For growing law firms, there are many reasons to open offices in multiple states. New clients, new legal areas, a larger national footprint – the list goes on. But for any type of business, there are also many potential pitfalls arising from out-of-state expansion. And law firms face hurdles unique to the legal profession.
Here we explore some of the main issues for law firms expanding to multiple states. We also look at the important role of electronic filing and how it can facilitate the firm’s growth.
Essential considerations for law firms moving into multiple states
Many of the considerations for out-of-state expansions for law firms are the same as for any type of company, with some unique issues for attorneys.
Attorneys at the new out-of-state office will need to be adequately licensed for practicing law in that jurisdiction. The difficulty here may be attorneys within the firm who wish to relocate to the new office. Will they all need to sit for the bar exam in that state?
Keep in mind that many states participate in a reciprocity program, where they will admit attorneys to the bar if they are already licensed in one of the participating states. However, many of the highest population states, such as California, New York and Florida, do not offer reciprocity.
There are situations where seeking state bar admission may not be necessary. For example, attorneys practicing transaction law may not need licensing in that state, since they are not appearing in court. Attorneys can also seek pro hac vice admission for one particular case.
Business and tax considerations
If the firm is a partnership or corporation, it will require an agent for service of process in the new office’s state. The firm should also plan for tax considerations in the new state. These include differences in payroll taxes for the firm, as well as state income tax changes for any relocating partners. If freelance contract attorneys are hired, be aware of the new state’s definition of independent contractors and their tax treatment.
Administrative and logistical hurdles
Finally, opening new offices will lead to administrative and logistical issues, such as the following:
- Hardware and IT: Furniture, office supplies, telephones, and computers are some of the basics here. IT infrastructure and staff should also be in place to deal with computer server issues. But keep in mind this may be an opportunity to look into cloud-based solutions for the firm.
- Office and phone services: Office services such as internet, janitorial services, and deliveries must be in place by the official start date. For phone services, determine whether there will be a central nationwide number for the firm, or whether the new office will have its own number.
- Marketing and internet presence: The website must be updated to reflect the new office. The firm might consider press releases or other promotions to get the word out to the legal industry and potential clients.
Your firm will also need to budget startup costs for the expanded office, as well as ongoing expenses.
Of course, as remote work becomes more and more an accepted and permanent way of working, you can also consider not creating local offices, and running all operations remotely from an existing office. Be sure to consider all sides of how this will work before finalizing this plan.
The important role of eFiling for multi-state expansion
For a smooth and seamless opening of the out-of-state office, electronic filing of court documents (eFiling) could be critical. eFiling is already the norm in federal court and is becoming increasingly common in state courts. This is a good thing since there are a number of benefits to eFiling for firms looking to expand out-of-state.
The main benefit of eFiling is avoiding the physical delivery of paper documents to courts. There is a large cost in time, expense and uncertainty of filing hard copies of documents. With eFiling, there is no more need for a courier to wait in line at a filing window, with an attorney waiting to receive a conformed copy later. Since so many court systems are allowing eFiling, it makes perfect sense for a firm’s new office to make use of the process when available.
Many courts that allow eFiling also maintain electronic dockets. These dockets allow users to review all court filings in a case quickly. And eFiling provides the firm with quick feedback on filing status. This allows the filer to correct any filing problems quickly and resubmit the document immediately. With all the havoc of any new office, streamlining court filings in this way is a game-changer.
And this increased accessibility does not come with any tradeoff in document security. To the contrary, electronically filed documents are more difficult to modify than paper documents. The filing attorney receives a file-stamped version of the document, and many court systems run regular audits of eFiled documents.
Expanding out-of-state involves increasing a firm’s reach, so scalability is a key consideration. The speed and efficiency of eFiling free up resources within your firm, so attorneys and support staff can focus on higher-value activities. In addition, eFiling can reduce the amount of on-site document storage required by the new office.
Implementation of eFiling software
The selection of eFiling software is integral to your firm’s multi-state expansion. If that software can also operate with multiple court systems in different states, the firm can maintain that same software nationwide. eFiling systems differ in California, Florida, New York, and elsewhere, so software that can operate in all these jurisdictions will have a leg up. This will also allow seamless interaction and communication between a firm’s main office and satellite offices.
High-quality eFiling software can help build the new office’s relationship with the local court system. And if that software can integrate with legal case management systems as well, the new office will be even more efficient.
No matter what specific hurdles your firm faces in its expansion, keep your eye on these basic elements. The success of your multi-state firm could depend on it.