Building a Solo Practice: Addressing Accounting, Tax, and Liability Issues
The latest set of tips for the solo practitioner come courtesy of central New Jersey solo William T. Harvey, Jr., who contributed a piece on setting up a solo practice to the February 2012 edition of The Young Lawyer, a publication of the ABA Young Lawyers Division.
In the piece, Harvey focuses on two related issues fundamental to establishment of a solo practice: tax and accounting on one hand and liability on the other. He recommends beginning by consulting with an accountant, and outlines a list of questions to tackle during that consultation, including tax issues and firm accounting methods. Among the questions he suggests asking:
· What is tax deductible?
· What can I depreciate over the years?
· What expenses am I allowed to “write off”?
· Should I claim a home office?
· Should I use a cash basis or an accrual basis?
· Should I lease or buy equipment? (For recommendations on equipping an office, see Philadelphia PI solo Evan Aidman’s advice on the topic in a previous PhiLAWdelphia post.)
As a bridge from discussion of tax issues to discussion of liability issues, Harvey also mentions formation your practice as a formal business entity, but does not give detailed advice. Fortunately, San Francisco tax solo Doug Greenberg has already considered the topic in a past PhiLAWdelphia post.
Finally, Harvey recommends acquiring malpractice insurance and provides a list of questions for your consulation with a broker, your consulatation with a broker, just as he did for your consultation with an accountant. As he notes, different practice areas come with different premiums, but all attorneys can be sued and litigation costs can add up quickly, so insurance is a must.
For more in the Building a Solo Practice series, start with the latest PhiLAWdelphia posts on the topic, Phone Call Handling Tips for the Solo Practitioner and The Marketing Power of Yelp.