to undertake the practice management letters of engagement play a key role the approach that is right for you. course within 12 months of starting in managing the relationship with Ultimately, you need to be clear about: your new practice. The course is usually your client. This includes minimising • Ownership hosted three times a year – typically in the risk of complaints and claims by • Storage March, June and October – though this managing the client’s expectations. • Destruction will depend on demand. • Security.

 Info Several practice management software Policy templates The Master Policy broker, Lockton, systems are available on the market, has produced an interactive guide with various options for cloud-based, Template policies are useful tools to letters of engagement with server-based, fixed cost, pay as you which can be utilised by new information you should consider go, and so on. A number of practice practice units. Below are a few including in your letters, together management providers are listed in examples that you might find useful. with some sample text. our Member Benefit Scheme. These www.locktonlaw.scot companies have been through a Law Society process to gain ‘Approved Supplier’ • Data protection policy status. However, since individual firm • Anti-money laundering policy. requirements vary, we do not endorse  Rule and  Guidance any one system. You need to ensure the Lockton See rule and guidance B4. relevant products or services meet with • Information management your needs, being careful to agree what and security policy services will be provided and what the • Clear desk and clear total cost will be. screen policy • Remote working and You could also use a combination of removable media policy system-based and paper-based storage, • Internet and communications with paper files stored in lockable and policy. fireproof cabinets.

 Guidance See the guidance – Section E, Division B: the ownership and destruction of files.

 Info See our Guide to Cloud Computing and our Member Benefits pages.

The Law Society’s CPD team offers training on risk management, cybersecurity and fraud. To be effective, training should be provided to all members of staff. GuideGuide to to starting buying a practice | 7 8 | Guide to starting a practice

2. Finance and cashflow

Cashflow results to the budgeted figures and As well as the amounts of tax and explanations for any material differences NIC deducted from the employees, Forecasts and budgets are hugely identified, allowing you to take employers are also obliged to make an important at this stage. You should corrective action promptly. employer’s national insurance payment keep your outlays lean and realistic. (contributions begin above minimum salary levels). The 12-month cashflow forecast should incorporate: Banking arrangements The net salary payments are generally • Initial investments made at a month end and the tax and • Initial funding from external sources At an early stage we recommend that NIC deducted should be paid to HMRC such as bank borrowings or grants you contact a bank to ensure you have by the 22nd of the following month. • Initial pre-trading expenditure an operational business account and such as rent deposits and a client account if you need one. This As part of the responsibilities of taking professional fees process can take a number of weeks, on employees, you must set up a • Monthly fee collections which so we recommend that you select your workplace pension scheme. Employees should be calculated on a prudent preferred bank and make early contact. are automatically enrolled in this basis allowing for the time to turn scheme, but they can choose not to join. fee income into cash Depending on the work you are carrying As part of the rules of the scheme, you • Monthly business payments out, you may also wish to consider if are required to make contributions, as including salaries, pensions additional banking facilities are required are employees. and business overheads such as credit cards, international • Monthly drawings or salary payments, overdrafts, electronic You should ensure that the additional costs for yourself banking and Worldpay card machines. employer NI and pension costs are • Payments for self-assessment incorporated into any cashflow and or corporate tax liabilities. If you are setting up client accounts, it profit projections you complete. is important that you tell your bank you You may wish to extend to a three-year will need a solicitor account, which is cashflow forecast to illustrate long-term different to a standard business account. business goals and longevity. VAT

Critical to good cashflow is to have You must register for VAT when your robust policies for: PAYE/Real Time taxable turnover exceeds the threshold • Converting work in progress into fees Information (RTI) set by HMRC. • How quickly you get those fees paid Registration – (debtor days) An accountant can advise on how • The method adopted for funding You must register for PAYE/RTI as soon to register for VAT and whether it client outlays. as you take on employees and intend to is desirable to do so, even if your make payments to staff. projected turnover in the first year Your forecast for cashflow should be won’t exceed the VAT threshold. It assessed alongside your forecasts for Registration for PAYE is generally might be advantageous depending Profit and Loss and Balance Sheet to straightforward and involves the setting on the clients you will be acting for, highlight any potential profitability or up of a PAYE online account as well as or if you are likely to incur significant funding concerns at an early stage. choosing payroll software. This allows early or pre trading expenditure. you to record employees’ details, Once you are trading, we recommend calculate pay and deductions and report If you decide not to register and you are that monthly or quarterly accounts to HMRC, which generally would be undertaking legal aid work, you should are prepared comparing actual done on a monthly basis. advise Scottish Legal Aid Board (SLAB) Guide to starting a practice | 9

so they do not pay VAT on legal aid fees. Corporation tax Accounts management If your turnover increases and you do and income tax software subsequently register for VAT, you must immediately advise SLAB so that VAT You should make provision for tax Many practice management systems can be added to the fees payable to you liabilities in your cashflow and profit provide functionality for both firm from then on. projections. The nature and timing of accounts and client accounts. payment of tax liabilities depends on However, some of the newer systems your business structure. on the market require a separate firm accounting system to integrate with Making Tax Digital (MTD) • Sole trader or partnership – the the practice management and client individual(s) concerned will be account side. Although these systems Making Tax Digital (MTD) is a Government required to make payments of may provide a flexible solution for initiative which enables you hold an tax and NIC under the individual some firms, you do need to consider HMRC digital account where you can self-assessment tax regime. These how they integrate, e.g. including check your records and manage your payments are due at the end of compliance with the Making Tax Digital filing of returns and VAT information. January and July each year and are (MTD) regime, while also ensuring they based on taxable profits which are comply with our accounts rules (which It is mandatory for the majority of VAT- calculated from your accounting differ from other jurisdictions). registered businesses above the VAT profit as adjusted for certain items. threshold. If you are VAT-registered with • Incorporated practice – corporation Spend some time with your case a turnover less than the VAT threshold, tax payments are due nine management system supplier, planning you are exempt from MTD reporting. months after your year end. These the installation and ensuring the system payments will be a % of taxable controls and setup best match your HMRC has issued a list of software business profits which are based business profile and needs. Ensure that providers that can offer MTD compatible on the firm accounting profit, also your contract covers issues relating systems. Compliant software should adjusted for certain items. to cybersecurity and that the supplier be able to record and preserve digital can articulate their cybersecurity records and send and receive VAT return Individual directors are likely to be credentials and the business continuity information to and from HMRC. Where employed by the firm and receiving a plans in the event of an outage, this capability is not available, bridging salary from it. However, as shareholders, particularly for cloud-based systems. software can be purchased to enable you may also choose to receive you to link digitally to HMRC’s systems. dividend payments which will form It’s worthwhile considering at the outset part of your individual taxable income. how your system can record/store/ We recommend that you ensure your The directors/shareholders will also delete data in line with the General accounts management software is able be required to complete personal Data Protection Regulations (GDPR) to deal with the current and ongoing self-assessment tax returns which and AML compliance, so they don’t requirements of MTD. will incorporate the salary and any have to be built in later. dividends paid by the company and which may generate further personal  Info tax liabilities. See www.gov.uk/topic/ business-tax/vat Whatever the structure, registration with HMRC for self-employment/self- See HMRC approved software assessment or corporation tax is essential suppliers www.tax.service.gov.uk/ at an early stage. We recommend you making-tax-digital-software take advice from an accountant in good time prior to commencing trade when considering business structures and the tax impact of these. 10 | Guide to starting a practice

3. Compliance

Accounts rules fraud by outsourced staff would not be covered by the Client Protection Fund.  Rule and  Guidance All practice units, regardless of whether You should also ask your suppliers about See rule and guidance B6. you will be handling clients’ money or their GDPR compliance, cybersecurity www.lawscot.org.uk/members/ not, must set up the required books, credentials and contingency planning rules-and-guidance/rules- records and cashroom procedures regime in the event of a breach. and-guidance in order to comply with the accounts rules before you start your practice. The As part of our regulatory duties, we carry rules cover client monies and interest, out financial compliance inspections with regular accounting and reconciliations, all law firms on an ongoing basis. To make We recommend that you staff training and supervision, and the sure that your new practice is on the right meet with a member of our delivery of compliance certificates. track, we will carry out an inspection with financial compliance team you within the first nine months. Please to discuss the accounts rules Our guidance gives an overview contact us if you want to know more about requirements, the books and of the rules. inspections and how best to prepare. records that need to be held and software available on the market. There are options to outsource your Our CPD team hosts regular seminars cashroom activities, depending on the and roadshows on this topic and also type of business you plan to operate. covers manual book-keeping to ensure When selecting an outsourced provider, that you remain fully updated on what consideration should be given to the is expected in advance of your first Law  CONTACT insurance cover provided. Third-party Society inspection. [email protected]

Anti-money If your firm’s activities are subject to the the topic of AML compliance and best laundering (AML) regulations, you must complete the practice. You can access up-to-date registration, which includes a requirement guidance from HM Treasury and the Law firms continue to be targeted by for basic disclosure certificates that are Law Society on our website. money launderers, so it is important less than six months old. to be aware of the threats. To ensure compliance, you should ensure Within six months of setting up  Guidance that excellent controls, policies and (when you have a better understanding Our guidance page includes procedures are in place from the outset. of your firm and your clients), we a draft AML policy, client risk will send you a questionnaire prior to assessment form and firm-level Firstly, you will need to appoint an initial inspection by our financial risk assessment template. someone to be the nominated officer for compliance team. Search AML. money laundering (money laundering reporting officer or MLRO). Even if your work is not subject to the regulations, you should still have  Info Secondly, you will need to determine policies and procedures in place to See www.mygov.scot for whether your business falls within the address the Proceeds of Crime Act and information on basic disclosure. scope of money laundering regulations. the reporting of suspicious activities. More information is available on our See Member Benefits website in the section, ‘Who needs Our CPD and events team organises for useful suppliers. to complete the AML registration?’ regular roadshows and seminars on Guide to starting a practice | 11

Data protection Incidental financial Officers of the firm and GDPR business You will need to assign certain roles In common with all organisations that If you carry out any of the following, within the firm, and confirm who process personal data, law firms must you will have to apply for an incidental holds those roles when you submit comply with GDPR. You can find out financial business licence (issued by your application: about data protection and GDPR from us) or you will need that area of work to the perspective of a legal practice on be regulated by the Financial Conduct • Client relations manager our website. Remember, all new firms Authority (FCA). Incidental financial • Money laundering reporting officer must register with the Information business means financial work carried • Cashroom manager Commissioner’s Office. out as part of your other professional • Compliance manager services. If you carry out any (if registering for civil legal aid) mainstream financial work, you must • Insurance distribution officer  Info be regulated by the FCA. (if required under the Insurance See the Law Society’s Guide Distribution Directive). to GDPR. • Incidental consumer credit business – more commonly, debt Annual submissions See the Information Commissioner’s administration or debt collecting Regulation is an ongoing Office at www.ico.org.uk • Incidental insurance distribution process. Every year you will business – advice on, or the sale be asked to provide information of, general insurance products about your firm depending on • Incidental investment business – the work you carry out: for example, arranging the sale of shares in an executry • Accounts certificate • Incidental long-term care insurance (twice per year) business – advice on, or the sale of, • Anti-money laundering long-term care insurance products certificate • Incidental mortgage business – the • Master Policy submission. arrangement of a mortgage on the instructions of a client.

 Rule and  Guidance See rule and guidance C2.

A list of all our forms is available at the end of this guide. www.lawscot.org.uk/members/ rules-and-guidance/rules-and- guidance/ 12 | Guide to starting a practice

4. Risk management

It is good business practice to understand, and plan how to deal with, the potential risks to your business. By carrying out the planning, you will be better placed to recognise the signs of risk and take any necessary action.

Business continuity plan Professional risk  Info It is important to consider what you See Scottish Government’s In day-to-day legal practice, there is would do, and how your business would website for a continuity plan always the risk that the client will be survive, if the unexpected happened. template www.gov.scot/ unhappy with the work you have done, Publications/2007/05/24103806/1 or you may miss something or make an Banks, insurers, and clients are more error. In those circumstances, a client likely to take a company seriously if it may make a claim against a firm for has a business continuity plan. Fraud and cybersecurity professional negligence. Such claims would be covered under the Master Helpful advice from the Scottish Confidentiality and security of Policy for professional indemnity (see Government suggests you should information are at the heart of any legal next page). However, it is important ask yourself a series of questions: business. Advances in technology to understand that most professional continue to change the way legal indemnity claims arise not from errors • Have you identified someone services are delivered – but can also in the law but from poor standards of responsible for leading a crisis present security risks. It is worth noting administration, poor procedures or not response? that your IT supplier is not necessarily following procedures. It is important to • Do you know what processes are an IT security expert. consider the processes and procedures critical to continuing in business? which you need to establish within your • Do you have arrangements to Client accounts firm to help to avoid, or at least mitigate, communicate with staff, or their Your client accounts are the most the risk of a professional indemnity relatives, in a crisis? attractive to cybercriminals, so we claim being made against your firm. • Could you cope if staff were absent? recommend that you start there with • Are your business computer records your security measures. These risks can Some examples of good risk protected and backed up offsite? be mitigated by operating with robust management would be: • Are your suppliers (including processes and procedures, including utilities) resilient with their own two-factor authentication/authorisation • Checklists of stages for various business continuity plans? and ensuring client communication standard types of transaction • Can you access essential via email is encrypted or, where not • File reviews equipment at short notice? encrypted, does not contain confidential • ‘Second pair of eyes’ checks on • Have you tested your assumptions information, particularly in relation to important or complex documents about recovering from a business bank account details or anticipated • Carefully considered letters of crisis or range of emergencies that dates for transaction settlements. Our engagement – with particular might affect your business? website sets out the most common attention to the scope of services. cyberthreats and how to deal with them. All solicitors must undertake a minimum  Rule of one hour of risk management CPD as For incorporated practices there  Info part of their annual requirement. is a rule requirement – D5.4.2 See the Law Society’s Guide to Cybersecurity

See Journal article Check those bank instructions at www.journalonline.co.uk Guide to starting a practice | 13

5. Insurance and client protection

The Master Policy for Client Protection Fund professional indemnity  Rule and  Guidance insurance See Rule and Guidance B7 As a new practice unit, all managers will need to contribute towards the Client We arrange the mandatory professional Protection Fund (the operating name of indemnity insurance, known as the the Guarantee Fund). The current rates, Master Policy, for all Scottish solicitors  Info along with the rates for the account fee in private practice. There is a minimum A master policy proposal form and the AML fee, are available on our cover level of £2 million. can be downloaded from website. Payment needs to be made www.locktonlaw.scot before your practice unit starts operating Before your firm starts trading, you will unless you have already paid it as a need to contact the appointed Master manager in another practice for that year. Policy broker, Lockton, to arrange your own professional indemnity cover. Additional cover Once completed, they will provide  Rule and  Guidance a certificate of insurance, which you Your practice will have a range of other See rule and guidance B7.1: will have to send to us before you start insurance needs. If you have an office, Master Policy to practise. you are likely to require office insurance. You will need employers’ liability A firm limited to criminal court work insurance if you hire staff (this is often only throughout the practice year is included in an office package of cover  Rule and  Guidance entitled to a discount on its Master as is public liability insurance). Some See rule and guidance B6, Policy premium. You will need to firms purchase fidelity, crime or cyber Part VI: Client Protection Fund confirm to Lockton the limitations of insurance. (Guarantee Fund) your work and complete a criminal court undertaking, copies of which must be If the Master Policy £2 million sent to the Law Society and to Lockton. compulsory cover is not sufficient for the nature of your work, Lockton can  Info Once you are provided with Master arrange additional top-up professional See the fees section of the website. Policy cover, Lockton will set you up with indemnity insurance for you. a username and login so that you can access your proposal form and policy Contact your usual insurance broker documents online. (or Lockton) for information on your specific requirements and they will be able to advise on any insurance  CONTACT products that are available. You can obtain a Master Policy quote for your new practice by contacting Lockton on 0131 345 5599 or by completing and returning a PI proposal form to Lockton. 14 | Guide to starting a practice

6. Legal aid

If you intend to carry out civil and You should contact SLAB to provide criminal legal aid (including advice signage advertising that shows that and assistance), you will need to first you offer legal aid work. register with the Scottish Legal Aid Board (SLAB). The application process ultimately leads to a certificate of  CONTACT compliance, which is required before www.slab.org.uk you can start practising.

If you only intend to carry out criminal  Rule and  Guidance court work, you will be eligible for a See rule and guidance C3. discount on your professional indemnity insurance. Your completed proposal form should highlight this to Lockton. Guide to starting a practice | 15

7. Practice unit options and information

There are several business models that Forms and fees you can adopt when setting up. You will Annual fees need to consider a number of factors in You will need to fill out the relevant We will ask you for fees at order to determine which model suits forms (depending on your business two points during the year: you, including: model) to let us know about your new • June – Scottish Legal practice unit. Below is the list of the Complaints Commission levy • The level of risk you are all the forms, what they do and the • October – membership fees prepared to take relevant fees. (including Master Policy • How quickly you wish to set up and Client Protection Fund • Costs. contributions).  Info We recommend that you take All forms can be found on the Law professional advice from an Society website. Search for ‘start accountant and a corporate up forms’. Search our website for solicitor before deciding what ‘fees’ for the full list. model is appropriate for you.

FORM PURPOSE FEE

Giving information regarding regulatory roles and contact details. Practice Unit Information1 (PUI 1) No fee Rule D4.

An application may be appropriate to give you incidental financial Incidental Financial Business 1 business licence cover, which includes a consumer credit licence. No fee (IFB 1) Rule C2.

Incorporated Practice 1 Requesting recognition of an LLP or a limited company practice by (INC 1), including Guarantee the Law Society of Scotland. There are very specific requirements in £400 one-off fee Fund undertaking terms of Rule D5.

Requesting recognition of a multi-national practice, detailing Multi-National Practice 1 (MNP 1) the Scottish and English managers/director/shareholders in the £400 one-off fee business and other legally qualified personnel. Rule D8.

Requesting recognition as a registered foreign lawyer, this needs to Registered Foreign Lawyer 1 £150 per manager be accompanied with a certificate of good standing from the home (RFL1) per year regulator. Rule D7. 16 | Guide to starting a practice

1. TRADITIONAL PRACTICE UNIT – 2. INCORPORATED – SOLE TRADER OR PARTNERSHIP LIMITED COMPANY BY SHARES, WITH UNLIMITED LIABILITY GUARANTEE OR, UNLIMITED

We require seven working days of receipt of all We require all documentation one month documentation to authorise a traditional practice. prior to the proposed start date. Please submit the following: Please submit the following:

PUI 1 PUI 1

Payment (if applicable) of: INC1 • Client Protection Fund fee • Accounts fee Memorandum and articles of association (M&A) (required) • AML fee – (Rule D5.4.1 provides specific requirements for M&A as per manager – if payment for the practice year has not standard M&A are not compliant) been made already been made Copy of the certificate of incorporation of the company Sample letterhead* Signed Client Protection Fund undertakings from IFB 1, if required (see below) each manager

Your practice unit’s Master Policy professional indemnity £400 fee insurance schedule as issued by Lockton Payment of the Client Protection Fund fee for each manager Anti-money laundering information – see page 10. (if payment for the year has not already been made)

Sample letterhead

IFB1 form, if required *This can apply to letterheads, business cards and email footers. There are no specific requirements as to what a letterhead should contain – Once an application has been granted, we require either although it would be useful to have your name, the name of the firm your endorsement to your indemnity insurance schedule and contact details. We are just keen to make sure that details are if you are converting an existing practice or your schedule accurate and compliant with our rules before you start trading. of insurance as issued by Lockton

There are statutory requirements in relation to publication of company Anti-money laundering information – see page 10. and LLP names: at registered offices, on stationery, invoices, emails and websites (e.g. The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 and Companies  Rule D5.3. Act 2006). Guide to starting a practice | 17

3. INCORPORATED – LIMITED LIABILITY PARTNERSHIP (LLP)

We require all documentation one month prior to the proposed start date. Please submit the following:

PUI 1

INC1

LLP agreement (optional)

Copy of the certificate of incorporation of the company

Signed Client Protection Fund undertakings from each manager

£400 fee

Payment of the Client Protection Fund fee for each manager (if payment for the year has not already been made)

Sample letterhead

IFB1, if required

Once an application has been granted, we require either your endorsement to your indemnity insurance schedule if you are converting an existing practice or your schedule of insurance as issued by Lockton

Anti-money laundering information – see page 10.

 Rule D5.3 18 | Guide to starting a practice

a) Multi-national practice 4. MULTI-NATIONAL PRACTICE (MNP) (recognised by the Law Society of Scotland only) We require all documentation three months prior There is a requirement that at least one Scottish manager to the proposed commencement date. and a manager qualified in the other jurisdiction are Please submit the following: appointed in the business. Becoming a Scottish MNP (with approval from us) only entitles PUI1 you to have lawyers from another jurisdiction as managers (as registered foreign lawyers registered in Scotland) in the Scottish business. The practice unit is only entitled to do MNP1 Scottish work, including Scottish reserved area work, and non-reserved work in the other jurisdiction. RFL1 form for each non-Scottish manager b) Multi-national practice (recognised by the Annual payment of the Client Protection Fund fee for each Solicitors Regulation Authority (SRA) only) Scottish manager (if payment for the year has not already Example: an English business becoming an English been made). £400 fee for MNP registration in addition to MNP (with approval from the SRA) only entitles you £400 if incorporated to have lawyers from another jurisdiction as managers (as registered foreign lawyers, or RFLs, registered in Sample letterhead England and Wales) in the English business. The practice unit is only entitled to do English work and IFB1, if required Scottish non-reserved work. Scottish solicitor managers in such a practice would register as RFLs with the SRA. The practice unit’s indemnity insurance schedule as issued by Lockton or evidence of insurance if you use multi- c) Multi-national practice (recognised by us and SRA) national options b or c right. Example: if a single business registers as an MNP with both the SRA and us, not only are solicitors from both If the MNP is to be a limited company or LLP, or if an existing jurisdictions entitled to be managers of the business limited company or LLP currently operating outside Scotland (all managers also being registered as RFLs in one is to be used, that entity will require to be recognised as jurisdiction or another, depending on where they originally an incorporated practice – in that case, we will require qualified), the business is also entitled to do work in both sight of all the additional documentation described in the jurisdictions whether reserved area or not. incorporated practices sections above.  Rule  Rule See rule D8 – Multi-national practices. See rule D8.1.3. See rule B7.1.6 Evidence of insurance.

5. REGISTERED FOREIGN LAWYERS

This provides for the registration of foreign lawyers, ie lawyers from jurisdictions outwith Scotland (including England and Wales). Foreign lawyers must be registered with us before they can enter into MNPs with Scottish solicitors or incorporated practices. An MNP must have at least one Scottish solicitor and one registered foreign lawyer.

A list of jurisdictions recognised by us for RFL licensing purposes is available on our website. If an RFL is from a jurisdiction that is not listed, an application must be made for recognition of that home regulator.

 Rule See rule D7 – registration of foreign lawyers. S60(4ZA) Application for recognition of home regulator. Guide to starting a practice | 19

Checklist and contacts

There is no definitive checklist for setting up a firm but here are a few to get you started. Contacts Law Society of Scotland Practicalities Suppliers For initial enquiries Telephone: 0131 226 8896 Premises IT Email: [email protected] Firm name trademark Cybersecurity services Paper/headed paper Printer/scanner For accounts rules advice Computers Shredding services Telephone: 0131 226 8897 Electricity Email: [email protected] Telephone Employment support Website Security-identification protocols For the application process Email Contracts Telephone: 0131 476 8367 Policies Email: [email protected] Staff Contact Support and reception staff For training (including the option to outsource Your bank We run events throughout the year for or use Intelligent Office) HMRC members who are running their own Cashier Information Commissioner’s Office practices. These include: (including the option to outsource Insurers cashiering, management Scottish Legal Aid Board • Cashroom accounting and payroll) Law Society of Scotland • Anti-money laundering Paralegals and accredited paralegals • Client care Trainees • Risk Solicitors • Financial skills • Cybersecurity Taxation • Data protection. VAT Email: [email protected] Corporation tax Telephone: 0131 476 8201 Self-assessment tax return National Insurance PAYE

In association with

The Cashroom offers outsourced legal cashiering, payroll, and management accounting services. Our thanks to Lockton and Gerber, Landa & Gee www.thecashroom.co.uk for their contribution to this publication 20 | Guide to starting a practice

The Law Society of Scotland Atria One 144 Morrison Street Edinburgh EH3 8EX T:+44(0) 131 226 7411 F:+44(0) 131 225 2934 www.lawscot.org.uk