Preparing for 1L Summer

If you are a 1L, you have likely received all of your grades back from your first term and you are now settling into your second.  Before you know it though, the school year will be over and you will have a "free" summer.  While your college summers may have been a time to explore the world or party, your 1L summer is a time to improve your resume and position yourself for your legal career.  Here are some things you should be thinking about and planning for NOW.

1.  Law Review & Journals

You will start to hear about your law review and journal competitions that will occur right after you finish your last set of exams.  The competition is usually a difficult 3-7 day event where you are given hundreds (or thousands) of pages of material and asked to write an article.  Based on the results of the competition, you may be asked to join a law review or journal.  While the timing for the competition is not great (right after exams), you should do everything you can to participate as Law Review and Journals look great on your resume.

2.  On Campus Recruitment (OCI)

One of the reasons your 1L year is so important is that your grades are the primary factor that will determine how you will do during the on campus recruitment that will occur at the end of your 1L summer.  This is where law firms come to your campus and offer you summer employment for your 2L year.  These jobs are highly coveted as they pay over $160,000 per year and this will be your only shot at one.  During the second semester, try to take any interview or job search classes or seminars you can find.  OCI is an important next step in your legal career.

3. Transfer

You may want to consider transferring law schools to "upgrade."   This is a very personal choice and you should look at all of the pros and cons.  You will find articles related to transferring on this blog.  Just access our search tool.

4. Job

You should also focus on the job that you will take for your 1L summer.  You should start looking early as all of the "good" jobs go fast.  You want to find a "legal" job for sure and look for something that will look good on your resume.  Even people who go to top schools have a tough time with the 1L summer job search so start your search early.  While pay is a consideration, the really important part of your 1L job is the duties you will be performing and the organization you will be working for.  

5.  Enjoy the Summer

While it is an important summer, take the time to relax and enjoy it. 1L year was tough and you need a break to get ready for your last two years of law school.  

Starting Classes Again! Be sure to Evaluate What You Did Correct and What you Did Wrong

A wise man once said that insanity is doing the same thing over again and expecting a different result. While I am not sure who the wise man was, I believe the phrase is accurate.  This especially applies to Law School and doing well while you are there.  As you return to classes after the winter break, you will likely get results back from the exams you sat for in December. If you did not do well, you should sit down and evaluate exactly what you did in the last term and make some changes.  Do not fall into the trap of thinking that you can exhibit the exact same type of behavior and do well in your second and future terms.

If you did poorly on exams, ask your self the following questions.  

• Did you skip classes
• Did you make your own outline
• Did you review your notes after each class
• Did you get enough sleep
• Did you participate in a study group
• Did you go in and ask your professor for help
• Did you do practice exams before each exam
• Did you surf the internet while in class
• Did you pay attention in class or daydream
• Did you eat correctly or did you eat junk food
• Did you cram for exams

These are just some of the questions you should ask yourself and depending on the answer you should change your habits!  If you did well, you may want to ask the same questions and continue doing what you are doing right!

Good luck during your next term!

Top Things A Solo Law Firm Should Do At Year End

This post is for all of those aspiring law students who wish to open their own practice.  

As the owner of a solo law practice, all year you have likely been running around acting as manager, developer, business generator, marketer, human resource manager and administrative assistant.  Given the numerous roles, it is often tough to sit back and look at the big picture.  For some businesses, December can be a slower month and it is a great time to reflect and plan for the future.  Whether you are running a law firm or a lemonade stand, as 2012 comes to an end there are several things that a prudent business owner should consider to position themselves for the new-year.  Here are the top things you should consider.

1.     Thank Your Customers

Study after study has shown that it is far easier to get new business or a referral from an existing client than it is to find a new client.  Even though many know this is the case, some business owners ignore current clients while spending significant resources trying to attract new clients.  This is a big mistake.  While business generation is important, you should make sure that you are catering to existing clients and you should also find some way to thank your clients.  This can be taking them out for coffee or dinner, sending them a small gift or even sending them a card.  A generic blast email to a client is better than nothing (although pretty close to nothing), but instead of this approach you should always try to personalize any message you send.  Let your customers know that they are special and it will likely be the best time and money you ever spent.

2.     Thank Your Referral Sources

In order for a business to thrive, a significant amount of your clients or customers will come from referrals.  Many of these referrals will be extremely lucrative for you and you should certainly acknowledge the people who send customers/clients your way.  This is not only a matter of courtesy but it is good business, as it will differentiate you from others and keep you at the top of a referral source’s list for next year.  Lawyers have a number of ethical rules to follow when it comes to providing things of value for referrals but even lawyers can send a hand written thank you card to referral sources or find another way to make your referral source feel appreciated.  For other industries, certainly a gift or a dinner is the minimum that you could do for someone who has referred significant business to you.

3.     Take Advantage of Tax Law that Can Reduce Your Tax Burden

There are a number of things you can take advantage of before year-end that will save you tax dollars.  Here are a few tax saving tips;

• Make a 401K contribution
• Look at expenses you can pay by year-end to get a tax deduction like association dues and other business expenses
• Make charitable donations
• Calculate estimated taxes and make a payment

Check with your lawyer or accountant for more tax saving ideas and also ask him/her about any tax changes for 2013.

4.     Review Your 2012 Marketing Plan & Make a New Plan for 2013

Just last week I made a list of all of the marketing sources I used in 2012 (eg. Published Articles, Newsletters, Networking, JD Supra distributions, Social Media, etc), and compared this to the clients that each source generated.  This simple analysis will allow me to modify my marketing strategy for 2013 to focus on the most lucrative marketing strategies.

5.     Set Some Realistic Goals for 2013

You should give some thought to some of the things that you want to accomplish in 2013.  If you have not made a business plan yet, perhaps now is a good time to make one.  A plan forces you to sit down and think from a financial and strategic perspective and this will only help your business.  This analysis should also include a comprehensive review of your expenses and a budget for the New Year.  I just went through a budget review exercises and I was able to significantly reduce my expenses based on a line-by-line review of what I spent money on in 2012.

6.     Meet With The Business Professionals That You Planned to Meet With All Year But Did Not Get a Chance

One meeting you should have for sure is a meeting with your accountant.  I will contact my accountant this week and also have meetings set up for insurance and 401K plan set up.

7.     Critically Review Your Policies, Procedures & Make Changes

During the year, I often did not have time to review policies such as billing, practice management, accounting, personnel, operations and consultations.  At year-end, it is a good idea to take a look at how you did things and ask yourself whether you can improve in some way.  I just went through this exercise and changed my policy with respect to consultations and implemented a new practice management system that has streamlined my accounting and billing.

8.     Review Your Website

Do not underestimate the importance of your website!  We had a client that just signed with our firm last week who indicated that one of the reasons he signed with us was because he thought we had a professional website that kept him on our page long enough to get a feeling for who we were.

Even if you are in law school, you can mark this post and refer to it when you achieve your dream of opening your own firm. Good luck!

Would You Like To Sit For The Bar Exam In February Rather Than Go To Class?

So what will they think of next? The State of Arizona is considering letting students sit for the bar exam in February rather than going to class.  I for one would have loved the option. (not sure I would have done it but I would have loved the option.)  This week, the Arizona Supreme Court is reviewing a proposal submitted by the law schools in the State, requesting 3Ls be provided the option to sit for the February bar exam as long as they meet some criteria.  

The proposal would permit students in their third year to sit for bar exam courses rather than their regular classes and the bar preparation would be more focused on professional skills. Deans of these law schools view this as a positive move to help students more quickly find a job, save money and become increasingly ready to practice law. Let us know what you think...We are very interested in your thoughts so let us know what you think.

Exams, Exams, Exams

If this is your first set of law school finals, our thoughts are with you and we can only say that it is not going to be as bad as you think. Well..perhaps it will be but it will be over quickly.  While the process can be a tough one, with Finals around the corner, we wanted to give you some helpful tips.  Here is a list of things to help you get through the next few weeks.

• Study In Groups but Find a Good Group

It is impossible for a law student to assimilate all of the information that law school has to offer. As such, studying with a group of people will help you recognize the things that you may have missed. A great approach is for all members of the group to work on a hypo or an exam and then sit down with the group to go over answers.  Remember to listen carefully to the answers of your fellow students because they will always have picked up on things that you will miss.  

• Avoid Study Groups that Waste Your Time

While a good study group is great, cut your losses if you do not feel you are getting anything out of the group or they are wasting your time.  Give it a real chance but you will find that your time will run out as exams near and you will not have time to waste.

• Make Your Own Outline

Do not use commercial outlines or other outlines that you can download at places like the outline depot.  The benefit of an outline is making your won and your grade will significantly improve if you work on your own outlines. This of course assumes that you went to class and have notes to make a good outline.

• Do As Many Practice Exams and Hypos as You Can

I was always shocked at how many people entered an exam and had not done even one practice exam. This is a mistake!  You should do as many exams as you can under timed conditions and compare your answers with either the answer sheet or friends

• Do Not Borrow Time from Subsequent Exam Questions

At the start of an exam, budget your time from each question and DO NOT BORROW TIME.  Those who borrow end up missing easy points on final exam questions. The fact is you likely have gotten as many points from the question you are wasting time on and you can always come back to it if you like if you have time.  

• Make A Schedule

Make a study schedule of what you want to cover and stick to it.  Time is a premium around exam time and you will find that the organized student does best.

• Go Visit Your Professor

There are many reasons to visit your professor during office hours.  First, Professors often give away what is on an exam.  Second, they can clarify things you do not understand. Third, they will see that you are engaged and this may help your participation grade. 

• Relax

Do not stress yourself.  You should of course take exams seriously but do not beat yourself up or stress too much. this will only lead to poor performance.  

Good Luck!!!!

What You Should Know About Which Business Form (LLC, Corporation, S-Corp or Sole Proprietorship) You Should Select If You Start Your Own Law Firm

More and more law students decide to open their own law firm after they complete law school.   When faced with this challenge, the question often comes up of which business entity makes sense to select.  In addition, as a Certified Public Accountant (C.P.A.) and Attorney, I have had my share of questions from clients regarding which type of entity a person should set up if they want to start a business.  I too had to ask myself the same question when I started my own law firm http://www.legalservicesincorporated.comand was surprised at how much inaccurate and confusing information exists on the Internet.  Moreover, as this is a complicated area, some advisors often give misleading and unclear advice on the topic. 

When deciding which entity to select for your law firm your decision will be based primarily on flexibility in the ownership structure, limited liability protection & tax reasons.  For a solo practitioner, your decision will be between a Sole Proprietorship (“SP”), Corporation (“C”) or Limited Liability Company (“LLC”) so those are the entities we will focus on.  Let us look at the SP, C and LLC in turn. 

What are The Advantages & Disadvantages of a Sole Proprietorship?

When you were a child, you may have had a lemonade stand where you bought, peeled and juiced lemons, marketed your event and took in revenue from your lemonade sales.  If so, your business would have been a Sole Proprietorship.  This type of business is easy to set up and in many places you are not required to do anything in terms of registration with the government.  For legitimacy and because some of the entities you deal with (a bank for example) will insist that you register your business, it is always a good idea to register your small business with the Government.   In terms of the process, you simply fill out some forms with your State or local Government office, pick a name, pay a fee and start business.  When you file your taxes, you will simply list the name of the business on your tax return and also itemize all of your revenues and expenses on your personal return.  All in all a very simple set up.

So if it is so simple, why doesn’t everybody pick this business form for their law firm?  The key reason is that this business form does not protect the owner’s personal property if someone decides to sue the law firm.  The legal terminology for this is that a Sole Proprietorship does not have “limited liability” protection.  Instead, the law firm and the individual are considered the same person and if the business is sued or incurs debts, you, the business owner, will be personally liable.  As you can imagine this can be a scary proposition as the end result of a bad business decision could be the loss of a home, car or personal belongings.  You should also note that even though you may face a low risk of being sued, this risk jumps significantly if you deal with vendors, hire employees or have clients visit your premises.  Even a photo on your website can result in a law suit.  As such, this entity is often not selected when people set up a law firm and instead a limited liability entity (a Corporation or LLC) is selected. Note though that there are special rules for setting up limited liability entities for lawyers and limited liability entitles do not protect you against malpractice. 

As I Am A Lawyer How Does A Professional Corporation Fit Into All Of This?

As you are a lawyer you cannot just set up a “regular” LLC or Corporation. Instead, you must set up a Professional Corporation or a Professional LLC.  All this means is that the limited liability will not protect the business owner against malpractice. As such, if you are a professional you must also get malpractice insurance. The idea here is that the Government does not want professionals setting up a limited liability entity and then shirking their professional responsibilities.  The entities are the same as a regular Corporation or LLC in all other regards.  Now let us take a look at the limited liability entities. 

As a Lawyer, Should I Set Up A Corporation & Will This Eliminate My Personal Liability?

In order to better separate personal & business finances (and for a number of other reasons too complicated to get into now), Corporations were formed and offer a law firm or business owner limited liability protection.  As such, generally speaking a law firm owner and the Corporation are two completely different people and you will only stand to lose what is invested in the law firm.  Accordingly, if someone sues the law firm they can only reach the assets in the business and not your personal assets.   The same concept applies to debts but as a practical matter, if you have a new Corporation a bank or other lender will usually ask for a personal guarantee as they are fully aware that a Corporation has limited liability.  You should remember to include the name of the law firm on any legal documents such as a loan document or lease, to avoid exposing yourself to liability even with the limited liability protection.

This limited liability protection gives a business owner peace of mind but there are issues associated with a Corporation.  The first is that in order to form a Corporation you must adhere to a certain amount of formality which requires time and expense.  For example, you must appoint a board (this can be yourself) and also hold board meetings, develop bylaws and develop minutes.  You must also fund the corporation and issue stock to yourself. 

The second is the issue of double taxation.  As a corporation is a separate entity, the government will tax the Corporation and then tax the business owner again on their personal tax return.  This also means that you must file a Corporate tax return.  While double taxation may seem reasonable for Ford or Microsoft (in that the Corporation’s profits are taxed and then distributions to shareholders through dividends are also taxed) it hardly seems fair for a small business who simply set up the Corporation to avoid their home being taken away from them if they were to be sued.  As such, the government created what is called the “pass through entity.”  The two forms of pass through entities are a Limited Liability Company (LLC) and S tax status. Let us first look at the LLC.

What is A Limited Liability Company (LLC) & Why Would A Lawyer Starting  A Law Firm I Opt For It?

A LLC is a relatively new creation and a very common business entity form for new law firms.  It was established to offer the business owner limited liability protection while addressing both of the problems outlined regarding a Corporation above. The first is the formality associated with setting up a Corporation.  To address this, a LLC has the advantage that the business owner is not required to adhere to the strict Corporate formality.  Instead, a flexible operating agreement is drawn up to describe how the LLC will operate.  A LLC also addresses the problem of double taxation as a LLC is a “pass through entity.” This means that all of the earnings in the LLC are taxed as if you earned them personally.  As such, the entity itself is not taxed but rather the earning “pass through” to you.  The tax preparation is much simpler than a Corporate tax return and is very similar to how you would file as a Sole Proprietorship.

In terms of set up, the process is simple in that you submit forms to the local government, pick a name, pay a fee and you will have to draw up an operating agreement. 

Regrettably, there are two downsides to a LLC.  First, many States have what is called a publication requirement where you must publish in local newspapers that you plan to open a LLC.  (A very odd requirement indeed as I cannot imagine who would read it – do you remember the last time you saw a LLC announced in the newspaper)  In some locations, this can be very expensive. For example, in Manhattan, this requirement would cost approximately $1500.  You should consult your local lawyer and ask about the impact of not meeting the publication requirement as it may not be as bad as you think.  The second disadvantage is that a LLC is subject to self-employment taxes on all of the income earned.  There is relief on the employment taxes though as the LLC can elect “S status” to eliminate this requirement on at least a portion of the employment taxes.  This is further described below.

Is “S Status” The Same As A S-Corporation and Can I Elect S Status For A LLC?

When you search the Internet, you will see many references to an “entity” referred to as a S-Corporations and you will often see self-employment taxes as one of the advantages of a S-Corporation over a LLC.  You should get all of that out of your mind and think of S as a TAX STATUS rather than as a type of entity.  If you do, most of your confusion will vanish. So here is the lowdown. 

BOTH a Corporation and a LLC may elect S status and if they do, they will avoid self-employment taxes on at least a portion of their earnings.  Here is a brief and simple example.  An entity (LLC or Corporation) makes $100,000 and the owner assigns themselves a salary of $60,000 (salary must be reasonable in order to qualify).  When this occurs, and S status is elected, the owner will only have to pay self-employment tax on the $60,000 rather than the full $100,000.  Do not confuse self-employment tax with income tax as income tax is paid on the full $100,000 and this cannot be avoided.  In order to be eligible, you must file the S tax status election with the IRS right after you set up the LLC or Corporation (they give you around 60 days).

We just explained how S status works and it may seem like the perfect middle ground.  Regrettably though, it too has its drawbacks as the ownership structure has certain requirements and you must be a U.S. resident for tax purposes to be eligible.  In addition, if you elect S Status there is a limitation on the amount of owners that may hold shares or membership units in the company.  If you are considering electing S Status, you should consult a Lawyer or Accountant as it is a complicated area. 

What Makes A Good Letter Of Reference For A Law School Application

As it is Law School application time, many have asked me what makes up a good reference letter and some have even asked me to write one for them.  Here are a few tips regarding selecting the proper person. 

In general, the more letters you have the better but all letters should be relevant and come from someone that knows you and can speak to why you would succeed in law school. 

The best letters come from your old college professors that can speak to your intellect and your ability to do well in law school.  The professor should of course know you and be familiar with your work and this usually means that you had the professor for a semester or you have performed research for the professor.  An unhelpful or non relevant letter from a professor would come from a professor who is a friend of your parents who you have never met.  This type of letter is useless and will not get you very far.  Similarly, if you know a professor but have never been in his/her class, the recommendation will only serve as a character reference and this is generally not what the admission’s office is looking for.  What they are looking for is a letter that will demonstrate you will do well in law school and this letter must be from a person who is in a position to give a reliable opinion about this.

Another good letter is a letter that comes from a lawyer that knows you and can speak to your scholarly potential.  This is especially the case if the person will be able to illustrate why you will do well in law school.  Another great source is a past or current employer especially if the employer can write about your analytical skills, problem solving ability or scholarly ability. 

When I went to law school,  each of my letters was selected to cover off an area that I thought would interest the admission’s committee.  Namely, one came from someone that attended Harvard, another came from a Judge that could speak to my scholarly ability and the others came from professors that I had for law school classes in my first year.  Each was strategically selected and the selection worked well for me. 

That worked for me and it could also work for you. Give who you want to select some careful thought as the people who are deciding whether or not to admit you will certainly review who you have selected.