Topical Research: Your Input Sought
For possible future articles, I'd like to gather reader input on a number of topics; here are two. Please be in touch if you or an interested colleague would be a good research contact for either topic. (If you have authoritative knowledge and would like to write on the topic, better yet!)
Optimizing Retirement Plans for Law Firms
Recent changes in the legislative and regulatory climate have made it possible and desirable to consider optimizing retirement plan contributions by combining defined benefit and defined contribution plans. But while combination plans can produce superior benefits, their designers must ensure that plans do not violate: the Internal Revenue Code rule that a plan qualified for favorable tax treatment must avoid discriminating in favor of highly compensated employees; or the requirement in the Age Discrimination in Employment Act (ADEA) that pension plans must not discriminate against employees on the basis of age. In Part One of this article, we introduce and compare some of these possibilities.
Containing Health Insurance Cost Increases
There's no relief in sight from rising health-care costs. Hewitt Associates, of Lincolnshire, IL, projects that health care costs will increase 15.4% this year, following an average rate hike last year of 13.7%. If this trend continues, Hewitt estimates, health coverage cost will double over the next 5 years. Law firms coast-to-coast therefore continue to search for their own magic bullets. While doing so, however, they're being careful not to shoot themselves in the foot. Firms see a strong benefits package as critical to retaining and recruiting employees, and therefore take a largely conservative approach to managing health-care costs - trying to maintain generous levels of coverage while minimizing the financial blow to employees.
MA Confidential: More 1099-MISCgivings
Does filing a 1099-MISC form without client consent violate a lawyer's professional ethical duty not to disclose client confidences? Absent such consent, how should a lawyer proceed? Using the example of our own state, Massachusetts, we illustrate in this article the analysis required to answer that question.
Telecommuting: Another Case of Double Taxation
The work Benjamin N. Cardozo School of Law tax professor Edward A. Zelinsky does telecommuting from his home in New Haven a couple days a week is equally, if not more, important to the work he does when physically present at the Manhattan law school, he insists. But that's hardly apparent in reading the New York Court of Appeals' Nov. 24 rejection of Zelinsky's constitutional challenge to the Empire State's tax system, which taxes the entirety of his income whether he worked for it in New York or back home in Connecticut.
Nonprofit Corporate Governance
In November, the Associated Press reported that HealthSouth's directors, outside auditors and investment bankers had been called to testify before Congress concerning why they failed to detect the massive conspiracy, allegedly led by chief executive Richard Scrushy, to overstate earnings of the one of the nation's largest providers of health care services. The case has already seen more than a dozen former executives of the HealthSouth Corp. plead guilty.
Proactive Fraud Prevention
Way back in the 80s, companies in the U. S. Defense industry determined that it was in their best interests to band together and develop the Defense Industry Initiatives as a method to police themselves during a time when their industry was fraught with fraud and corruption. As an aftermath, ethics and compliance programs have been developed and implemented by the majority of U.S. companies. To further entice companies to establish an effective and proactive program designed to detect and, to the extent possible, prevent violations of law The Federal Sentencing Guidelines for Organizations, passed in November 1991, rewards these companies with relief when sentenced for violations of law.
Spam Gets Canned Federal Anti-Spam Law to Take Effect January 1
More than 35 states have enacted laws regulating spam in some form or fashion. Legitimate marketers and businesses adapted to these various state laws, gravitating toward a fairly uniform best practices model, which stopped short of the sort of true "opt-in only" model strongly preferred by consumer and anti-spam groups. Mailers could be fairly confident that they would avoid liability under state spam laws and not overly alienate Internet service providers (ISPs) or their own customers by simply including valid contact information, honoring "opt-out" requests, providing accurate headers and routing information, using nondeceptive subject lines and (in a few states) labeling the messages as advertisements. This widely followed compliance strategy became unworkable in September 2003, however, when California instead enacted a true "opt-in" approach to commercial e-mail marketing. Marketers were faced with a January 2004 compliance deadline and sweeping new prohibitions on marketing to or from any California e-mail address unless the sender had the recipient's "direct consent" or had a "pre-existing business relationship" with the recipient (and the recipient had not "opted out" of such mailings). In response, legitimate marketers aggressively lobbied Congress to accelerate final passage of federal legislation to pre-empt at least the more disruptive aspects of California's new law prior to its effective date. Congress responded to the call, and the CAN SPAM Act of 2003 was signed into law by President George W. Bush on Dec. 16, 2003.
Should Your Firm Keep Two -- or More -- Sets of Books?
Most law firms operate as general partnerships, limited liability partnerships or limited liability companies (together, "partnerships", whose members having capital in the firm herein are "partners"). Does your partnership keep two sets of books ' or more? Al Capone kept two sets of books, and the judge sent him to the Federal Pen for doing so. Yet many law firms (and other professional businesses) legally keep two or more sets of books, arising from different accounting systems prescribed by 1) their partnership Agreements; 2) generally accepted accounting principles (GAAP) audited statements (which are required by some lenders and landlords), and 3) the tax laws. As a result, the firm's net assets ' and the partners' ownership of the law firm, as reflected in the partners' capital accounts ' may be substantially different under each set of books. Moreover, the amount and timing of the firm's cash distributions to partners, the amount of the partners' annual income taxes, and the availability and amount of bank loans to the firm may all be affected by the firm's applicable accounting methods ' all items that may substantially affect the partners' pocketbooks.
Strategies to Enhance Cash Flow
Managing partners, financial partners, members of executive committees and administrators must devote more of their time today, than in the past, to planning and managing their firms' finances and those functions that improve the cash flow. Part One of this article described the first three of six aspects of law firm management and economics that the author has recommended to assist them in improving their firm's cash flow: 1) cash flow; 2) a business plan; 3) budgets for revenues, expenses and client advances. Part Two examines the remaining aspects: 4) partner compensation; 5) a recommended new business and billing committee; and 6) partners' capital and borrowing.
