How to Set Up a Law Firm in the UK: A Practical Guide to SRA Authorisation

Setting up a law firm in England and Wales is not like setting up any other type of business. Compared to other businesses and even many overseas law firms, it is a much more highly regulated and, at times, complex process.

 

If you are looking to set up an SRA-regulated law firm or an Alternative Business Structure (ABS), you will need to obtain SRA authorisation before you can begin trading.

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The regulator, the Solicitors Regulation Authority (SRA), requires all new firms applying for SRA authorisation to:

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• have a very particular type of professional indemnity insurance in place, meeting the SRA’s minimum terms and conditions

• adopt a compliant legal and regulatory structure

• complete a number of extensive SRA authorisation forms, typically including FA1 and FA2 and, in many cases, FA8 and FA10

• respond in detail to questions raised by their dedicated SRA Authorisation team

 

On average, the SRA authorisation process takes months rather than weeks, particularly in the current regulatory climate. However, with the right preparation around structure, insurance, governance and compliance roles such as COLP and COFA, you can normally speed up the process a great deal and significantly reduce the risk of delay.

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This guide explains how to set up a law firm in the UK in practice, based on how the SRA and insurers actually apply the rules rather than how they appear on paper.​

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Question 1: Am I eligible for SRA Authorisation to set up a new law firm in the UK?

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To obtain SRA authorisation, a new law firm must meet a number of core eligibility requirements.

The three most fundamental requirements are:

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1. There is at least one lawyer qualified in England and Wales who has at least three years’ post-qualification experience in practice. Note, however, that in practice more experience will often be required to satisfy professional indemnity insurers. See further below.

2. The proposed firm is able to obtain a professional indemnity insurance quotation covering its first year of trading. This must meet the SRA’s minimum terms and conditions – it is not simply any commercial insurance quote.

3. There is a practising address in the UK (or within England and Wales if applying as an Alternative Business Structure (ABS)).

 

In reality, the SRA authorisation process goes much deeper than these headline criteria. The SRA Authorisation team will also want to understand:

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• whether suitable individuals have been identified for the COLP and COFA roles

• whether the business appears viable and compliant on its face

• whether any individuals involved raise character and suitability issues

• whether appropriate systems, policies and procedures are in place for compliant operation

 

Question 2: Do I need to set up a fully regulated SRA law firm?

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Before doing anything else, it is worth asking a simple but critical question: do you actually need to establish an SRA-authorised law firm?

 

In the UK, not all legal work is “reserved”. A significant amount of advisory, drafting and regulatory work can lawfully be provided without a regulated firm. Since 2019, solicitors have also been able to practise as freelance solicitors or through unregulated businesses that employ solicitors.

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These models can work well for certain types of practice, particularly commercial, regulatory, employment and advisory work. In the right circumstances, it can be an efficient and cost-effective way to launch a legal practice.

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For example, a group of solicitors specialising in:

• regulatory advice

• commercial contracts and drafting

• intellectual property advisory work

• certain business-to-business employment matters

could establish a business immediately and provide those services as solicitors. The entity would not describe itself as an SRA-regulated law firm. From the client’s perspective, the service and billing model might appear very similar. The difference lies in regulatory infrastructure: the business would not pay SRA entity fees nor be subject to the full firm authorisation regime.

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However, this model is usually unsuitable if you intend to:

• conduct litigation

• undertake conveyancing or reserved probate work

• hold client money

• rely on SRA minimum terms professional indemnity insurance

• access the SRA Compensation Fund

• eliminate uncertainty around legal professional privilege.

 

For most founders and investors setting up a new law firm, full SRA authorisation remains the appropriate route. Choosing the wrong regulatory model at the outset is one of the most common and costly strategic mistakes. Good planning means thinking about where the business is intended to be in three to five years, not simply what it will do in year one.

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Question 3: How should I structure my new law firm? Recognised Body or Alternative Business Structure (ABS)?

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Before submitting Form FA1 to the SRA, you must decide two things:

1. What regulatory model will apply?

2. What legal structure will the entity adopt?

 

In regulatory terms, there are broadly two options:

• A recognised body – a traditional law firm owned and managed entirely by lawyers recognised by the SRA.

• An Alternative Business Structure (ABS), also known as a licensed body – a law firm permitted to have non-lawyer ownership or management involvement.

 

Today, there is little regulatory difference in day-to-day obligations between recognised bodies and ABS firms. ABS applications can be slightly slower and involve additional approval requirements. However, the ABS model provides materially greater structural flexibility.

 

An ABS allows:

• non-lawyer directors or owners

• external investment

• group or holding company structures

• employee ownership trusts

• succession planning involving family members

• separation of ownership from operational management.

 

Converting later can significantly delay investment or acquisition. Many founders prefer to build in flexibility from the outset.

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You must also decide on the legal form of the entity. In practice this usually means choosing between:

• an unincorporated partnership

• a limited liability partnership (LLP)

• a company incorporated under the Companies Act 2006

 

Incorporated structures (LLP or company) are now the more common choice, largely due to separate legal personality and limited liability. There are also tax and governance considerations, and it is prudent to obtain accounting advice alongside regulatory planning.

The SRA will request constitutional documentation (such as Articles of Association or an LLP agreement) as part of the FA1 submission. It is often acceptable to submit model documents initially, provided it is explained that final versions will follow. Delaying submission purely to perfect constitutional drafting can unnecessarily extend the overall timeline.

Poorly designed structures are one of the most common causes of regulatory delay.

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Question 4: What Professional Indemnity Insurance Do I Need to Set Up a Law Firm & Secure SRA Authorisation?

 

Professional indemnity insurance (PII) is frequently the single biggest practical constraint when setting up a new law firm in the UK.

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You cannot submit a complete SRA authorisation application without compliant insurance in place.

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Although we have a 100% success rate for submitted SRA authorisation applications, we have seen projects stall where a firm was unable to secure a compliant first-year insurance quotation. For this reason, the insurance stage is often the decisive factor in determining whether a new law firm can actually begin trading.

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Research suggests that many firms pay around 5% of turnover in PII premiums, though this varies significantly by practice area. Conveyancing, for example, typically attracts higher premiums than lower-risk advisory work.

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Why are premiums high? The SRA minimum terms and conditions create a very protective insurance framework for clients. Insurers are often required to meet claims even where they might otherwise have been able to decline cover under ordinary commercial policies. This makes insurers cautious, particularly with start-ups.

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Obtaining a quotation usually involves completing an insurer proposal form and submitting a business plan.

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Insurers will focus on:

• the types of legal work undertaken

• the potential value of claims arising from that work

• the experience of fee earners

• management capability

• financial projections

• client acquisition strategy

• risk management systems.

 

Early engagement with brokers is essential. Leaving insurance until late in the process is one of the most common causes of delay in commencing the SRA authorisation application.

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Question 5: Which SRA Authorisation Forms (FA1, FA2, FA8 and FA10) Do I Need to Complete?

 

Most SRA firm authorisation applications involve multiple forms, including:

• FA1 (firm authorisation)

• FA2 (approval of managers, owners, COLP and COFA)

• FA8 (approval for exempt financial services activities)

• FA10 (registration under the Money Laundering Regulations 2017).

 

These forms are detailed and cross-referenced. Inconsistencies between them are a frequent cause of delay.

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Commonly misunderstood areas include:

• bodies with share capital, capital without shares, or no capital

• profit entitlement and surplus distribution

• voting rights and veto powers

• separate businesses and referral arrangements

• group and subsidiary structures

• the “deeming” provisions under rules 13.2 and 13.5

• maintenance of legal professional privilege in ABS structures.

 

FA8 is required where the firm intends to carry out certain exempt financial services activities under the Financial Services and Markets Act regime. This can include activities such as arranging insurance in a conveyancing context or credit broking in litigation funding scenarios.

FA10 is required where the firm will undertake work within scope of the Money Laundering Regulations 2017. This often includes:

• conveyancing

• probate

• mergers and acquisitions

• trust work

• company structuring

• tax advice

• certain employment settlement agreements.

 

MLR registration typically requires approval of managers, owners, COLP, COFA, MLRO and MLCO, together with DBS checks. Delays in obtaining DBS certificates can impact overall timelines.

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