The rising popularity of Limited Liability Companies is partly due to the ease of organization this company form with the state. The Kentucky Secretary of State’s online business service provides all the forms and information necessary to create your own LLC. For many fairly sophisticated entrepreneurs, the do-it-yourself approach works out just fine. Also, the IRS now accepts LLCs as non-profits. However, some more complicated business structures need the professional assistance of an attorney.
One example is a non-profit organization. Ironically, many of these non-profit companies, usually founded for charitable purposes, are very small, lean operations with little or nothing set aside for legal assistance. However, the consequences for mistakes with non-profits can be graver due to the IRS regulations.
When starting a non-profit, one must have specific language in the Articles of Incorporation that does not fit into the Secretary of States form. Also, while not filed with the state, there need to be bylaws that will be submitted to the IRS with the Form 1023 required to be recognized as a non-profit under 501(c)(3). Also, when applying as a 501(c)(3) entity, the default designation given is a private foundation. This entails additional scrutiny of your operations as compared to a public charity. Churches, hospitals and certain educational institutions are specifically designated public charities, but many others need a letter of determination from the IRS.
Occasionally I am asked why I refer to myself as a Counselor at Law rather than Attorney. It is a sublety that most miss, but it actually encapsulates a key philosophy to my practice. An Attorney is an agent. They go and do what they are told to do by the principal. I remember going to an attorney in my prior life over an employment issue. I really needed to understand what was happening, but this highly recommended attorney told me very little. I later realized that this was because he either: 1) did not know what he was doing so stayed silent to look wise, or 2) said very little to minimize any liability on his part.
Anyway, he went and did what I asked him to do, but I was very dissatisfied with the process because I felt very much in the dark most of the time. I mean for my clients to feel informed. This is one thing a counselor does. They help you understand what you are going through.
Secondly, a counselor counsels. In my example above, I sought wise counsel as well as understanding. This is because I was faced with something outside of my experience. I recognize that it was ultimately my decision to make as to whether or not to pursue the matter, but I needed at least some rough estimates about the expected outcomes would be depending on my decision. So, as a Counselor at Law I take the risk I believe I believe my profession calls upon me to take to explain options and the likely outcomes of each.
I was excited to come across this post by The Greatest American Lawyer. It reflects very closely my own approach to billing as I described here. I am reprinting his value billing policy here for comparison purposes:
Value-Based Billing Policy
Some of Traverse Legal’s customers prefer to be billed on a time-based system, where hours are tracked and billed to the client at a specific hourly rate. Some cases are best suited for time-based billing. Unlike most other firms, Traverse Legal does not bill for every activity and task associated with the handling of a matter for a client.
The following is a list of items that we do not charge to clients:
· Transmittal letters which do not contain significant legal analysis or recommendations.
· Short phone calls that do not lead to immediate legal work.
· Update or general information calls to or from client.
· Any activity that does not add value to client’s immediate matter.
· Any activity which deals with general information about the client.
· Any activity which does not work towards resolution of the client’s problem.
Things that we do bill for:
· Any activity which provides specific value to a specific client problem.
Once again, only at a solo or small firm could you find this approach.
I found this article about the legal bill to Larry Birkhead’s custody fight for Anna Nicole Smith’s daughter. Here’s the essential part of the post:
Opri’s bill serves as a template for what lawyers shouldn’t do when invoicing clients. The bill includes multiple, extravagently priced meals that Opri shared with other lawyers, where Birkhead wasn’t even present. And while presumably, Opri and her colleagues at least talked about Birkhead’s case at these meetings, most clients will wonder how much business is really discussed in the course of a fancy dinner.
Compare this to my own billing practices as I described them here. It is a fallacy to believe that you automatically get higher quality representation with higher fees. What higher fees often mean is higher overhead and inflated billing practices. Opri’s bill to Birkhead is a perfect case in point.
Here is some good, basic information about jury duty at Lawreader.com. Serving on a jury is a crucial part of the American justice system.
Go see the movie Amazing Grace. Not much in the way of action, but it kept my attention and was very inspiring.
I came across this post by The G.A.L. regarding the downside of the traditional billable hour that most firms use. While G.A.L. is quoting another blogger in his post, here is my favorite quote:
Blind obsession with the billable hour not only destroys the relationship amongst attorneys and staff at a firm but inevitably between the firm and its clients.
I have wrestled with the best way to bill for various matters I have handled. As a rule, my firm foregoes billing on many items customarily passed on to clients by law firms. For example, we do not track and bill long distance phone charges, routine postage, copies, and mileage in our home county and a number of surrounding counties. Because I do not have a billable hour goal set for me, I find myself often rounding down the time I spend on a project rather than rounding up because my tendency is to think about my clients circumstances as much as my own.
I have contemplated using flat fees, and I have done so in some cases where the work involved is fairly predictable. I have also used flat fees in a family law matter simply because the client could not afford anything else. However, the downside to flat fees is that when the unexpected occurs, there is a built in disincentive to going the extra mile and one must consciously resist the temptation to do less.
While I still use time as a measure of cost to the client in most matters, there are various other ways that I avoid the billable hour trap and focus more on the value of the product to my clients. By “no charging” time that did not call upon my education and experience as an attorney, such as brief phone calls that just conveyed simple information, or that add to my experience and marketability, such as basic research in an unfamiliar area of law, I essentially do a form of value billing. However, I think this approach actually goes beyond what is usually meant by “value billing”.
Value billing just means that there is a set expected time it takes to prepare a certain document. For example, 1/2 an hour to draft a motion to compel discovery. A new associate may take an hour but only bills for 30 minutes while a seasoned attorney may do it in 10 minutes but bills for 30. Instead, I like to think my approach encapsulates value added to the client. I suspect there is no perfect solution to this dilemma, but I do know that it is only at a small firm or with a solo where one can find the freedom to experiment with better ways to bill.
Check out the prayer here.
Dr. Ananthi Jebasingh, Founder and Director of The Good Samaritan Schools in New Delhi, India will be speaking in Lexington this Thursday, March 1, 2007, at our offices at 4740 Firebrook Boulevard. The event begins at 7:00 PM and will be followed by a dessert reception. It is hosted by Dale Ditto, Tim Philpot, and Mike Troutman.
The Good Samaritan Schools are dedicated to providing education, nutrition, and medical care to underprivileged children from Delhi’s slum communities. Since 1989, when Ananthi took the first child into her home, The Good Samaritan Schools have educated over 7,000 impoverished children.
In a just rendered, but NOT to be published opinion, the Kentucky Court of Appeals in Richardson v. DLC Inc., 2005-CA-001635-MR (February 16, 2007) looked at this language in a release of an employee of Little Ceasar’s Pizza from tort liability:
This release does not release any claim against Little Caesar’s
Pizza and the undersigned expressly reserves the right to
pursue any personal injury or property damage claim against
Little Caesar’s Pizza.
The COA states:
The basic rule is that if an employee/agent is released from liability, then the employer/principal is thereby also released from liability based on the same acts of negligence. Copeland v. Humana of Kentucky, Inc., 769 S.W.2d 67, 69 (Ky.App. 1989). The release of the employee releases the employer from vicarious liability as a matter of law despite language in the release to the contrary. Id. at 70.
The key in looking at when a release of an employee also releases the employer is determining whether the suit against the employer is based on vicarious liability or if there is an independent claim of negligence. In this case, the only claim against Little Ceasar’s was based on vicarious liability even though it was framed as negligence in hiring. An attorney needs to carefully analyze the real basis of the different claims before entertaining a release of any party.