5 Ways to Run a Compliant Law Firm
Maintaining compliance is a must for any firm that wants to keep their clients happy, avoid issues with their bar association, and run an ethical, efficient practice. The stakes are high in the legal industry, where violations can result in disciplinary actions, including sanctions and even disbarment. To avoid this, law firms must be dedicated to setting up processes and … Read More
How to Avoid Client Ledger Overdrafts
Keeping track of individual client ledger balances and making sure there are sufficient funds to cover any disbursements is a requirement of trust accounting compliance[1]. To prevent a situation where there is an overdraft on a client trust account, you must keep careful track of the balances of each individual trust account. These funds are typically pooled into one larger … Read More
How do I handle interest on settlement funds?
The handling of interest from settlement funds kept in trust accounts falls under Model Rule 1.151 regarding the safekeeping of property. Because the funds are considered to be the property of the client as long as they remain in the trust account, the client may be entitled to any interest accrued during its term in the account. In general, the … Read More
Do I need to keep original canceled checks for compliance purposes?
Rule 1.15 of the American Bar Associations’ model requires lawyers to keep complete records for trust accounts. As part of this, lawyers should be prepared to keep supporting documentation for all transactions and balance amounts. When acting as a fiduciary for client funds[1], part of that responsibility requires lawyers to be able to substantiate their books, reconciliations, and transactions. Should … Read More
What do I do if a client overpays?
If a client overpays, those additional funds belong to the client and at no point should the law firm keep them. It is the lawyer’s responsibility to make sure those funds make it back to the client. Those funds should be placed back in the client trust account and a diligent effort made to reimburse them for the overage. The … Read More
What is the statement of cash flows for law firms?
The statement of cash flows, sometimes alternatively referred to as the cash flow statement, shows law firms where the cash is coming in and where it’s going. On the report, the cash flow statement will list inflows and outflows into helpful line items. It includes cash from investing returns, operating activities and financing/borrowing. This statement provides firms with a short-term … Read More
What is my law firm's tax liability?
Tax liability occurs because of a taxable event, which is frequently is fiscal year-end financial taxes. However, there are other scenarios in which law firms can incur tax liability, including royalty income, stock or asset sales or business mergers that cause profits. In legal terms, tax liability means the government has a client on assets, which are typically those in … Read More