Task 8. Read and render the following text. HOW TO OPEN A SMALL LAW FIRM

HOW TO OPEN A SMALL LAW FIRM

There are several business entities to choose from: sole proprietor, general or limited liability partnership, corporation (professional association) or professional limited liability corporation.

Sole Proprietor

The unincorporated attorney is a sole proprietor. The attorney is the business entity. If an attorney wishes to maintain a simple office life, at least in the beginning, then the sole proprietor is likely the entity of choice. The income and losses of a sole proprietor are the income and losses of the individual attorney. On the other hand, the sole proprietor is personally liable for business debts and negligent errors and omissions. For example, if the sole proprietor signs a lease for office space and later breaches the lease, then the landlord can sue the individual attorney for damages. To satisfy the judgement, the landlord may levy on not only the attorney's business operating account, but also the attorney's personal accounts and real estate. Therefore, while this entity is simple to maintain, the liability is greater.

Partnership

General partnerships are similar to sole proprietors in that they are simple to form and maintain. No written partnership agreement between the partners is required by law. Without an agreement it is presumed that the profits are shared in the same proportion as losses. Losses are assumed to be apportioned equally among the partners. A written partnership agreement can reallocate profits and losses among the partners. Partnership agreements also often spell out such terms such as the logistics of a dissolution or adding another partner.

Professional Limited Liability Company

A professional limited liability company (PLLC) is the next type of business entity. A PLLC is the same thing as an PLLC, except all members of the PLLC are members of a profession (doctors or lawyers), and the licensing board for the respective profession has approved the filing of the Articles of Organization. Such companies are simple to form and maintain.

An Operating Agreement among the members of the PLLC serves the same function as a Partnership Agreement among partners of a partnership. An Operating Agreement is not required, but is suggested to avoid unnecessary conflict among the members. No annual meetings are required, unless the Operating Agreement states otherwise. Generally, the profits and losses of the PLLC pass through to the members as if they were partners in a partnership. However, unlike a partnership, the members of a PLLC have limited liability for their acts taken on behalf of the PLLC.

Corporation

A professional corporation (PC) or association (PA) is very similar to a PLLC. As with a PLLC, all shareholders in a PC or PA must be licensed attorneys. The first step in forming a corporation is to prepare Articles of Incorporation

Finances. Many new attorneys open their new firms with borrowed money with no idea as to how they will pay it back. This is not a good idea. Many lawyers feel that since they went to law school they should know everything needed about opening a business. This is probably incorrect, and you need to have the courage to ask for help. Most community colleges in the USA have Small Business advisers who provide free services and advice in opening a new business, including law firms. But in Ukraine it looks like “do-it-yourself”.

So you need to have exact business plan, i.e. papers that shows a lender how borrowed funds will be paid back, the new attorney must adhere to the plan. Many firms now use credit cards to finance purchases that bank lines of credit used to cover. Credit cards should be handled like snakes, and any credit card offer should be scrutinized to ensure that low interest rates will not be steeply increased by one late payment, and to determine the terms of the interest rates. Further, as with other lines of credit, purchases on credit cards should only be made with a plan as to how to pay off the debt.

The attorney should often project at least three to four months ahead to determine when and if fees will be generated to cover certain expenses. An annual budget should be prepared, taking into account ordinary expenses such as research expenses (books, online and CD- ROM), rent, electricity and employee overhead, as well as annual or semiannual expenses such as malpractice insurance premiums, privilege licenses, jurisdictional bar dues and taxes to name a few. The budget helps to forecast cash flow for the business to ensure that the firm can weather the lean times and not overspend during the good times. Some people suggest that before you open up you have enough financing to survive one year without drawing any funds. On a final note for finances, it is a good practice to purchase equipment such as computers on three-year cycles. For instance, the firm budget should include allowances to replace one-third of the office's equipment each year. This helps ensure that the technology is fairly current and avoids many repair costs otherwise incurred.

Дата добавления: 2015-07-19