Family lawyer Andrew Feldstein and tax lawyer Vitaly Timokhov took turns to the podium and presented their tips for effective billing systems and tax strategies:
Don’t oversell: If you promise something you cannot deliver, you’re asking for an angry client who will not willingly pick up the tab, Feldstein said. “Never oversell. If anything, undersell,” he said. Clients might come to you and say another lawyer told them a certain thing could be done, but if what they’re asking for seems farfetched, don’t guarantee it, Feldstein said.
Select the right tax form: Different tax forms for things like sole proprietorships, limited liability partnerships, and professional corporations qualify you for different benefits, said Timokhov. Know the differences and choose the one with maximum benefits, he told lawyers. Once you select a form, follow the formal rules, which is something many people fail to do.
Be very cautious about giving quotes: Always make sure your clients know it’s impossible to determine exactly how much their case will cost them, Feldstein warned lawyers. “If you do give a quote, do it in writing,” he added, noting the written quote should indicate the possibility of exceptions. Clients might say their case is an easy one, but experience has taught Feldstein they’re not always right. He gave an example of a man who retained him for an “easy” divorce. That client went to the doctor’s office that same afternoon, found out he had contracted a sexually transmitted disease because his wife had been unfaithful to him, and got arrested after a confrontation ensued between the pair. It was no longer such a straightforward case.
Consider a profession corporation: “Lawyers are not proactive when it comes to professional corporations,” said Timokhov. If a lawyer has a net practice income of $130,000 and has personal living expenses tallying up to $70,000, they will be taxed $39,600 under a proprietorship but only $31,000 as a professional corporation, he said.
Pay tax only on already received income: Don’t pay taxes on income you will receive in the future, said Timokhov, who also noted not all expenses are deductible.
Bill every month: Preparing your bills can be a real pain, said Feldstein, but you’re still better off billing your clients every month than doing it less frequently. “If you bill every month, you will find you have better collections and less clients asking for [volume] discounts,” he said. Clients also want to know how much they’re spending. If the bill comes as a shock after four months, good luck getting paid the full amount, he added.