Whether you are a lawyer or paralegal who has just received their license from the Law Society of Ontario, or you have a decade of experience under your belt, opening your law practice in Ontario is about more than just regulatory compliance (which is our area of speciality!). It is about embarking on a new exciting journey where the freedom of being your own boss, and the financial rewards of successful entrepreneurship, are just over the horizon for you.
In this step-by-step guide, we’ll walk you through the practical steps you should take in order to ensure that your practice starts off on the right foot. This article will absolutely not dwell on abstract non-sense that sounds nice but doesn’t actually give you precise steps to take. We wouldn’t be helping anyone if we just sat here and told you to remember to order some great looking business cards; you already know that.
So let’s get into those actual, practical steps right now.
Register your business using Ownr
Since you’re a licensed legal professional, you probably already know about registering your business, and choosing between things a sole proprietorship, or corporation, etc.
We think using a “Professional Corporation” comes with a lot of great tax advantages and liability-reducing advantages, and we highly recommend registering a provincial corporation using Ownr.co (click here to use our discount).
That company is owned and operated by RBC, and you’ll get a $300 rebate if you open your business account with RBC within a certain timeframe of registering your corporation with Ownr. You’ll also get a cool dashboard where you can manage your annual compliance obligations, and keep a record of important data like your business number, HST number, corporation key, etc.
Remember, a “professional corporation” must be provincial corporation, it can’t be a federal corporation. Also, you’ll need to include some very specific wording in your Articles of Incorporation, or else the Law Society of Ontario won’t grant you a Certificate of Authorization, which is mandatory in order for you to practice law using a professional corporation.
Fortunately, the LSO has put together useful information sheets which spell out exactly what you must do in this regard. Here is the info sheet for lawyers, and here is the sheet for paralegals. Don’t forget to read the LSO’s webpage about professional corporations too! We know from personal experience that if you miss any of these steps, you’ll be in the inconvenient position of having to ask the friendly staff at Ownr to amend your corporation!
Remember, don’t start offering legal services through your professional corporation until you’ve got both your corporation properly registered, and the LSO has given your corporation a Certificate of Authorization.
It’s time to get those bank accounts set up!
Okay, one of the things you’ll notice as an Ownr customer is that you’ve got all of your important corporate documents neatly organized in your dashboard. Grab your government-issued ID, your Certificate of Authorization from the LSO, and any incorporation documents from your Ownr dashboard proving that you have a properly registered corporation, and take all of those documents to RBC if you want that $300 rebate. If you don’t care about the rebate, then go ahead and pick any of the major banks who do business in Ontario.
Yes, you’ll likely need to show up in person and somehow find a printer and show up with, wait for it… hardcopy pieces of paper. Even in today’s modern world, starting up a law practice in Ontario can feel awfully old fashioned, but here we are.
Remember, you’ll want to open four different bank accounts in the name of your corporation. This is something that a lot of new law practice startups forget. Here are the four accounts you’ll want:
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- A general account. This is the main operating account which handles all of your day-to-day operations of your business. It is also the account you will use to pay yourself.
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- A trust account. This will hold all of your clients’ money, and your bank will already know that a very specific letter must be signed by you, which they usually provide to you, which instructs the bank to remit all interest accrued from the trust account to the Law Foundation. Sorry, you don’t get to keep that interest, nor do your clients.
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- An income tax account. This is not a special bank account, it’s just another savings account, but it’s smart to set aside some money for corporate income taxes every month, or every time you get paid, so that you don’t find yourself running behind on taxes when tax season arrives.
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- An HST savings account. Again, this isn’t a special bank account. It’s just a savings account. That being said, whenever you get paid for an invoice that you sent to a client using Clio (see next section about that), make sure to read the “HST” line on the invoice, and then put that amount into your HST savings account. By the end of the year, you’ll probably have more set aside to pay the government’s HST bill than you actually need, that’s because you essentially get a rebate (known as an “input tax credit”) every time your business was charged HST when your business paid its business expenses. For example, if you gave a bill to a client for $100+HST, you collected $13 of HST, but if you paid one of your suppliers $40+HST, then your business paid $5.20 in HST, so this amount gets offset against the $13 you collected, and you would only have to pay $7.80 to the CRA for HST, even though you set aside $13 like a responsible business owner. In this way, HST time each year becomes a little opportunity for your business to enjoy a little bonus.
Sign up for Clio, which is easily the best practice management software on the market
If you haven’t already heard of Clio, then you’re going to be really happy when you find out how effortless Clio makes practicing law. Everything from invoicing, calendaring, time docketing, trust accounting, contact list management, online payments, and almost anything else you might need to do can be done in Clio.
Moreover, Clio isn’t just about managing your day-to-day practice, with Clio Grow, you can also optimize your advertising and client intake process. So, basically, obtaining your next client, and helping your next client, can all be done within Clio.
The brand is trusted by over 150,000 lawyers across the entire world, and has become one of the most popular, if not the most popular, practice management software for Canadian legal professionals. You can also get 10% off Clio if you sign up using this link.
Get ahead of the LSO rules and By-Laws with TrustReq
If you’ve spent more than 5 seconds looking at the Law Society of Ontario’s By-Law 9, it’s enough to make your head spin. Everything from trust accounting requirements, cash handling rules, referral fee regulations, valuable property record keeping, mandatory forms, and much more, can be found in that By-Law.
Of all the LSO By-Laws, this is the one that causes the single most amount of confusion and frustration for lawyers and paralegals in Ontario. For example, every single time you move money from your trust account to your general account to pay yourself for an invoice you sent to your client (and for many other reasons), you’ll need to diligently complete a Form 9A (learn more about that here). Now, we know that strict regulations and responsible record keeping requirements are integral to a well-regulated profession. The public puts their trust in lawyers and paralegals, with the expectation that their practices are run properly and professionally. That being said, lawyers and paralegals in law practice in Ontario need the right tools to keep up with those rules and regulations.
TrustReq is the only app created specifically to help licensees comply with the Law Society of Ontario’s By-Law 9 record keeping obligations. Beyond that, we also use advanced biometric AI technology to comply with the LSO’s virtual identity verification requirements. Many clients don’t want the inconvenience of showing up at your office in person. So how do you comply with your professional obligation to “know your client” (KYC) and verify their identity? After all, the LSO’s website says,
“Effective January 1, 2024, lawyers and paralegals who choose to verify the identity of an individual using video conferencing technology or other forms of virtual communication are required to have a process or method to authenticate the individual’s government-issued photo identification document. Verifying identity by only viewing an individual and their identity document virtually is not permitted.”
In other words, if you’re going to be verifying your client’s identity virtually, you’ve got to use sophisticated technology to comply with the LSO’s requirements, and TrustReq is the perfect solution to do exactly that.
And when that inevitable “spot audit” date arrives, you’ll be able to securely and conveniently live-share your TrustReq data with your auditor in just a couple of clicks on your TrustReq dashboard.
Conclusion
We didn’t bother sayings things like “make sure you set up a nice website!” and “don’t forget to get on TikTok and start making content!”, because we figured you already knew stuff like that. We hope the practical steps and actual apps & tools in this step-by-step guide brought you one step closer to your dream of running a successful law practice in Ontario.
