Should Your Firm Keep Two -- or More -- Sets of Books?
December 01, 2003
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.
Pennie to Close Doors by End of December
December 01, 2003
Intellectual property boutique Pennie & Edmonds will ring in the New Year by closing its doors and firing some of its lawyers and staff. Ahead of a likely announcement of a deal for many ' but not all ' Pennie & Edmonds lawyers to join the New York office of Jones Day, Pennie & Edmonds' management informed associates and staff members Monday that the 190-lawyer firm will cease practicing law and wind up affairs by Dec. 31.
Strategies to Enhance Cash Flow
December 01, 2003
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.
Around the Firms
December 01, 2003
Movement among major law firms and corporations.
Knowledge Management: Lose the Label and Focus on Clients
December 01, 2003
The label "knowledge management" (KM) means different things to different people. For IT types, it often means technology solutions to the information deluge facing business today - intranet portals, document management and extranets, to name a few. For MBAs, knowledge management implies organizational systems and processes to capture, disseminate and leverage the collective wisdom of a business enterprise. For most lawyers, unfortunately, the words "knowledge management" mean little or nothing. I'm not suggesting that lawyers do not appreciate the competitive imperative to make the most of their firm's collective knowledge and expertise. But the label "knowledge management" does not work well in law firms. It sounds like just so much vague jargon having little to do with real-life client expectations. Since successful KM requires lawyers to buy in and collaborate, the jargon can stand between you and the significant payback that KM has to offer.
Sentencing Convicted Corporations
December 01, 2003
The Ad Hoc Advisory Group to the United States Sentencing Commission on the Organizational Sentencing Guidelines (OSG) has recommended significant changes, particularly in the seven criteria for an effective compliance program to prevent and detect violations of law that, if implemented by an organization, may qualify it for a reduced fine in the event of a conviction.
Selling a Law Practice: Prospects and Pitfalls
November 01, 2003
Large firms have long had well-defined methods for transferring ownership interests in a practice via "mergers," "retirements," "breakups," etc. Attorneys in larger firms have also always had mechanisms in place that provided them and their heirs with funding for the value of their individual interests in the firm. By contrast, the outright "sale" of a law practice from one attorney to another was prohibited for decades. In 1991, however, the ABA dropped its opposition. California had already permitted such sales since 1989, and more states have now followed suit; so the mechanisms for selling a practice have been developing, albeit slowly. These changes are economically vital for small-firm and sole practitioners. Many of these attorneys tend to conclude their law practice without any transfer of ownership, by just closing their office doors one day and never returning. By doing so, an attorney forgoes "cashing in" on a valuable asset that has taken many years to build. That no longer has to happen. Like their counterparts in large firms, sole and small-firm practitioners ' and their heirs ' can now reap the rewards of years of effort. This levels the economic playing field for retirement and estate planning.
Lease Drafting and Negotiation: A Checklist of Easily Overlooked Details
November 01, 2003
Not surprisingly, most of the time we spend negotiating leases is devoted to discussions of significant, fairly predictable aspects of the landlord/tenant relationship: the fundamental business terms of the deal, details of business terms that were not fully settled before the lawyers became involved, and a variety of legal issues from assignment to zoning. As we all know, these substantive negotiations can sometimes consume more billable hours than our clients would prefer and (if we are fortunate) there are always other deals waiting in line demanding our attention. If we focus only on the major points, though, we may miss some meaningful issues and potential traps, for both the principals and their counsel, lurking in the mundane, "boilerplate" provisions of our leases. This article will explore several such provisions, not necessarily in order of importance. Although some specific suggestions are made and some sample provisions are included, the primary intent of this discussion is to provide a checklist of easily overlooked items to be examined.
