Accounting for Lawyer and Law Firms
ACCOUNTING & advisory Services for Lawyers and Lawfirms
At Presti & Naegele, we understand the unique financial challenges faced by legal professionals. Our dedicated team of accountants and CPAs provides comprehensive accounting and advisory services to help lawyers and law firms manage their finances effectively. Whether you’re a solo practitioner or part of a larger firm, we offer tailored solutions to identify deductions, optimize tax strategies, and ensure compliance.
BOOKKEEPING SERVICES FOR LAWYERS
P&N’s bookkeeping services for lawyers lays the groundwork for accurate financial data. Accurate bookkeeping ensures financial transparency, compliance, and informed decision-making for your firm.
Proper bookkeeping provides a solid foundation for understanding income, expenses and overall financial health reducing the risk of errors, fraud, and financial mismanagement.
Regular bookkeeping helps track cash flow allowing lawyers to manage their finances.
efficiently, ensuring bills are paid on time and funds are available for growth.
TRACKING CONTINGENCY EXPENSES
Contingency expenses in the eyes of the IRS may not be immediately deductible. P&N helps lawyers manage this process.
IOLA AND ESCROW ACCOUNT MANAGEMENT
P&N assists lawyers and law firms with IOLA and escrow account management. We understand the rules and regulations governing IOLA and escrow accounts. We can assist in maintaining accurate records, monitor transactions, track deposits, and ensure proper segregation of funds.
We regularly reconcile IOLA and escrow accounts verifying balances, identifying discrepancies, and addressing any issues promptly. For IOLA accounts, we calculate, and report interest earned on client deposits ensuring compliance with interest remittance requirements to the IOLA Fund.
CHOOSING THE RIGHT BUSINESS ENTITY
Lawyers and law firms can operate as sole proprietors, partnerships, LLCs, or corporations. Each structure has distinct tax implications. P&N can assist you in choosing the right business entity. Choosing the right structure for your business is crucial, as it affects legal liability, taxation and operational flexibility. Each business type has its own trade-offs. We can walk you through the process identifying the advantages and drawbacks of one entity vs the other.
Legal Structure:
How lawyers pay taxes depends on the structure of their business. At P&N, we can evaluate your situation and recommend the right entity for your business.
Sole Proprietorship – A sole proprietorship is the simplest form of business, where the owner and the business are one.
Limited Liability Company (LLC) – An LLC combines the liability protection of a corporation with the flexibility of a partnership.
Partnership – A partnership involves two or more individuals or entities sharing ownership and responsibilities.
S-Corporation – An S-Corporation is a pass-through entity that combines features of
corporations and partnerships.
C-Corporation – A C-Corporation is a separate legal entity owned by shareholders. It’s the most complex structure.
COMMON DEDUCTIONS FOR LAW FIRMS
- Meals and Entertainment: Expenses related to client meetings, networking events or business meals can be deductible.
- Office Rent and Utilities: Deduct the costs of office space, utilities, and equipment.
- Home Office: Expense reimbursement for home office.
- Salaries and Benefits: Payroll expenses for employees, including health insurance and retirement contributions.
- Legal Fees: Fees paid to other attorneys or legal professionals.
- Marketing and Advertising: Costs associated with promoting the firm.
- Professional Development: Deduct expenses for continuing legal education (CLE) courses.
- Travel Expenses: Deductible if related to business purposes.
- Technology and Software: Expenses for legal software, research tools, and hardware.
- Interest on Business Loans: Interest payments on loans used for business purposes.
Retirement Planning
As a Lawyer or Law Firm, you have several retirement options to help you defer earnings and secure your financial future. Some of the more popular choices:
- 401K PLANS - Many law firms offer 401(K) plans. Lawyers can contribute a portion of their pre-tax salary, which grows tax-deferred until retirement. Employers may match contributions up to a certain percentage.
- INDIVIDUAL RETIREMENT ACCOUNTS (IRA) – Lawyers can open Traditional or Roth IRA’s, which offer tax advantages for retirement savings.
- SIMPLIFIED EMPLOYEE PENSION (SEP) – Self-employed lawyers or those with their own practices might consider a SEP-IRA. It allows for higher contribution limits and contributions are tax deductible.
- DEFINED BENEFIT PLAN – Provides a fixed retirement benefit based on years of service and salary history.
- PROFIT SHARING PLANS – Law firms can set up profit sharing plans. Contributions are based on the firm’s profits.
- CASH BALANCE PLANS – Popular among firms with high-income partners. Cash balance plans provide a guaranteed benefit like a pension but with individual accounts.
For inquiries or guidance, contact Presti & Naegele Accounting and Advisories. Your success awaits!
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