My Solo Plan

How do I plan?

eddie — Mon, 29 Apr 2013 15:20:53 +0000

There is no time like the present to protect your business. As a solo business owner, you must take the time now to protect your business before it is too late. Unforeseen events can happen at any moment; you need to prepare yourself and your business for the worst. If you are not able to work for any reason, then your clients are not serviced, their questions are not answered, their needs are not met, and their matters are unresolved. Some clients may be willing to withstand a short period without you, but at some point, your clients will replace you with someone else. The time period at which this occurs depends on the type of business. For instance, a client who needs her taxes filed before April 15 will not wait months for a solo CPA to return from a medical leave. She will seek out another accountant to file her taxes because of the federally imposed deadline. By planning for an absence, you gain the ability to continue to be of service to your clients even when you are temporarily or permanently absent. By planning ahead, you are able to retain your clients and thereby preserve the asset value of your business. With that being said, how does one begin to plan? You must be familiar with all the possible contingencies, responsibilities, obligations, rules, and laws which are applicable in your profession. You must choose a trusted colleague who will be ready, willing, and able to act as a substitute for you in the event of your absence, or would be willing to consider buying your practice in the event of your permanent absence. The parties will need to enter into an agreement memorializing the relationship and the rights, responsibilities, and duties between them. This contract must provide for the triggering event activating your substitute’s authority. The contract must provide for confidentiality of information, especially in regards to those restrictions customary in your profession. There must be provisions for compensation of the parties and for the sale of the business. Also, the reasons for the agreement’s termination must be clearly stated. These are only a few of the considerations one must provide for in such contract. Each profession and each situation is unique and requires a special understanding of the issues. Such planning can be a daunting and time consuming task. People often begin to plan and quickly become paralyzed by the enormity and complexity of the task. Surely, you don’t want to omit any important piece of the plan by mistake. It may seem overwhelming and daunting. There are too many variables to consider and omission of any one of them may lead to problems in the future. Any mistakes may cost your clients and your business and in turn you and your family will suffer. You may be armed with the resources and knowledge to formulate a plan – maybe you are a lawyer. If this is the case, finding the time to plan may be […]

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Cosignatories on Attorney Accounts in New York

eddie — Fri, 01 Mar 2013 17:35:51 +0000

This is a response to a recent inquiry on whether a cosignatory is permitted on attorney trust, escrow and special accounts in New York: We have found that neither the Rules of Professional Conduct nor the New York State Bar Association (“NYSBA”) Committee on Professional Ethics have addressed whether a cosignatory attorney is permitted on attorney trust, escrow, and special accounts. Nevertheless, relying primarily on the Planning Ahead guide, our position was and is that a cosignatory is permitted on all attorney accounts as supported by the discussion below. Rule 1.15(b)(1) of the Rules of Professional Conduct addresses that a lawyer or law firm shall maintain separate accounts for funds belonging to another person. 1.15(e) entitled “Authorized Signatories” states that “Only a lawyer admitted to practice law in New York State shall be an authorized signatory of a special account” (emphasis added). Lastly, 1.15(g), entitled “Designation of Successor Signatories” directs that upon the death of a sole signatory, an application may be made to the Supreme Court to designate a successor signatory on trust, escrow, or special accounts. The Rules of Professional Conduct do not directly address the situation of naming a cosignatory when planning for an inability to practice. However, one can infer that there are situations where multiple signatories on such accounts are permitted. For instance, where these accounts are in the name of the law firm, multiple attorneys may be authorized signatories as members or employees of the firm. The Rules state that an admitted New York Lawyer shall be an authorized signatory, and one may infer that each account does not require only one signatory. Lastly, there are situations where there are sole signatories and upon their death applications may be made (not “shall”) to the Supreme Court for the designation of a successor signatory, and one may infer that it is discretionary whether the application is made, not compulsory. This does not address a situation where the sole signatory is disabled or has provided for a cosignatory. The NYSBA Committee on Professional Ethics has not addressed a situation where there are cosignatories or successor signatories on attorney trust, escrow, and special accounts. Opinion #693 however, concludes that “A lawyer may allow a paralegal to use a signature stamp to execute escrow checks from a client trust account so long as the lawyer supervises the delegated work closely as provided in this Opinion and exercises complete professional responsibility for the acts of the paralegal.” It may be safe to assume that a lawyer may delegate the authority to use a signature stamp to another lawyer under similar conditions regarding supervision and responsibility for the acts. This still does not address a situation where the sole signatory is disabled or dies and is unable to exercise the requisite supervision and responsibility, or has provided for a cosignatory. The Planning Ahead guide was prepared by The NYSBA’s Committee on Law Practice Continuity in 2005. Despite referencing the New York Disciplinary Rules (the Rules of Professional Conduct, which replaced […]

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Law Practice Protection: Valuation and Sale of the Practice

eddie — Thu, 07 Feb 2013 21:22:45 +0000

Most solos view their practice merely as a source of income. However, a law practice is much more; it is a business with an asset value that deserves to be protected and can be sold. Once this point of view is understood and accepted, the need to plan to protect their clients, business and family becomes apparent. But if a law practice is a business with an asset value, then how is it valued, how is that value protected and eventually accessed? In the following, we will discuss law practice valuation. Please look forward to upcoming discussions on law practice value protection and access. First off, it is important to have an experienced and credentialed business valuation expert involved in the buying and selling process. Generally, there are two valuation methods that are used to value the practice. The first method is determining a value by making comparisons between practices with similar transactions. This is a difficult approach because of the lack of comparative data. The other method is based on the income approach. Here, the future earnings are estimated against a multiplier derived from the inverse of the perceived risk rate. This is a common method used for a lump sum purchase of a practice. However, if the estimated future earnings or perceived risk are not accurately factored, either party is positioned to unjustifiably gain or lose in the transaction. When it comes to law practices, the earn out may be most equitable payment structure to each party. In an earn out, the parties could agree to some up front lump payment. Then the remaining payments of the earn out is paid over time and is correlated to the amount of business done over a period of time after the sale. This correlated payment to the seller is usually a percentage of the revenues or profits from services rendered to a client or account obtained by the buyer. This period can extend for a few months, as in the case of practices that service clients on a one transaction basis, or the period may last years, as in the case of practices that have continuing relationships with their attorney. In either case, an earn out more accurately represents what is passed on to the buyer. However, if the buyer’s service of the clients in less than satisfactory, the seller’s clients will find another attorney, and the seller will lose out on the full asset potential. Therefore, it is important that a successor and buyer be chosen with care. In order to deter current clients leaving after the sale of the practice, have clients sign an engagement letter addendum which introduces and authorizes the successor to act for the client on behalf of the selling attorney. This will make the client aware of successor and gives each an opportunity to become familiar. However, it is important to note that the buying attorney needs to check for conflicts of interest in representing the seller’s clients. If a conflict is found, then […]

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Why Plan?

eddie — Mon, 28 Jan 2013 20:40:18 +0000

As a solo practitioner, you know if you do not show up for work, the work is not done. The responsibility of your business is entirely yours. If for some reason – disability, incompetency, death, etc. – you cannot perform your responsibilities or duties as a business owner, your clients and customers suffer, and so does your business and reputation. If client matters are left unresolved, the client is going to find another business to fulfill their needs. Loss of clients and customers means loss of revenue and profit, not only does your business suffer, but also so do you and your family. Such unfortunate consequences can be avoided simply by planning ahead. Such comprehensive plans need to include powers of attorney (during life) and authorizations (for after death), confidentiality and non-disclosure provisions, temporary employment contracts (we call “Assisting” Agreements), a pro forma Asset Purchase Agreement (or Bill of Sale), as well as a business information handbook, which contains all the important information regarding running your business. Sound like a lot of work? Sound daunting? Not really. The Bruechert Law Firm was established to help solo practitioners protect their business, and access the asset value of their business when they are not able to work because of some unforeseen event. We developed My Solo Plan for solo practitioners. We know the pressures of being a solo, and want to help. Please take a moment to view our newly redesigned website. Here, you will find more important information on solo business contingency, continuity, and succession planning. Then please give us a call to find out how we can help you protect your business. “You spent a lifetime building your business, now take steps to protect it.”

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Comment on the Proposed New Uniform Court Rule on the Appointment of Caretaker Attorneys

props — Wed, 22 Aug 2012 14:30:14 +0000

The Proposed New Uniform Court Rule on the Appointment of Caretaker Attorneys (“Proposed Rule”) fills a critical gap where solo practitioner attorneys (“solo attorneys”) fail to plan for an “inability to practice.” Such inability to practice may result from suspension, disbarment, incapacity, temporary or permanent disability, death, or disappearance.

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