As an associate at most larger law firms, interactions with the firm’s accounting department are often sporadic at best. Most of the time, you never hear from accounting at all. At some point, when you have been fortunate enough to originate a client or two, you will likely be introduced to someone in accounting, who will likely reach out to make sure that outstanding invoices are in the process of being collected, if at all. Making partner doesn’t change things much — your interactions with accounting typically revolve around billing and collections issues. (While collecting money can be a bear, at least you can also take succor in the fact that you are a partner at a large enough firm to have its own internal accounting staff.)
What about personal taxes for Biglaw lawyers? As a salaried associate or counsel, they are actually quite easy to handle using tax software or a volume preparer — unless you have a spouse with their own business, or have inherited a vast real estate empire that generates income for you on the side. Even as a partner, most of the difficult personal tax issues — such as paying state taxes in each state the firm operates in — are handled by the firm, leaving your personal return relatively simple to handle with minimal outside help. In fact, at least for litigators, you are more likely to have to spend more time dealing with litigation audit requests from accountants for your clients than you need to spend on your personal taxes. Again, assuming your main income is from your Biglaw draw and distributions, without involvement of income-bearing investments of consequence and the accompanying additional tax complexity.
Things change immediately, however, once you decide to leave the big firm cocoon (or if you never entered one, right when you start practicing) to open your own firm. As a service business owner (albeit one that is a bit disadvantaged under current tax law relative to other businesses), one of the first things you need to do is find a good accountant. This can’t be overstated — and is as integral to running a successful law practice as picking the right banking relationship or malpractice insurance provider.
In fact, it is well worth the investment in time to actually interview accountants before selecting one. You can start with practices that come recommended by others and have some familiarity with the types of issues firms like the one you are starting typically encounter. Probably best to talk to at least two so you have some means of comparing options. For firms with established accountants, it is important to continually evaluate your relationship with your firm’s accountant, to make sure you are getting the expertise and service your firm needs to flourish.
Considering how important it can be to have good accounting help, it is also worthwhile to consider what you can do as a client to help your accountant provide optimal service. That starts with recognizing how busy accountants can get, especially during tax season. Which means helping them out by organizing the firm’s finances, collecting 1099s from clients, and assembling whatever other information the accountants will need for the firm’s upcoming return. In addition, an awareness of the accountants’ workload during tax season suggests you should leave the planning and strategy discussions for less busy times. Ideally after filing season has completed, when your discussion can take into account the return that was just filed as well as your performance to date in the current tax year.
As important as a relationship with a solid accountant can be for a firm, it is also important for lawyers to learn from how accountants service their clients. In fact, anytime you, as a lawyer, interact with other service providers, you are provided with an opportunity to learn something. Sometimes, we can emulate what we learn, such as how good accountants really take the time to try to understand a client’s businesses as much as possible. So that advice can be tailored to the particular needs of the client — something any good lawyer should strive to do for all clients. And at other times, a lawyer may be presented with an example of what not to do from a fellow service provider, such as if an accountant is not forceful enough about getting critical documents or information from a client, resulting in errors on a return, for example. Here too, a lawyer can learn how important it is to be persistent about making sure that clients are giving the full picture, so that any advice can be accurate and responsive to the client’s actual needs.
Ultimately, developing a relationship with a good accountant is a must for any firm, as it is with any business. Our practice has benefited from the good advice we have gotten from accountants we have worked with, on issues such as how best to structure licensing deals to whether or not it is worth it to pursue tax refunds from overseas withholdings of monies due our clients by foreign defendants. Just as each and every practice is different, so too will a firm’s needs from its accountants be different. So take the time to find a good one, or periodically consider whether your current accountant is the best match for your firm. For as long as the answer is yes, appreciating the accountants will always be good form.
Please feel free to send comments or questions to me at email@example.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at firstname.lastname@example.org or follow him on Twitter: @gkroub.
This article is sourced from : Source link