The COVID-19-Era Firm

The challenges of starting and running a firm during a pandemic.

Launching and running a law firm in “normal” times is difficult enough. But doing so during a pandemic creates additional challenges on top of the usual ones, say attorneys who participated in the ISBA CLE program, “Starting and Running Your Own Law Practice,” which was held in late February.

The Illinois Bar Journal spoke with the program’s presenters, who outlined their pandemic-minded advice for solo and small-firm attorneys who are either starting out or rethinking the ways they conduct business.

Their main takeaways: Plan to add extra measures of flexibility, networking, and a focus on well-being to the typical to-do list of establishing technology, billing and finance practices, incorporation paperwork and tax filings, a library of forms and documents, and policies that guide employee-related decisions.

Laying the foundation

Mary Andreoni, ethics education counsel at the Illinois Attorney Registration & Disciplinary Commission, says attorneys need to address four major issues as they hang out their shingles: 1) how to communicate with clients; 2) how to handle fees and billing; 3) how to set up trust account access; and 4) how to put together succession and emergency plans. “These are all things that are not necessarily new,” she says. “But the pandemic has made them a little more challenging.”

Communicating with clients. “With the pandemic, we’re having to do everything online. How are you doing that?” she says. “Are emails sufficient? Are they secure enough? Maybe you should think about client portals. Or, maybe clients don’t have access to good internet.” To ensure you’re communicating as responsively as you can with clients, Andreoni says you must understand their needs.

One example of understanding the needs of clients—perhaps heightened by the pandemic—is that some will prefer alternative fee options. “Maybe that’s easier, better, and more responsive,” Andreoni says. “Lawyers are very slow to get off the billable hour. The pandemic has shaken everything up and forced us to consider alternative fee arrangements and electronic payments.”

Trust accounts. Lawyers starting a practice need to know the fundamentals of trust accounts, how to set them up, and how to take electronic payments, which now include PayPal and other digital payment services. “Will using these services cause me to commingle trust funds with business funds?” Andreoni says. “Can I maintain confidentiality using this third-party vendor? How am I going to track these payments so I’m not screwing up my records? It’s a different twist than just getting a check in the mail.”

Succession and emergency planning. Although not required, Andreoni strongly recommends having a succession plan in place and—especially during a pandemic—a shorter-term strategy for leaves of absence. “What if I become sick? What if a spouse or family member or spouse dies, and I have to virtually close up my office and attend to that? How am I still able to serve my clients and avoid neglecting them? If I cannot be in the office for a long period of time, how are those open client matters going to be met?”

On the bright side, the pandemic has forced attorneys to rely increasingly on technology, which they will be able to use for future emergencies, Andreoni says. “We’ve all adapted to a certain extent and integrated technology to get us from point A to point B. But a lot of this is not going to go away,” she says. “The first few weeks and months of learning and changing the way you’re doing things are the most painful parts. Most lawyers are adapting to it.”

The courts also are adapting, Andreoni says. “I can’t imagine marching down the street on a cold January day to go in front of a judge for a routine status call. They can do a lot of the routine stuff electronically.”

LLC, Inc., or Ltd.

Attorneys forming new firms first must decide how to incorporate. Business-law attorney Danya Shakfeh of Oak Brook-based Shakfeh Law LLC says whether you form an LLC or a corporation depends on your vision for your practice and business model. She prefers LLCs because they’re more flexible. Once you decide, you must register with the Illinois Secretary of State and Illinois Supreme Court and renew your registration annually with each one.

Those who organize as LLCs then have three possibilities when it comes to filing taxes: to be taxed as a partnership, S Corp., or C Corp. Shakfeh notes that these are tax statuses, not business structures. An S. Corp. provides more control over what taxes you pay because you can triage your income into different categories. The main stipulations are that you can’t be a nonresident alien, the entity must have fewer than 100 owners, and the owners of the corporate entity must have proportionate rights and liabilities.

Corporations, which can have an ‘Inc.’ or ‘Ltd.’ designation, require more formalities and may be too restrictive for smaller and medium-sized law firms, Shakfeh says. Owners who don’t follow those formalities to the letter potentially expose themselves to personal liability. LLCs still shield you from liability, but the entity is a little less formal. “I advise a lot of people to go for the LLCs,” she says.

LLCs don’t provide blanket protection from all types of liability; owners are still exposed in areas like taxes and wage claims, but they are shielded from business liability. “I can’t think of a disadvantage of an LLC off the top of my head,” Shakfeh says. Though, she notes one potential pitfall: “Because it’s a partnership at its core, if people are not careful and if they don’t have the proper operating agreement, they might end up losing a lot of the benefits of an LLC.”

Billing

Electronic payment systems became more commonplace long before the pandemic. But they will be even more essential in the coming months, says Juan Thomas of Aurora-based The Thomas Law Group. (Thomas is also of counsel to Chicago-based Quintairos, Prieto, Wood & Boyer and a member of the ISBA Board of Governors.)

In the short term, Thomas believes the ethics rules will need to be modified to allow a brief grace period for attorneys to transfer those funds into the proper accounts. “Given that we are now not meeting people in person, it’s unfair to force lawyers to make a deposit in a trust account when that trust account is usually not linked to Paypal or Zelle,” he says. “We’re going to have to allow lawyers time to transfer those funds into their trust accounts without it being an ethics violation.”

Thomas says it’s essential to understand ethics rules on trust funds when clients use PayPal, Venmo (PayPal owns Venmo), and especially Zelle, which only allows one account to be linked to it. “Illinois Supreme Court Rules require that unearned fees go to your attorney trust account. To what extent are lawyers setting up electronic payments that people can make to their trust account versus a personal or business account?” he asks, rhetorically. “If I’m receiving a retainer payment from a client, I’ve got to put that money in my trust account.”

Nathan Lollis of Chicago-based Law Offices of Nathan Lollis says attorneys starting their own firms need to think about the practical aspects of payments and how to handle late payments.

“In our office, you can pay by credit card. You can pay by Venmo. Make it as easy as you can for people,” Lollis says. “Attorneys should be giving clients different ways to pay and making it really easy. You can set milestone retainers for a particular case,” he says. “I’m also talking about things like including a credit card link, so they can click and pay right away.”

Make sure attorney-client agreements cover your fees, costs, and a stipulation about how long clients have to appeal certain charges, “so they don’t come back five years later,” Lollis says. “If they legitimately don’t like a bill, it’s reasonable for them to tell that to an attorney in a reasonable amount of time and work it out. But if you properly draft the client agreement, you can prevent some of those issues from arising.”

If clients fall behind, you can agree to draft promissory notes for past fees, if you want to keep representing them. You can ask clients for a guarantor or cosigner, especially if your background screening reveals that they filed bankruptcy recently or have done so repeatedly, Lollis says. “That might be something the attorney would want to consider before undertaking to represent that client,” he says. “If they went into bankruptcy court to discharge another attorney’s fees, they might do the same thing to you.”

Technology

“Everything is done electronically these days,” Thomas says. I would much rather appear remotely at the ‘9 a.m. cattle call’ particularly in northern Illinois. In the dead of winter, who wants to drive to the Daley Center? This virus has changed the way we practice law. There are some good things that have come from this experience.”

Young lawyers starting their own practices might have four to six status calls on the same day, requiring multiple devices at the ready to be able to Zoom into each courtroom at a moment’s notice, Thomas notes. “It’s going to be crazy some mornings, particularly when two judges call your case at the same time,” he says. “It’s still much better than going up and down the Daley Center. And when you’re done, you’re still at home.”

Software that provides the ability to electronically sign documents is another handy asset, Thomas says. “I e-sign almost everything now,” he says. “We’re living in a virtual world. It’s made things more efficient.”

“E-security, cybersecurity, and electronic transmission of documents have become critically important,” says Dana Zivkovich of the Glenwood-based Zivkovich Law Offices LLC. “That’s going to continue to be important going forward, even beyond the pandemic. Because the nature of our practice has expanded, and to whatever degree we return to normal, it will not return to the normal we knew. It will have shifted in a way that probably continues to rely on technology.”

Human resources 101

On the human-resources side, the pandemic has drawn attention to home-office expenses, how to handle the state-level implications of people working from outside jurisdictions, and even whether Occupational Safety and Health Administration (OSHA) regulations apply to remote-work situations, says Allison Powers of Chicago-based Barack Ferrazzano Kirschbaum & Nagelberg, LLP, a management-side employment litigation firm.

New firms will need to do some basic recordkeeping and build a personnel file, and depending on how they implement a paid sick-leave policy, there could be administrative obligations around reporting and tracking those issues, she says. The Family First Coronavirus Response Act, which expired at the end of December, provided additional leave entitlements around child-care obligations. Powers anticipates the Biden Administration will continue those and also resurrect diversity training requirements, which were swept away by the previous administration.

When it comes to COVID-19-related safety requirements, new employers should start with guidance put out from the U.S. Centers for Disease Control and Prevention, the Illinois Department of Public Health, and OSHA, Powers says. Firm owners need to be aware of physical distancing requirements, cleaning and disinfecting protocols, COVID-19 testing routines, and indoor mask requirements. “These agencies also address things like the number of people who can gather in an office space; and if face-to-face meetings need to happen, how many people can be in those meetings,” she says.

Employment protocols. If attorneys starting a firm plan to hire support staff, paralegals, or associates, employment policies need to be in place.

First, the firm must be properly registered with the state, able to withhold unemployment insurance, and have a process in place to handle employee concerns, Powers says. Attorneys also need to decide whether to have written employment agreements and become aware of and comply with anti-discrimination statutes at various levels of government, she says.

Those starting a firm also must consider whether to hire people as employees or independent contractors, Powers says. “Many times when small employers look to add to their staffing, they try to do it as quickly and as cost-effectively as possible,” she says. “Sometimes that desire drives them to bring an independent contractor on board to avoid the headaches of tax withholding.”

But independent contractors come with drawbacks. “How much control are you planning to have over this person’s day-to-day schedule, how they perform the work, when they work, and the details of what they’re providing?” she says. “Are you literally just paying for a service, or are you expecting to orchestrate everything about how the work is performed?”

Marketing and advertising

Settled on a firm name yet? Or maybe you’re considering a new name. There is nothing wrong with playing it safe. But if you’d like to get creative, be purposeful.

“Most people go with their last names. That’s just custom at this point. I know attorneys who have been creative, using fun legal terms, even. I just used my last name because it was convention, being a solo. I’ve been contemplating changing it to a more descriptive name,” Shakfeh says.

Shakfeh has seen a small but growing trend of attorneys using more creative names for their firms. “They’re moving more toward names that are not necessarily their name or region. Like ‘Law Firm for Startups’—that’s their brand. I’ve seen a little more of that coming up. Start with what you can’t do, ethically, and then be open to what you want to do.”

Once you’ve chosen a name, incorporated your business, put your financial and technological pieces in place, and hired a person or two, you need advertising and marketing plans. Advertising generally refers to a paid or sponsored listing, while marketing is content you generate using your own resources.

Starting a new firm during the pandemic has made marketing more challenging and more tech-focused, says Zivkovich.

“The primary force behind a law practice is the establishment of rapport with potential clients and potential referral sources,” she says. “To do that with authenticity is more difficult when you are working from home on a daily basis. Engaging in social groups online becomes more important, and there has been an increase in the number of social opportunities. Since the pandemic began, I have taken part in more networking events via videoconference and watched more webcasts.”

“Marketing your practice is different from advertising and probably more important for your practice in the long term,” says Zivkovich, who also runs a social network for lawyers called the Friendly Lawyers Association. “Marketing is meant to build your firm’s reputation and make an impression on potential clients. And that is going to dictate how you do your advertising, how you develop your client-retention policies, and how you develop your referral sources.”

Mindfulness and self-care

The pandemic has disrupted the way law is practiced and continues to take a heavy toll on lawyers personally. It also has further exposed how isolated solo and small-firm attorneys can be. Now more than ever, attorneys need to bounce ideas off one another, Andreoni says. “That’s the best way for lawyers to avoid getting into serious trouble,” she says. “Lawyers are particularly vulnerable when they’re alone and don’t reach out to somebody and discuss a problem or seek legal advice. Or worse, they bury their heads in the sand and hope the problem is just going to go away. That can be the beginning of a rocky road that gets worse over time.”

“We had to create alternative ways for people to remain connected. We started organizing virtual happy hours,” says Zivkovich. “I formed a virtual book club. Lawyers need to consider opportunities to expand their network.”(See our Groups and Participation page for networking opportunities provided by the ISBA. For more information about the ISBA and COVID-19, visit our COVID-19 Information and Resources page.)

Don’t forget to take care of yourself, unwind, and destress, says Karen Munoz, partner at Dolan Law Offices PC in Chicago and a resident yoga teacher at the Illinois Lawyers’ Assistance Program (LAP).

“It’s more important than ever to make it a priority to take care of yourself,” she says. “If you’re not well and not balanced, that trickles down and will affect how you practice and deal with clients. We’ve been so physically disconnected from our daily lives since COVID-19—from our routines, from other humans. We have to make it a daily priority to take care of ourselves, mentally, physically, and emotionally.”

Nobody else is going to make that a priority for you, Munoz says. “Long term, everything you put into yourself will be reflected,” she says. “You will see it in the way you practice, the way you think, the way you communicate with others.” This is no less important than when working from home. “Start your day at the same time, take breaks, end your day at the same time,” Munoz suggests. “Make it a priority to not blur the lines between your home life and office life.”

Build a network and stay connected, whether virtually, by phone, or by e-mail. “It’s very easy to stay in your bubble and keep your head down,” Munoz says. “It’s not mentally healthy when we’re not collaborating or talking to others, or asking how someone’s practice is doing. LAP sees a lot of solo practitioners. Because there isn’t anyone around, people don’t see how they’re struggling.”

LAP helps attorneys struggling with stress, burnout, or substance abuse, Munoz says. The services are free, confidential, and “fantastic at evaluating and analyzing where people are. If they’re not able to help you internally, they will put you in the right hands. And not just lawyers—they help law students and judges—and LAP is all over the state.” (See this month’s LAP column on page 48 of this issue.)

“Everybody struggles. It’s OK,” she says “Get you and your employees the help they need. Let your employees know their well-being is very important. Without a happy and balanced employee, your business will suffer. You have to make that a part of your business plan and have resources available to your employees. Let them know, ‘We want you to be successful, and we want you to be well, and those two go together.’”

Ed Finkel is an Evanston-based freelance writer.
edfinkel@edfinkel.com