A Comprehensive Guide to Law Firm Finance in 2021

Published on: 03 June 2021 Last Updated on: 03 January 2025

Have you been practicing law for a while? Today, many lawyers are stepping into the entrepreneurship world to open their law firms. Indeed, practicing under experienced lawyers gives a lot of exposure but having autonomy at work is equally vital. You can choose clients and legal cases of your choice and practice in a particular area. Likewise, you can enjoy flexibility and freedom, make decisions, and set your priorities.

However, most lawyers don’t understand that starting a law firm is more than practicing law. Apart from legal responsibilities, you have to recruit people, market the law firm, and most importantly, manage finances. You have to document a long-term financial strategy to stay on top of your daily budget and earn profits. At the same time, you have to manage taxes, acquire funding, handle invoices, and much more.

To help you get started, here is a comprehensive guide to law firm finance in 2021.

1. Create a Long-Term Financial Strategy:

As a law firm owner, you have to establish a vision for the firm’s future. Do you picture a multi-lawyer firm handing corporate clients? Or you want to step into litigation or criminal law? Having a clear idea of long-term goals will help in creating a well-defined financial strategy. You can start putting funds aside for expansion from the beginning.

Likewise, you have to keep up with numbers, forecasts, and budgets to manage the day-to-day cash flow. You have to ensure the business has enough funds to secure new clients and take cases to trial. After all, not every case settles. However, if you don’t have a knack for numbers, consider learning the ropes.

You can look for virtual programs such as MSF online to avoid the hassle of traveling to college. After all, online education gives students a lot of flexibility, motivating them to keep learning. As for your law firm, it will help in managing finances efficiently while practicing law.

2. Get Access to Funding:

Although you are stepping into a service business, you will need a hefty amount of capital and cash to start a law firm. From office rentals, conference rooms, stationary costs to staffing – you will come across a long list of expenses. Therefore, look for ways to obtain capital for your law firm. Here are some of the options you can explore.

Savings:

Whenever starting a business, make sure a small chunk of the capital comes from personal savings. That way, you will keep working in the game because you won’t be liable to another person when things get tough.

Bank Loan:

You can start with a few thousand dollars, but more capital gives lawyers enough runway to make the business profitable. Hence, if your savings don’t seem sufficient, opt for a bank loan or open a credit line to raise capital.

Startup Incubators:

Today, many incubators connect new business owners with funding to get going. Often, they use their contacts with angel investors to fund new businesses or seek help from venture capitalists.

3. Manage Taxes:

Most attorneys operating law firms aren’t aware of legal obligations. As a result, taxes hit them in surprising ways. You might get a call from Internal Revenue System (IRS) or a hefty fine for missing the deadline.

Similarly, many lawyers have difficulty categorizing deductibles. You might think everything is deductible, whereas your tax liability is higher than you predicted. These pitfalls not only halt business operations but are super pricey too.

Hence, consider bringing an experienced tax specialist on board. However, if you don’t have a budget for additional hiring, learn about the taxation policies yourself. It doesn’t mean you have to go back to school; instead, look for online programs. You can opt for an online LLM tax program and learn from the comfort of your home and office. It will help you plan for tax liability, closing doors for IRS audit, and incorrect tax deductions.

4. Streamline Invoicing & Payment System:

Usually, lawyers have different payment policies. When dealing with corporate clients, they charge a monthly fee and have separate legal charges for cases. On the other hand, they don’t charge when fighting for accident victims until the negligent party’s proven guilty. Despite having different payment policies, you must have an appropriate invoicing and payment system at the firm. You can leverage savvy software to automate the firm’s finances.

Moreover, record your income correctly. If you charge a retainer fee, treat it as an advance payment and track its spending on every case. Similarly, avoid recording any income in your financials until you have won the case. It will give you a realistic view of the firm’s financial position, making sure you are on the right track. Besides this, don’t forget to set flexible billing terms with the clients and discuss everything upfront to avoid issues later.

5. Prepare Budgets, Reports, & KPIs:

Having a budget is imperative for your law firm’s financial success. You have to estimate your expenses and the revenue you expect to earn. It will give you a solid idea of how much you should work to make the business profitable. Likewise, you have to prepare financials to catch a glimpse of profitability.

Well, to begin effective financial reporting, you have to start with the bookkeeping basics. You have to record all financial transactions and maintain a separate account for every client.

After this, you can prepare an income statement and balance sheet to determine the law firm’s equity. Also, create a cash flow statement to understand how much cash goes out and comes into the business. All these financials will be a brilliant source of insights about your law firm. You can spot trends, overcome weaknesses, and capitalize on your strengths to make the business more profitable.

Final Thoughts:

Every successful law firm considers numbers and data first. You have to create an excellent financial plan with a growth vision to make your law firm successful. Similarly, you have to manage cash flow, follow a detailed billing process, and raise sufficient capital. As you progress forward, a strong financial position will unfold new growth opportunities. You can tap into new practice areas, offer more services, and expand your team.

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Crypto Staking: Locking Up Crypto Holdings To Earn Interest

Staking cryptocurrency is a growing trend since it allows individuals to generate passive income from their existing cryptocurrency holdings. Making money in the crypto space can be done in several ways. You can join in DeFi and stake your cryptocurrencies, acquire and keep coins with the expectation of price appreciation, or trade on price speculation via crypto CFDs. In this post, we will define staking and walk you through the steps necessary to begin staking your own coins. What Is Crypto Staking? How Does Staking In Crypto Work? By "locking up" assets to maintain the integrity of a cryptocurrency network, "staking" allows users to receive a passive income from their cryptocurrency holdings without ever having to sell their coins. Investing in cryptocurrency through staking is equivalent to putting money into a high-interest savings account. Staking allows cryptocurrency networks to obtain consensus on the status of transactions via a proof of stake mechanism, with the tokens themselves acting as a kind of internal security rather than the computer power and electricity consumed by the network. This is demonstrated by the success of proof-of-stake cryptocurrencies like Cardano, Solana, and Polkadot in the cryptocurrency market. These networks are able to process a high volume of transactions with low transaction fees because of the various staking mechanisms they employ. Blockchain infrastructures benefit from this because they become more adaptable, affordable to users, and eco-friendly. Besides improving cryptocurrency's safety, scalability, and efficiency, staking lets its owners make passive revenue. To maximize their returns, many long-term holders are taking advantage of staking rewards. Staking, however, has some negatives, such as a reduced ability to sell assets swiftly in the event of a market downturn. The network chooses validators according to the number and age of tokens they have staked. Staking more tokens for a longer period of time increases the likelihood of getting chosen as a validator. Users that have a lesser portion of tokens have a decreased likelihood of contributing to the network's security and earning incentives as a result of their participation. Because of this, users with a lower stake make use of staking pools so that they can take part in the network. Staking Pool Definition To increase their chances of being chosen to validate blocks and receive block rewards, cryptocurrency network users can form staking pools by pooling their funds with other users. Those who have stakes in the pool receive a proportional share of the block reward based on the sum of stakes they own. Staking pools, therefore, often result in lower payouts than individual staking. In contrast to the reliable and predictable payouts from staking pools, solo staking involves a significant investment in the crypto network. Operators of staking pools, typically cryptocurrency exchanges, are in charge of maintaining the network's validator nodes. Participants in the pool are obligated to store their funds at a predetermined public blockchain address. The pool has a nominal price for this convenience. Other options enable users to stake money from their wallets directly into pools. Cold staking is one method that allows users to participate in pools while still using their hardware wallet. Users who don't feel comfortable managing and running their own node but still want to contribute to the security of the cryptocurrency network can do so through staking pools. Why Is Staking Limited To Some Cryptocurrencies? Whether or not a cryptocurrency network supports staking depends on the consensus process used. Many cryptocurrencies, including Bitcoin and Litecoin, are not stackable because of the consensus method they employ. The double-spending issue that plagued early attempts with digital currency is resolved by crypto networks thanks to their consensus processes. These consensus procedures are resilient in the face of opposition because of the careful economics they employ. The economics of the first cryptocurrency networks relied on mining, the mechanism through which nodes competed to solve cryptographic challenges with computational power. Tokens and transaction fees are awarded to the node that verifies the right set of transactions and solves the cryptographic issue first. Bitcoin mining has come under fire due to concerns over its impact on the world's energy supply. Later, in 2012, Peercoin's developer presented the notion of staking as a solution to the problems with the proof of work consensus mechanism. By risking their tokens, nodes demonstrate their support for the right set of transactions without having to solve complicated cryptographic challenges. Staking is only possible in cryptocurrencies because only they use this particular consensus methodology. However, in order to attain consensus, several cryptocurrencies use a hybrid approach, combining proof of stake with proof of work. Bitcoin and Litecoin are examples of very straightforward cryptocurrency networks that can function adequately using proof of work. Moreover, proof of work is notoriously time-consuming and expensive, making it unsuitable for use in cryptocurrency networks like Ethereum. How Are Crypto Staking Rewards Calculated? Crypto staking calculators are utilized to determine the value of staking incentives. These calculators provide you with an estimate of the amount of interest you will get after the investment period has passed. Calculators work with the number of tokens invested, the annual percentage yield, and the length of time the tokens are held. Be sure to do the math on the potential winnings from your bets before you place them so that you can pick the solution that works best with your goals. What Are The Benefits Of Crypto Staking? As is the case with all different kinds of investments, there are potential downsides as well as potential upsides. Find out more about the benefits of staking cryptocurrency below: It validates financial transactions with a little amount of energy consumption. A cryptocurrency network can have its own internal security without having to rely on third-party hardware. Provides customers with the ability to generate passive income from their cryptocurrency holdings. It contributes to increasing the scalability of cryptocurrency networks. Provides an incentive for users to contribute to the safety of blockchains by reducing the required investment in their tokens. Is Staking Crypto Safe? There is some risk involved in staking, despite the fact that it is a revolutionary and relatively simple technique to generate passive income from your crypto holdings. Before staking their coins, investors need to be aware of certain risks, including the following: Low Liquidity When staking cryptocurrencies with a lesser market cap than Bitcoin or Ethereum, users frequently run the danger of being unable to sell their tokens once the staking time has ended. Choose a cryptocurrency that has a high level of liquid market activity and one that supports staking in order to reduce the impact of this risk. Lockup Periods Users will not be able to access their tokens while they are participating in the staking process since several staking protocols have lockup periods. You will not be able to sell the staked token in order to reduce your losses in the event of a personal financial crisis or if there is a significant reduction in the value of the staked token. Alternatively, you may have to pay a high price to get at your tokens, reducing the number of tokens you have staked. Staking tokens without lockup periods is one way to deal with this. Validator Limitation In order to enhance their likelihood of successfully validating blocks, certain protocols mandate that validators keep their nodes online and operational at all times. In addition, validators need to exercise extreme caution whenever they operate a node. If validators make a mistake and include invalid transactions by accident or if they default by going offline, they run the risk of having their staked tokens wiped out, which could include the tokens of individuals who are associated with that node. Protect yourself from this by either becoming a validator by learning how to host a node or by staking your tokens with a trusted staking pool. Conclusion If you have cryptocurrency that you may stake and you do not have any immediate plans to trade it, then you should consider staking it. You won't have to put in any effort at all, but your cryptocurrency holdings will grow as a result. What happens if you don't currently possess any cryptocurrency that you can stake? Researching cryptocurrencies that support staking is something you should do because of the potential returns. There are many platforms that provide this service; nonetheless, it is important to determine whether or not each cryptocurrency represents a sound financial investment. You should only buy a cryptocurrency with the intention of staking it if you are also convinced that it is a suitable long-term investment. The proof-of-stake system has proved useful, not just for cryptocurrencies but also for investors in crypto assets. Proof of stake is a method that can be utilized by cryptocurrencies to facilitate the processing of a high volume of transactions with a low associated cost. Since you now have a better understanding of staking, you can begin looking into cryptocurrencies that have this feature. Read Also: Why Entrepreneurs Should Pay Attention To Cryptocurrencies In 2021 Is 2021 The Most Critical Year For Bitcoin And Other Cryptocurrencies? The Future Of Digital Currencies: 7 Things We Can Expect In 2022

How Do You Avoid Negative Equity On Your Next Car Loan?

Car finance allows drivers to spread the cost of a new or used car into affordable monthly payments. By borrowing money from a lender, drivers can purchase a car and pay the lender back in monthly installments until the end of the agreed term. Negative equity is a term you may hear often with car finance, and for many drivers, it is best to avoid it. Find out how you can ensure you don’t end up with negative equity and what to do next if you find yourself in this situation. What Is Negative Equity? In car finance, negative equity is when you owe more on your loan than your car is worth. Negative equity can be known as outstanding car finance or an upside-down loan which means if you sold your car to clear the loan, you still wouldn’t have been able to pay the balance off. For example, if your settlement figure was £6,000 and your car was worth £4,000, you would still owe the finance company £2,000. Usually, negative equity happens when the value of your car drops quickly during your agreement. This is especially common with brand-new cars, as they can lose up to 50% of their value in the first few years of ownership. Here, if you want to trade in your car but have negative equity, you will need to repay the loan amount before you take a new loan to purchase a new vehicle. What Are The Reasons For Negative Equity? Basically, a negative equity situation happens for a variety of reasons. For instance, an upside-down situation in regard to a car loan can happen due to the following reasons: You might have a loan for a longer term. Apart from that, your vehicle has also gone through depreciation since your purchase. There is a no-money-down auto loan in your case, or you might have paid more than the sticker price of the vehicle due to the inclusion of add-ons. You might have purchased an expensive vehicle, which might not have the same value that you expected during the purchase. Your debt regarding the loan is of a high rate of interest. Hence, most of the money that you are paying is going to the interest as compared to the principal. Depreciation is also a major factor in this case. Basically, the term rate of depreciation shows how fast an asset loses its value. Generally, a car loses almost 20% of its value in the first year itself. Furthermore, the process of depreciation continues to happen in the following years until the car fully loses its value. Why Is Negative Equity Problematic? Negative equity within your car finance deal can be an issue because you will still owe the lender money even if you sell your car. In some cases, you may not be able to sell the car, too. If you find your circumstances have changed and you can’t afford to carry on with the loan, you may be charged additional fees for missed or late payments, and it can lead to much more serious financial consequences. How Do You Avoid Negative Equity In The First Place? Before you take out a car finance deal, consider these factors below to help prevent negative equity from occurring: Only Borrow What You Can Afford. If you’re in a position to buy a new car on finance, it’s important you use a car payment calculator first to see how your loan could look and make sure it is affordable. This may mean choosing a used car over a brand-new car, as older cars usually have already depreciated at their fastest rate in previous years. Put Down A Larger Deposit. A larger deposit contribution at the start of your finance agreement can help to reduce your loan amount. A smaller loan can help to reduce the risk of your car being worth less than how much you owe. Choose A Slower Depreciating Car. If you want to avoid negative equity, you could consider choosing a car that depreciates at a slower rate. Cars that hold their value will be less likely to leave you out of pocket at the end of your car finance deal. Make Higher Payments. Negative equity can often be associated with PCP deals as they offer low payments and a large balloon payment at the end of the deal. Opting for a deal such as a hire purchase, which aims to pay off the value of the car at the end of the deal and has higher monthly payments, can help avoid any outstanding finance. How Do You Get Out Of Negative Equity? There are different ways of getting out of negative equity. However, based on your current situation, you will need to choose which way works the best for you. Basically, you will need to choose the one that goes with your budget. Furthermore, it also depends on whether you want to keep the vehicle or not. Hence, to get out of negative equity, make sure you do the following: 1. Start By Paying Off The Loan The most obvious way to pay off your negative equity is to accelerate your payment. Here, the faster you pay your loan off, the sooner you will be able to deal with the debt. One of the best ways of paying off the loan is to pay extra on the principal part. Apart from that, you can also consider paying a lump-sum amount beforehand to avoid paying interest for a longer period. Hence, you must consider reviewing your budget and savings from time to time to pay off your existing debt. 2. Loan Refinancing Here, you might consider taking out a new loan to pay off your existing debt. This will help you in getting out of your upside-down car loan faster. This works even better if you can avail of a new loan with a lower rate of interest. 3. Selling The Vehicle If you do not need the vehicle, you can consider selling off the vehicle. This way, you can get a lump sum of cash, which will allow you to pay off the loan. Furthermore, if you sell the vehicle to a private buyer, you will have the option to negotiate the price further. This will enable you to get more cash, which will further help you to pay off the negative equity. 4. Surrendering The Vehicle If you handle the vehicle to the lender, you can get out of the negative equity, too. In addition to that, if you do a voluntary surrender, you will be more likely to get out of the negative equity. Summing Up: Getting Out Of Negative Equity If you’ve not been able to avoid negative equity and need to know how to get yourself out of it, follow the top tips below: If you can still afford your current car finance payments, it is recommended you stick with the deal you have at the moment. In many cases, your deal will balance out over the duration of the loan, and the negative equity should be settled by the time you reach the final payment. You could pay off your negative equity by paying the lender in cash. You can hand your car back to the lender through Voluntary Termination. If you’ve paid half of your agreement off, you could return the car to the lender. It’s always best to speak with your lender first, though, to see how they could help you. Do you have any more ideas to add? Consider sharing in the comment section below. Read More: Proven Strategies To Captivate Buyers And Sell Your Business Successfully Get On The Online Market With The Best Web Design Experts In Brisbane 8 Tips For Tech Industry CV Writing That Highlights Your Skills And Experience

A Beginners Guide to Listed Investment Companies

Investing can be a daunting task for anyone, especially for those who are new to the game. With a plethora of options available, it can be challenging to know where to start and what investment vehicles to choose. One option that has gained popularity in recent years is listed investment companies (LICs). In this beginner's guide, we'll take a closer look at what LICs are and how they can be a valuable addition to your investment portfolio. What are LICs? LICs are publicly traded companies that invest in a diversified portfolio of assets, such as stocks, bonds, and real estate. They are similar to mutual funds, but instead of investing in the fund directly, you buy shares of the company that owns the assets. This allows you to gain exposure to a variety of investments through a single stock, making it an easy and convenient option for those who want a simple and diversified investment portfolio. Benefits of Investing in LICs Diversification: As mentioned earlier, LICs offer a diversified portfolio of assets, which helps to spread risk and minimize the impact of any single investment. Professional Management: LICs are managed by professional fund managers who have the expertise and experience to select and manage investments on your behalf. Liquidity: LICs are listed on stock exchanges, making it easy to buy and sell shares, and providing you with the flexibility to make changes to your portfolio as needed. Potential for Higher Returns: By investing in a diversified portfolio of assets, LICs have the potential to deliver higher returns than investing in individual stocks. Lower Costs: Compared to other investment vehicles, LICs often have lower fees and expenses, which can result in higher returns for investors. Risks of Investing in LICs Market Risk: As with any investment, LICs are subject to market risk, which means that the value of your investment can go up or down depending on market conditions. Credit Risk: LICs may invest in bonds, which are subject to credit risk. This means that if the issuer of the bond defaults on their debt, the value of your investment may decrease. Management Risk: The success of a LIC depends on the ability of the fund manager to make good investment decisions. If the fund manager fails to perform, the value of your investment may be negatively impacted. How to Invest in LICs Research: Before investing in a LIC, it's important to research the company and its portfolio of assets to ensure that it aligns with your investment goals and risk tolerance. Consider the Fund Manager's Track Record: Look at the fund manager's track record to see how they have performed in the past and whether they have a history of delivering good returns. Diversify Your Portfolio: As with any investment, it's important to diversify your portfolio to minimize risk. Consider investing in multiple LICs to achieve a well-rounded and diversified investment portfolio. Monitor Your Investments: Regularly monitor your investments and make changes as needed to ensure that your portfolio remains aligned with your investment goals. In conclusion, LICs can be a valuable addition to your investment portfolio, offering the benefits of diversification, professional management, liquidity, and the potential for higher returns. However, it's important to understand the risks involved and to do your research before investing. By following these tips, you can ensure that you make informed investment decisions and achieve your financial goals. Additional: 5 Reasons Why Bitcoins Are Considered Reliable Investments Top 5 Investment Decisions You Need To Make In Your Thirties 4 Key Concepts on Making Signage an Effective Strategic Investment What Investors Should Know about Investment in Gold and Silver Assets

A Comprehensive Guide to Law Firm Finance in 2021

1. Create a Long-Term Financial Strategy: