Setting up a legal practice: 7 key regulatory and practical considerations

Setting up your own legal practice can be one of the most professionally rewarding moves you’ll make - greater autonomy, sharper client focus, and the chance to build a business on your terms.

However, the regulatory foundation must be planned early and built properly, with key regulatory requirements and practical points carefully considered.

1. Do you need SRA authorisation?

Most new practices will need authorisation from the Solicitors Regulation Authority (SRA) or another approved regulator before they can provide regulated services. While you can prepare in advance - securing premises, arranging IT, and preparing operationally - you cannot begin providing regulated services until authorisation is granted, so build realistic lead times into your plan.

Authorisation timelines will shape your commercial launch. The SRA aims to decide most recognition applications within 90 days of receiving correct papers and fees, though ABS licensing (see below) can take several months.

2. Define your service mix: reserved vs non-reserved legal activities

Reserved legal activities include the exercise of rights of audience, the conduct of litigation, reserved instrument activities, probate activities, and administering oaths. If you plan to offer these, your route to market may require an authorised body or a licensed body (ABS).

If you will provide only non-reserved legal services, you may be able to operate as a non-authorised business (including as an employee), though authorisation remains an option.

3. Choose the right legal structure

The SRA authorises three main practice types: recognised bodies, recognised sole practitioners, and licensed bodies (Alternative Business Structures).

• Recognised body (partnership, LLP, company)

Recognised bodies are generally firms where managers and interest holders are lawyers (not necessarily solicitors), subject to eligibility requirements such as having at least one manager who is a practising solicitor (or REL, where applicable), and meeting restrictions around lawyer ownership/control.

• Recognised sole practitioner

If you want to practise alone, providing reserved legal services through a business or trading name (or where certain regulatory conditions apply), you must be authorised as a recognised sole practitioner before you commence practising.

If you add a salaried partner, you are not authorised as a sole practitioner - salaried partners are treated as full partners for authorisation purposes, pushing you toward recognised body authorisation.

• Licensed body (ABS)

Alternative Business Structures (ABSs) are relevant where there is a non-lawyer owner or manager (for example, an external investor or a head of internal service). There is no service requirement for ABSs, but managers and owners with a material interest (greater than 10%) typically require approval, and the process can take longer depending on the model.

4. Build a business plan that satisfies regulators and insurers

During the authorisation process, the SRA and insurers will consider your business plan. A robust plan typically includes your services, target market, marketing strategy, management team, HR/recruitment, operations (premises/IT), forecasts, funding, and—crucially—a compliance plan.

5. Secure PII early and prioritise cyber security

Professional indemnity insurance (PII) is a regulatory requirement for solicitors in private practice, and new firms need to have PII before starting business. New firms can find cover difficult or expensive; insurers look for contingency planning, clear competence boundaries, competitive viability, and operational maturity.

Following a rise in cyber-related claims, insurers increasingly expect robust cybersecurity protocols, including endpoint protection, staff phishing training, and a written incident response plan - so these should be built into your early operational design.

6. Put operational compliance frameworks in place

The SRA expects clear and effective governance, systems and controls; monitoring of financial stability; risk management; competence and training; effective supervision; and safeguarding of client money and assets.

Practical systems you may need include accounting procedures, payment authorisations, undertaking controls, recruitment checks, regulatory deadline management (including indemnity cover and practising certificate renewals), file reviews, and structured training support.

If you will hold client money, you must comply with the SRA Accounts Rules, keep client money separate, and hold it in an identifiable client account. Some circumstances may allow operation without a client account (for example, where money represents fees/unpaid disbursements and you inform the client where and how it will be held).

Holding client money may trigger the need for an annual accountant’s report, subject to exemptions and thresholds described in the rules and guidance.

Records management matters too. Implement a clear system for document management and retention, keep a record of destruction, and retain certain records for specified periods.

7. Meet core regulatory obligations and compliance roles

Some requirements are non-negotiable and are frequently underestimated when setting up a new practice.

• All authorised bodies must have SRA-approved compliance officers (COLP and COFA), with deemed approval noted for certain sole practitioners or smaller firms with annual fee income (at the time of writing) under £600k.
• Firms must also have a compliant complaints handling procedure.
• Price transparency obligations apply under the SRA Transparency Rules, where firms (and freelance solicitors) publish that they offer specified services, requiring certain price and service information to be published.
• Outside SRA-specific requirements, broader business duties include data protection compliance and ICO registration/fee (unless exempt), and anti-money laundering obligations, including required roles for firms in scope (ILP/TCSP/tax adviser) and keeping AML policies aligned to updated guidance and evolving requirements.

Launch timeline (indicative): a path to opening doors

Below is a practical timeline you can adapt depending on structure (recognised body vs sole practitioner vs ABS) and how quickly authorisation/insurance progresses.

Weeks 1–2: Define scope and structure

• Confirm whether you will provide reserved legal activities and therefore likely need authorisation.
• Choose structure: sole practitioner / partnership / LLP / Limited Company.
• Decide whether you will hold client money (this impacts Accounts Rules, reporting, systems, and risk controls).

Weeks 3–4: Build the “insurer-ready” business plan

• Draft business plan: services, market, marketing, management, HR, operations, forecasts, funding, compliance plan.
• Begin PII discussions early; explore broker support and evidence of competence/risk management.
• Design cybersecurity controls aligned to insurer expectations (endpoint protection, phishing training, incident response plan).

Weeks 5–8: Prepare authorisation and compliance framework

• Prepare authorisation application documentation and fee-ready submission; plan around stated decision timelines. This will include obtaining a PII quote required in support of the SRA application.
• Nominate COLP/COFA (where required) and prepare supporting compliance documentation.
• Build governance, supervision, risk controls, and operational compliance systems (payments, undertakings, recruitment checks, training).

Weeks 9-11: Submission to the SRA

• Application is via your MySRA account.
• The legal decision clock only starts once the application is complete with all required payments, information and documents have been submitted.

Weeks 12-26: Finalise operational readiness, whilst SRA assessment is in progress

• Confirm client money arrangements and Accounts Rules processes (or document your no-client-account model where applicable).
• Implement complaints procedure, records retention/destruction policy, and regulatory deadline tracker.
• Prepare marketing and client information materials aligned to conduct and transparency obligations.
• SRA assessment and queries generally take between 6 – 12 weeks depending on the complexity of the application and the information requested, where the SRA’s own published target is 90 days from the date of submission.

Weeks 17–26: Go-live preparation

• Secure PII, once authorised by the SRA (required before starting practice) and document continuity planning, including run-off cover budgeting for eventual closure.
• Complete AML and data protection setup where in scope, ensuring policies reflect relevant guidance and obligations.
• Launch: ensure you do not provide regulated services until authorisation is granted.

Build a strong foundation

A well-launched practice is built on more than branding and premises—it is built on a defensible compliance operating model, insurer confidence, and clarity about what you will (and will not) offer. Start with authorisation and service scope, lock your structure, secure PII early, and implement practical systems that will stand up to supervision and scrutiny over time.

If setting up your own legal practise would be the next step for you, whether you are refining your structure, preparing your authorisation application, early advice can prevent expensive rework later.

Here at Armstrong Watson, we support new law firm start ups via our 12-page checklist that details all of the required steps, and then by guiding on and then vetting all application documents. Further detail can be found at: Starting a New Law Firm | Armstrong Watson