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In a recent edition, Professor William G. Ross analyzed the professional ethics restrictions incumbent upon lawyers who want to bill by the hour for previously produced work product. ("The Ethics of Billing by the Hour for 'Recycled' Work," August 2003.) Edward Poll, one of our prominent Board members, responds to the issue.
Features
Until 2001, the general view was that IRS determinations of "unreasonable compensation" were not a concern for shareholder employees of professional corporations. That equanimity was shattered - at least for those paying attention - by the 2001 Tax Court decision in <i>Pediatric Surgical Associates P.C. v. Commissioner</i> (T.C. Memorandum 2001-81). In that case, the tax court determined that compensation paid to the shareholder physicians in a Texas surgical practice was unreasonably high because it exceeded the value of the services performed by the firm's shareholder physicians. This seminal tax court opinion turned on the issue of profits generated by the non-shareholder surgeons. Analogous compensation scenarios are common in law firms PCs, so they could face similar IRS determinations, with similarly costly results. Lawyers who are PC shareholders should pay close attention to this case.
Set aside some quiet time every year to think through your insurance and risk management programs with someone knowledgeable in the field. Law firm administrators are mostly not insurance experts, and unless there is some crisis, tend not to give this area the attention it needs. Crisis time may be too late.
Features
<b><i>Without Working Longer Hours or Raising Rates</b></i><p>In today's competitive environment, the profitability challenge to law firms is to increase profits while reducing clients' legal fees. This two-part article provides dozens of specific, workable ideas for enhancing profitability, leaving aside the played-out (and problematic) methods of working longer hours and raising hourly rates. This month's article offers ideas in the following categories, which together offer the greatest opportunities for profitability enhancement.
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J.W. Toothman and W.G. Ross, <i>Legal Fees: Law and Management</i>. Carolina Academic Press, April 2003, 350 pp. plus appendix, cloth, ISBN 0-89089-068-4, $85.00.
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This three-part article will summarize that discussion. Part One is a general overview and comparison of the major surveys currently available for U.S. law firms. Part Two will advise further on how to select a survey, and Part Three will explain how to get the most out of survey participation.
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Most law firm partners react skeptically to the suggestion that their capital contributions should go up in 2003. After all, with the cost of borrowing at its lowest level in over 40 years, why should partners invest more capital in the firm, thereby delaying or reducing personal cash flow? Nevertheless, even well managed firms are now likely to need more partner-contributed capital than they did just a few years ago.
Features
With the compromise-laden Federal tax cut now law, what if any are the implications for law firms? Members of this newsletter's Editorial Board and several other recent contributors were asked to address that question.
Recent rulings of importance to your practice.
Last month's article concluded with 'Surviving a Motion to Dismiss or Suspend,' which discussed the exact boundaries of international comity, and explained that these boundaries are not clear. Therefore, a court's decision on a motion to dismiss or suspend a non-U.S. debtor's bankruptcy case under section 305(a)(2) (which invokes the 304(c) factors) will depend heavily on the case's specific facts.
