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The Friday Five

Five Win-Win Ethics Tips for Start-ups and Solos

By Joan Feldman

It’s a win-win. The best strategies for keeping your startup on the straight and narrow, ethics-wise, are often the same strategies that help your practice grow.

Mark Bassingthwaighte, risk advisor for malpractice insurance carrier ALPS, knows a bit about the common ethics traps and practice management missteps that can beat down solos and small firms. These tips from his e-book, The ALPS Guide to Getting Started Solo,” will help you rise to the challenge of starting your practice and hanging in for the long term.

It’s All in the Details

When you are starting a new business, the details can be overwhelming. Bassingthwaighte helps break it down. The first step is to write a business plan and set a realistic budget. It will take time — Bassingthwaighte estimates 30 to 100 hours — but it’s time well spent.

From there, you will need to decide the business structure for your firm, choose your office space — traditional, co-working or virtual, set up your bank and trust accounts, decide what forms of payment you will accept, hire staff or arrange for freelance or virtual assistance, get the appropriate insurance, and set up your software and systems. You’ll need software for accounting, document management, calendaring, conflicts-checking, practice management, and to develop systems and forms for client intake, engagement letters, billing, file retention and loss prevention — just to name a few.

Here are tips to consider as you work through your plan.

1. Master your calendar. Even when you’re on your own, managing various calendars can be frustrating. Now add a few more people to the mix, and the chances of miscommunication and missed deadlines expand. “The single leading cause of malpractice errors continues to be missed dates and deadlines,” says Bassingthwaighte, and the reason is often simple data-entry error, be it an incorrectly entered date or a date that never made it into the calendar.

A good calendaring system, he says, starts with how you handle incoming mail. He recommends a centralized system where a designated mail handler opens and reviews all incoming mail (and email) for deadlines, and then enters deadlines and reminders on the firm’s centralized calendar. A second set of eyes (you, if you are in a solo practice) should then verify each calendar entry for accuracy. (If you have no staff, set aside time to double-check your work.) “This will assure that all critical dates have been gleaned from all original documents and that all calendared entries were accurately placed,” he says. Depending on your practice, you might use a rules-based calendaring system or service that can automatically calculate the dates based on jurisdictional statutes. Always maintain a backup copy of your calendar off-site, says Bassingthwaighte. And, whatever calendaring system you design, set aside time at least every four to six weeks for file review to make sure no cases are forgotten.

2. Load up on checklists and forms. Checklists work because they help ensure important details don’t fall through the cracks. They can be life-savers when you are stressed or over-tired (it happens). Forms save you time, and also keep you from making mistakes, especially if you use document assembly software to create templates and produce documents. “One of the most critical working tools you will need is legal forms or standard agreements for your areas of practice. These clean documents (without metadata) will be your most valuable time-saver. Continue to revise and improve them and keep them well-organized and properly indexed,” says Bassingthwaighte. For good raw material for your documents, look to state CLE providers and national legal institutions and vendors that offer forms databases for solo and small firms. And if you want to be more productive, stop reinventing the wheel and start using tools like Word’s Quick Parts, HotDocs, The FormTool, Worldox and TextExpander.

Related: “Five Checklists to Make Your Law Firm More Efficient.”

3. Watch your back in shared office space. Sharing office space can be a great option for a startup, but be careful about what you are sharing. Follow strict client confidentiality and conflict of interest rules, of course, but consider public perception, too, says Bassingthwaighte. Is it clear that your practice is separate from the others or, for marketing purposes, are you encouraging people to believe you are part of a larger law group or center? “If you and your office-mates conduct yourselves in a way that would lead a reasonable person to believe you are a law firm, ethical and/or liability trouble may be just around the corner,” says Bassingthwaighte.

How’s that? Beyond the obvious — misleading the public — if one lawyer in your space gets sued, most likely the rest of you will be named, too. And that could be a coverage issue for you. “Malpractice policies generally exclude coverage for … claims that arise out of or in connection with any act, error or omission committed by an attorney with whom an insured shares common office space and who is not an insured under the insured’s policy. So, if your suite-mate gets sued for malpractice and you are named in that suit, but had no involvement with, or perhaps even no awareness of the client who filed suit, don’t be surprised if your insurance carrier says ‘good luck with that.'” Talk to your carrier and be aware of the clauses regarding shared space.

4. It’s not your money! One of the fastest ways to get in trouble with the legal licensing authorities is by mishandling client funds. Things can get out of hand quickly if you are even slightly sloppy with management, or fuzzy on the rules. “Lawyers are required to keep client funds separate from the firm’s general fund,” says Bassingthwaighte. “It is never okay to borrow funds from your client trust account. Trying to make payroll, covering a quarterly tax payment, paying your bar dues, borrowing from one client to cover a check to another or a necessary personal expense don’t pass muster.” You may not keep an unearned advance fee, hold onto non-disputed client funds as leverage over disputed earnings, or apply a client’s current funds to that client’s outstanding bill from a previous matter.

Beware of commingling client funds — don’t let any money you’ve earned sit there very long or use the account as a de facto savings account for holiday bonuses. And always wait for checks to clear before you disburse the proceeds. If there’s a shortfall and another client’s funds are used to cover it, you’ve commingled client funds. And if disbursement checks bounce because you have insufficient funds, that is cause to lose your license in some jurisdictions.

5. When you can’t get your money. “Fee disputes are at the heart of a significant percentage of all legal malpractice claims,” says Bassingthwaighte. Typically, the attorney sues his client for unpaid fees and is then countersued for legal malpractice. Sometimes merely sending a final bill triggers threats of legal malpractice. While there are a number of systems you can put in place to avoid this, from written fee arrangements to timely billing and collections, his best advice is: Don’t accept clients who can’t afford your services and never sue for fees. If you can’t work out a realistic payment plan, consider arbitration or mediation. “If you are tempted to sue for fees, consider this: The counterclaim for legal malpractice usually seeks an amount far in excess of the legal fees in dispute. In most of these cases, the attorney ends up dropping the fee suit to get rid of the malpractice claim.”

Back to the first point. Never sue a client who didn’t have the ability to pay your bill in the first place. “Accepting them was your mistake, not theirs; and they will often counterclaim. What other option do they have?”

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Joan Hamby Feldman Joan Feldman

Joan Feldman is Editor-in-Chief and a co-founder of Attorney at Work, publishing “one really good idea every day” since 2011. She has created and steered myriad leading practice management and trade publications, including the ABA’s Law Practice magazine where she served as managing editor for a dozen years. Joan is a Fellow and served as a Trustee of the College of Law Practice Management. Follow her on LinkedIn and @JoanHFeldman.

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