Archive for the ‘Uncategorized’ Category

Virtual Law Firm Checklist: Adhere to State Requirements

September 27th, 2016 By Virtual Paralegal Services

A virtual law office, or virtual law firm, is a law practice that doesn’t have a traditional brick-and-mortar office and largely relies on technology to meet client needs. As technology has become more sophisticated, workforces have become more mobile, and the legal industry is no exception.

In a virtual law office, an attorney or group of attorneys works from home or some other remote location. This allows small and solo law practices, especially startup firms, to minimize overhead and increase or decrease personnel according to current need. Advances in cloud computing have made it easier for attorneys to securely manage data and communicate with clients without the capital expenses incurred when building on-premises IT infrastructure.

Virtual Law Offices Held to Same Legal and Ethical Requirements as Other Law Firms

Although a handful of states such as Delaware have a Bona Fide Office Rule that requires attorneys to maintain a physical office, most states have softened their laws to allow virtual law offices. For example, New Jersey removed the requirement in 2013. Although guidelines vary from state to state, virtual law office operators in New Jersey must:

  1. Be accessible during business hours, usually by phone and email.
  2. Be available for face-to-face meetings with clients at a convenient time and location.
  3. Follow guidelines for maintaining files and records.
  4. Designate a physical location for file inspection, deliveries, and service of process.
  5. Designate the clerk of the Supreme Court of New Jersey as the agent for service of process.

Opinions from several jurisdictions consistently state that the Rules of Professional Conduct do not impose greater or different duties on attorneys who maintain a virtual law office. However, these attorneys are held to the same ethical rules and obligations as traditional law offices, and there are some areas that require close attention.

For example, just because client information is stored in the cloud on a third party’s storage infrastructure, the attorney must act competently to protect the confidentiality of that information. As a result, attorneys must carefully screen cloud service providers to minimize the risk of a breach and ensure that all data is properly backed up. Also, attorneys must be careful to provide legal services only in jurisdictions in which they are licensed and clearly communicate their status to clients.

Technology and the trend towards flexible work schedules have made it easier to work from home and other remote locations. However, attorneys who operate virtual law offices must maintain the same general structure, organized support, and books and records to meet American Bar Association and state bar requirements.

Virtual Paralegal Services delivers flexible, on-demand support for both traditional and virtual law offices. Contact us to learn how we can help you maximize operational efficiency, meet client expectations, and adhere to legal and ethical rules.

Bookmark and Share

Are You Using Virtual Paralegals and Outsourced Support? Make Sure You Comply with Ethical and Professional Obligations

September 2nd, 2016 By Virtual Paralegal Services

Guideline 1 of the American Bar Association Model Guidelines for the Utilization of Paralegal Services states the following:

A lawyer is responsible for all of the professional actions of a paralegal performing services at the lawyer’s direction and should take reasonable measures to ensure that the paralegal’s conduct is consistent with the lawyer’s obligations under the rules of professional conduct of the jurisdiction in which the lawyer practices.

In other words, if your law firm outsources paralegal services, you are ultimately responsible for all tasks delegated to the paralegal service provider and the quality of work performed. But what constitutes “reasonable measures” when determining whether the paralegal’s conduct is consistent with your ethical obligations to your client and your profession?

For many solo and small law firms, delegating tasks to a paralegal is a daunting, but critical step towards cost-effectively delivering exceptional service and growing the practice. However, certain steps should be followed before outsourcing to minimize the risk of legal and ethical issues.

  1. Communicate Your Requirements

Obviously, a paralegal service provider will work with multiple law firms. Each law firm has different preferences and requirements for performing various tasks. If you’re going to outsource paralegal services, you must clearly communicate how you expect work to be done. You must also familiarize paralegals with all relevant provisions of your state’s rules of professional conduct.

For example, what types of information may be disclosed by email, and what types may not? How must client data be protected on computer networks? Do you require the use of encryption? If so, what encryption standard do you require? What is your policy for tracking time? These and other requirements should be documented to avoid confusion and minimize the risk of ethical and professional violations.

  1. Protect Client Confidentiality

Client confidentiality is sacred. Paralegals must understand and fulfill their duty to preserve and protect client confidentiality on behalf of your law firm. No information related to the representation should be revealed under any circumstances, in or out of the office.

It is reasonable to expect that confidential client information will be exposed to non-lawyers, including both in-house and third-party personnel, who perform work on a particular case. However, the lawyer is obligated to carefully train, instruct and supervise such personnel to ensure that all client confidences and secrets are respected. Most states have specific guidelines related to protecting client confidentiality when the services of associates, legal assistants, paralegals, etc. are utilized.

Confidentiality procedures and policies should be documented to provide assurance that paralegals will adhere to all relevant rules of professional conduct. At the same time, it is incumbent upon the paralegal to learn and understand guidelines related to the preservation of confidentiality to minimize the risk of an ethics violation.

  1. Identify and Avoid Conflicts

Just like an attorney should work solely for the benefit of the client, the attorney must also demand the same from a paralegal to prevent conflicts of interest. Because paralegals are often employed by multiple law firms simultaneously, attorneys should screen paralegals to determine if personal relationships, financial interests, previous employment, etc. would cause a conflict.

For example, some states suggest that a law firm should not hire a paralegal that was previously employed by a firm that is representing an opposing party. Although disqualification rules that might apply to a lawyer do not apply to a paralegal, every effort should be taken to ensure client confidentiality and avoid conflict of interest.

Virtual Paralegal Services

Our highly qualified, senior level paralegals offer on-demand paralegal services that allow you to outsource with confidence. Virtual Paralegal Services requires paralegals to participate in quarterly training and to complete 10 hours of continuing education each year. Let us make sure the requirements of your firm and your state’s rules of professional conduct are met. Contact us today.

Bookmark and Share

Poor Collections Can Cost You. Ask 4 Questions and Assess.

August 25th, 2016 By Virtual Paralegal Services

If you expect to be paid for the services you provide, you need to lay the ground rules in advance, and you need to vigorously manage your collections process. Period.

Typically, effective collections management is easier said than done for solo and small law firms that don’t have dedicated personnel to handle invoicing each month or the ability to follow up when bills aren’t paid.

There are a numerous factors that can contribute to poor collection practices, including fear of losing clients. But, being too slow to take action on past due accounts, or failing to act at all, can show the client that you’re not serious about payment.

Many law firms have no defined, documented policy for collections or fail to adhere to the policy they have. The longer bills go unpaid, the longer the odds of ever collecting.

Consider the present value of money and its decline over time. Every dollar of receivables declines over the time it remains outstanding (see the chart below). This can represent significant dollars to your firm.  So, don’t unwittingly discount your rate by allowing billables to go uncollected.

Value Graph

  1. Are you consistent? It starts with a regular statement. A law firm should send statements to clients each month.  Some firms will even send a statement if no work has been performed during that period simply to keep the client aware that nothing is due.  It also serves as a way to stay in touch and keep your firm on their mind.  The next step is to send a dunning letter after 45 or 60 days of non-payment. A dunning letter is a notification sent to a client that states payment is overdue. It will typically include the client’s name and the amount owed, and state that the debt will be considered valid if not disputed within a certain period of time. Dunning letters are typically sent after 60, 90, 120 and 180 days. They don’t have to be combative, but they do tend to become more demanding over time. By consistently sending statements and dunning letters to clients, you show that you will actively pursue these matters, and you create a paper trail that shows you’ve made every effort to collect what is owed.
  2.  What’s your policy? Every law firm, regardless of size, should have a formal collections procedure in place that clearly outlines what actions must be taken and when. You should also have document templates that can be customized for each client. Include your collections policy in your fee agreement so the client understands how they will be invoiced, how soon they will be expected to pay their bills, and how outstanding balances will be handled and pursued.
  3. When does it become bad debt? At some point, you may have to make the determination that outstanding balances are bad debt. Bad debt may be written off in your business tax returns, but you need to know the rules first. For example, if your firm operates on a cash basis it may not be allowed to write-off bad debt, but generally if it reports on an accrual basis it can. You also need to have a policy and process for determining when it becomes uncollectable. When collections do fail, don’t let poor collection practices cause you to miss the tax benefit of writing off bad debt.
  4. Should collections be a DIY project? Managing collections in-house can backfire if it creates gaps in your collections process or takes you away from strategic initiatives that can grow your firm. It can also place solo practitioners in the uncomfortable position of having to play an aggressive collections role with a client to the detriment of the relationship. Being one step removed from this process can be beneficial. Outsourcing these tasks is often more advantageous and cost-effective.

Virtual Paralegal Services can develop and/or enforce a collections policy, send statements and dunning letters, make phone calls to clients when necessary, and manage bad debt. Contact us to help you manage your collections process and improve your firm’s cash flow.

Bookmark and Share

Avoid the Pitfalls – and Consequences – of Poor IOLTA Management

August 19th, 2016 By Virtual Paralegal Services

Interest on Lawyers Trust Accounts (IOLTA) programs are operated in every state, as well as the District of Columbia and the U.S. Virgin Islands. Most IOLTA programs are mandatory, but a handful are opt-out or voluntary.

IOLTA programs are do the following:

  • Prevent the co-mingling of client funds held in trust with the law firm’s operational funds and other business assets; and
  • Pool funds to earn interest that is used to support charitable efforts. This could involve providing low-income folks with access to legal services, improving the administration of justice in the courts, or supporting educational programs.

On the surface, the management of an IOLTA might seem fairly simple. For example, if a client sends you a $2,500 retainer, it can’t be deposited into an operations account. It has to be placed into a trust account, such as an IOLTA, because that money hasn’t yet been earned. As you perform billable services, you can move earned funds into an operations account.

But how do you manage an IOLTA in a way that meets ethical standards? How do you avoid serious issues if you’re ever audited?

From an accounting standpoint, some billing systems have built-in functionality to help with IOLTA management, but they need to be configured to do exactly what you need them to do. If you have funds from 10 clients in a single trust account, managing the funds of each individual client is complex.

Do: Best Practices for IOLTA Management

Record-keeping requirements vary from state to state, but transparency and accountability are key.

  • The IOLTA and individual clients’ funds should be reconciled each month.
  • All funds should be properly tagged when deposited into the IOLTA.
  • All deposits and disbursements should be tracked.
  • Each transaction should be associated with a specific client.
  • Each client’s transactions should be logged and tracked separately.
  • Hard and soft (digital) copies of all statements, checks, deposit slips, etc. should be retained for auditing purposes.
  • Trust reports, including all transactions and balance information, should be provided to each client.

Don’t: Examples of IOLTA Misuse

Misuse or mismanagement of an IOLTA can result in discipline from the state bar. Law firms are also expected to train and supervise any staff members who handle client funds. As a result, there should be documented procedures for monitoring the handling of client funds and reviewing bank statements.

Examples of improper use of an IOLTA include:

  • Borrowing client funds to compensate for cash flow issues.
  • Accepting one check that covers both work completed and advance fees.
  • Hiding assets in an IOLTA account.
  • Using IOLTA as a savings account by failing to remove earned funds.
  • Sloppy record-keeping.

IOLTA programs were introduced to help attorneys meet their ethical and fiduciary obligations. However, the complexity of IOLTA management has led many law firms to outsource these tasks to a third party to ensure compliance and minimize risk in case of an audit. If your firm doesn’t have the in-house resources or accounting expertise to properly manage an IOLTA, outsourcing may be the most effective way to address the problem.

At Virtual Paralegal Services, we enable solo and small law firms to focus on providing legal services while we manage the accounting side of your business. Contact us to find out how we can take IOLTA management off your plate.

Bookmark and Share

Overcome the Challenges of Accepting Credit Cards for Legal Services

August 11th, 2016 By Virtual Paralegal Services

Credit card and other non-cash payment methods have long been considered taboo or even unprofessional in legal circles. Resistance is primarily driven by ethical concerns. Can these payment methods compromise confidential information? If credit cards are used to pay for services rendered as well as retainers and other unearned funds, is the risk of commingling the law practice’s funds with client funds too great?

From a business standpoint, nobody likes to pay fees to credit card companies. However, by offering the option to pay via credit card, law firms can take control of cash flow and shorten billing cycles. While this shifts receivables to the credit card companies and allows you to focus on providing legal services, there is a potential ethical dilemma of allowing a client to go into debt to pay for those services.

However, we live in an age where many people loathe writing checks and carrying cash. When virtually any bill can be paid via credit card, requiring a check or cash payment is often considered antiquated and inconvenient. This is why PayPal, Apple Pay, Square and other online and mobile payment services have entered the mainstream.

To be clear, the American Bar Association and many state bar associations allow law firms to accept credit card payments for legal fees. However, advance legal fees must be credited to a client’s trust account until the fees are earned to prevent commingling with law firm funds.

Take Five

Law firms that currently accept or plan to accept credit card payments should consider doing the following:

  1. Check State Bar Rules. Find out how advanced fees are characterized in your state, and whether certain card processing services comply with trust account rules.
  2. Understand Payment Card Industry (PCI) Standards. Increasingly stringent PCI security standards protect cardholder data from being stolen. For example, if a client has a new EMV computer chip card and you’re only capable of processing a magnetic strip card, you will be liable if cardholder data is compromised, not the credit card company. Keep technology current.
  3. Explore Lawyer-Specific Credit Card Processors. LawCharge, PayPros Legal, LawPay, and Lex/Actum were designed for lawyers. However, not all versions of these platforms separate trust and operating accounts, so look for a solution that includes this functionality.
  4. Generalize Service Descriptions. While it is important to provide clients with a detailed account of services rendered, including this information when processing credit card payments increases the risk of a client confidentiality breach. General, non-descriptive language removes that risk.
  5. Include Payment Method Details in your Engagement Letter. Communication and transparency are key. Have your client sign an engagement letter that explains payment terms and what types of services can be paid via credit card. To avoid chargebacks resulting from disputed fees, attorneys will sometimes include language that prohibits the credit card company from refunding fees, and mandates that any disputes must be settled between the attorney and the client.

Virtual Paralegal Services helps solo and small law firms implement consistent, ethical billing procedures that remove confusion, minimize risk, and meet client demand for convenient billing methods. Contact us to learn more.

Bookmark and Share

Are You Using Virtual Paralegals or Outsourced Support? Make Sure Billing is Correct and Ethical.

August 4th, 2016 By Virtual Paralegal Services

Organizations, large and small, are under constant pressure to improve operational efficiency. This often involves outsourcing certain tasks such as:

  • Recruiting
  • Hiring
  • Training

Why? Paying full-time employees just isn’t a financially feasible option for many smaller companies. Plan B? They outsource to pay-as-you-go services such as virtual paralegals on an as-needed basis to effectively meet their client needs.

A side benefit of outsourcing is that a paralegal does not have the same jurisdictional restrictions as the attorney, according to American Bar Association (ABA) guidelines. In other words, the physical location of the paralegal doesn’t matter as long as they’re working under the direct supervision of an attorney who is licensed in the jurisdiction of their practice.

Are you outsourcing the right way?  

How do you know that you are charging correctly and ethically for these services?

According to the ABA guidelines for using paralegal services, “The Model Rules and most states require lawyers to make fee arrangements with their clients and to clearly communicate with their clients concerning the scope of the representation and the basis for the fees for which the client will be responsible.”

In other words, law firms should disclose what work will be handled by paralegals and how the client will be charged for these services. To ensure accurate billing and meet ethical obligations, a law firm should closely monitor the activity of and communicate regularly with the paralegal and ensure that nothing goes to the client without attorney approval.

The U.S. Supreme Court ruled in the case of Missouri v. Jenkins that a law firm may charge for paralegal services at market rates, not just the actual cost to the firm. In addition, the ABA states that paralegals must only be compensated for the quantity, quality and value of their work. Compensation must not be contingent on the outcome of a case.

Although the ABA does not provide specific restrictions for marking up paralegal fees, the law firm must follow ABA guidelines for establishing a reasonable fee for these services. Again, these fees must be disclosed to the client. These guidelines apply to any type of outsourcing. Failure to do so could result in client disputes.

According to The National Law Journal, the law firm Chadbourne & Parke charged Virgil Waggoner $20,000 for legal research services that cost the firm only $5,000. As a result, Waggoner’s attorney, Patricia Meyer & Associates, filed a lawsuit, alleging “unfair business practices, unjust enrichment, fraud and deceit.”

Criteria for paralegal compensation varies from jurisdiction to jurisdiction, so it is important for law firms to understand their jurisdiction’s criteria before hiring and billing for paralegal and other services.

Virtual Paralegal Services makes it possible for solo and small law practices to better serve clients and control costs while meeting ethical standards. Contact us to schedule a consultation and to learn more about our on-demand paralegal services.

Bookmark and Share

Breaking the Shell: New Disclosure Rule to Impact Business Owners

July 28th, 2016 By Virtual Paralegal Services

Making it difficult for terrorists to get funding was the mission of the United States Patriot Act of 2001. It paved the way for regulations requiring banks to know their customers. The Know Your Customer (KYC) regulations were also intended to help prevent money laundering by tying customers’ identities to their transactions.

One thing the KYC regulations did not account for was the use of shell companies to accomplish a variety of business goals. That loophole gained media attention when a Panamanian law firm had a massive leak of internal documents which is exposed the business dealings of a number of parties, including noteworthy political figures.

While the connection between offshore companies and politicians drew the most headlines, it didn’t escape notice that countless shell companies incorporated by the firm had dealings with international banks. The banks were allowed to do business with these shell companies without knowing the owners, and subsequently, their customers.

The Due Diligence Rule

The Treasury Department is pursuing methods of increasing financial transparency of legal entities. The goal is to bring the U.S. in line with a global trend against secrecy in financial dealings and financial institutions will soon be required to conform to a Customer Due Diligence (CDD) rule or face penalties.

The Treasury Department says there are six factors that show the importance of CDD:

  1. Assisting law enforcement in financial investigations
  2. Improved counterterrorism and general furtherance of national security
  3. Increased ability of financial institutions to assess and mitigate risk
  4. Improved tax compliance
  5. The establishment of clear and consistent expectations and practices
  6. Generally improved financial transparency of legal entities

The Bank Secrecy Act forces financial institutions to verify the identity of the beneficial owners of shell corporations, as well as any other legal entity customer. Effective July 11, 2016, the CDD rules explicitly apply to:

  • Banks
  • Brokers or dealers in securities
  • Mutual funds
  • Futures commission merchants and introducing brokers in commodities

Note: Institutions affected have until May 11, 2018 to comply with the CDD rules.

Who is a Beneficial Owner?

The concept of beneficial ownership is central to the impact of the new CDD rules. The final rule uses a two-prong system to define who is a beneficial owner. It’s anyone who:

  1. Directly or indirectly owns 25 percent of the equity interests of a legal entity customer
  2. Has significant responsibility to control, manage or direct a legal entity customer

All legal entities are required to identify at least one beneficial owner who exercises control over the entity, regardless of the ownership breakdown of the business. The ownership prong and control prong taken together define the total number of beneficial owners of a specific entity.

The final rule gives financial institutions the right to establish more restrictive thresholds regarding the identification of beneficial owners. Some entities may choose 10 percent ownership as the baseline for the ownership prong. It’s important to recognize that the CDD rules represent the minimum level of information that financial institutions must gather. Depending on the risk assessment policies of a specific company, more information may be required to open an account.

Legal Entity Customers

The CDD requirements apply specifically to legal entity customers. This legal term applies to specific forms of business, including:

  • Corporations
  • Limited liability companies
  • Limited partnerships
  • Any entity created by a filing with a state office
  • Any similar entity formed under the laws of other countries

The term does not apply to sole proprietorships or unincorporated associations.  Why? Those entities have no legal existence separate from the individuals owning them. Application of the legal entity owner designation is logically tied to entities that provide a shield for individual owners.

Reporting Requirements

In many cases, those doing business with a financial institution will be expected to complete a standard certification form. Some institutions will maintain their own forms, incorporating the baseline information required under the CDD rules with any other information deemed necessary by the business. The information provided on the form must be kept current. If a financial institution becomes aware of information that is not compatible with that provided in the form, it’s required to update its records. The banks are expected to maintain the information in a database and use it for compliance with other regulations, including those put forth by the Office of Foreign Assets Control and those necessary for currency transaction reporting.

Customer Due Diligence is about more than just identification. The CDD rule also contains an Anti-Money Laundering (AML) component. The rule requires financial institutions to take steps to understand the nature and purpose of the business relationship with a customer. They are also required to create a customer risk profile when opening an account, and to assess future transactions against that profile. The CDD rule requires banks to report any suspicious activity. Compliance with the rule forces banks and other financial institutions to gather and maintain sufficient information to identify when a client is engaging in transactions that fall outside the normal operating procedure of the business.

For attorneys looking to establish shell corporations for their clients, the CDD requirements pose new challenges in compliance and in achieving business goals. Opening an account with a financial institution will require more time, training and information than ever before. The more beneficial owners a legal entity has, the more time it will take to complete the verification process.

Perhaps more important is the reduced privacy rights of those that want to do business with financial institutions. The entity formation rules of various jurisdictions have not built in a CDD requirement. So, when forming a shell corporation or other business entity, it’s often possible to disclose minimal information. The beneficial owners of these entities may be unhappy to learn that the privacy they enjoyed in forming the business will not extend to transactions involving financial institutions. An attorney or law firm that wants to assist clients to create new business ventures should discuss CDD disclosure requirements early in the process.

The disclosure requirements are similar in form to those required for individual customers. Anyone familiar with the Customer Identification Programs (CIP) used by banks will find the CDD process familiar. The main impact of the new rule is to apply CIP rules to all the beneficial owners of an entity that wants to do business with a financial institution.

It’s fair to assume that the costs of doing business with some financial institutions will rise with the CDD. The costs of compliance attributed to financial institutions will likely be passed on to customers in the form of fees or higher minimum deposits. These costs will vary depending on the financial institution in question. Some already have established customer due diligence programs. The CDD rules are intended to unify these efforts and provide a baseline that all players must meet.

Retroactive Application

The final rule does not contain a categorical retroactive requirement. Banks and other financial institutions are not required to obtain beneficial ownership information for existing customers. They may choose to do so, but the law only applies to new accounts opened after the final rule is implemented.

The guidelines issued with the final rule do instruct financial institutions to obtain this information when, during the course of normal monitoring, they become aware of information relevant to assessing or reevaluating the risk posed by the customer.

Immediate Action

The CDD rules are of primary interest to financial institutions and these businesses must be ready to implement the new guidelines by May 11, 2018. For their customers, the impact is less concrete if no less important.

For years, the decision to incorporate a business in one jurisdiction or another has been based on the rules put forward by the state or nation in question. For example, there’s a reason many businesses are incorporated in Delaware. The new CDD rule may erode some of the benefits of choosing one jurisdiction over another. For companies looking to do business with financial institutions, there may be precious little advantage to choosing Delaware or another “friendly” jurisdiction over other alternatives.

The immediate impact of the CDD rule on new businesses is in choice of entity and jurisdiction. The CDD rule has the potential to alter both the ideal form and the ideal location of a new business. Anyone looking to do business with a financial institution must be prepared to provide information concerning beneficial ownership and control over the enterprise. Even existing customers need to consider the impact of this rule, as many financial institutions may choose to gather this information for existing as well as new customers.

In Conclusion

The comments attached to the final rule regarding the CDD indicate that the annual impact of the measure could reach $150 million or more. The Treasury Department hopes that a reduction in illegal business activity will recoup that cost.

Shell companies have a reputation as devices used for tax evasion and other unsavory ends, but there are perfectly legitimate reasons for using these entities. Shell companies are useful tools for:

  • Conducting foreign operations, including foreign capital investment
  • Tax avoidance, rather than tax evasion. While tax avoidance is legal, there are reasons why an individual or group of individuals would prefer to remain anonymous in seeking these benefits.

Despite the legal benefits of shell corporations, the Treasury Department has decided that anonymity for beneficial owners should not be maintained. The Bank Secrecy Act and its CDD rule lay out explicit rules that financial institutions must follow to pierce the veil of their legal entity customers. This may limit the utility of shell companies and cause some customers to shy away from otherwise beneficial transactions. It will also raise the costs of doing business with financial institutions by placing new burdens on them regarding the gathering and retention of customer information. Whether it will offset those costs with actual gains in the prevention of money laundering, tax evasion, and threats to national security remains to be seen.

For now, clients who want to establish legal entities with the expectation of privacy should know that the Treasury Department is not interested in secrecy and is actively working to further the financial transparency of legal entities.

Would you like to know more? Contact Virtual Paralegal Services.

Bookmark and Share

Poor Time-Tracking Practices: Stop the Bleeding

July 21st, 2016 By Virtual Paralegal Services

Most solo and small law practices have a significant gap between hours worked and hours billed. In fact, a study from LexisNexis found that solo and two-attorney firms are not billing as much as 39 percent of time worked. Why? The culprit is poor time tracking which is often the result of a business or ethical dilemma.

The Business Dilemma

Science shows that memory fades with time. The famous Ebbinghaus experiment conducted by the German psychologist Hermann Ebbinghaus taught us that after 31 days without relearning or memory reinforcement, we forget 78 percent of what we learned. From a business perspective, the longer you wait to track your time, the more it turns into guesswork rather than an accurate, detailed account of billable activity. So, if you wait until the end of the month, or even week, it’s nearly impossible to remember all of the work completed. Instead of monitoring your time, you’re forced to recreate it.

The natural instinct is to be conservative. You don’t want to overbill your clients, and you certainly don’t want your clients to dispute your bill, so many firms will underbill to “play it safe.” This can have a dramatic impact on your bottom line.

Hypothetically speaking, suppose sloppy time tracking causes you to underbill by 15 minutes per day – an extremely conservative figure based on the LexisNexis data mentioned previously. Fifteen minutes per day probably doesn’t seem significant, but if you charge $250 per hour and work 48 weeks per year, those 15 lost minutes each day will cost you $15,000 over the course of a year – per attorney. If you bill at a higher rate, do the math. The cost is staggering.

The Ethical Dilemma

Attorneys are prohibited from charging unreasonable fees. One of the key factors in determining if a fee is reasonable is the amount of time and labor required to provide services. People expect accountability from their attorney, and every client deserves a detailed, accurate report of services provided.

Poor time-tracking practices result in generic, somewhat vague, and often inconsistent descriptions of your time. This not only leaves the door open to ethics violations and client disputes, but the lack of detail makes you less prepared to defend yourself. It only takes one incident to permanently damage a client relationship and your reputation.

The Solution

Some firms prefer handwritten forms or dictation. Of course, there are a number of apps that automate the process of tracking time and integrating this data into your accounting system. However, technology only works if you choose the right tool, configure it to do what you need it to do, and commit to using it every day. This is easier said than done.

Perhaps the simplest time-tracking method is to outsource these tasks to a service provider that can receive information by phone, email or a web-based interface. Descriptions are then reviewed to ensure accuracy, consistency and correct grammar so they are invoice-ready when entered into the accounting system.

Are you ready to take the guesswork out of time tracking? Are you ready to take this task off your to-do list? Are you ready to improve your revenue and cash flow? Are you ready to reduce your risk?

Virtual Paralegal Services helps solo and small law firms improve the accuracy, consistency and reliability of time tracking, using the client firm’s communications platform of choice – phone, email, dictation, web or other means. Contact us to learn how we can help you cost effectively manage your financial operations.

Bookmark and Share

The Privacy Shield Protects

July 12th, 2016 By Virtual Paralegal Services

Just as Captain America’s shield protects him from bullets and flying debris, a privacy shield provides protection to personal and sensitive data. Data protection is a difficult task, especially when data is being transferred. If a company does not have the proper mechanism in place, trouble can ensue. For example, when dealing with transfers from Europe (EU) to the U.S. (US), data protection can be tricky. Up until recently, the “gold standard” transfer mechanism to move data was the Safe Harbor framework, but only a handful of US. companies have used it.  Why? It was costly and required that a company certify annually that it complied with certain privacy principles consistent with European law.

On October 6, 2015, the European Court of Justice issued a judgment declaring invalid the European Commission’s July 26, 2000 decision on the legal adequacy of Safe Harbor.  The European Court of Justice has ruled that the “safe harbor” agreement that allowed the transfer of European citizens’ data to the US. is no longer valid. This caused many companies to panic especially if they were using the Safe Harbor framework.  Companies needed to look for other mechanisms to transfer data out of the EU to the US.  Model clauses, binding corporate rules and other options were available to use, however given that the gold standard was struck down, there was no guarantee that these methods would not also be challenged.

Enter the Privacy Shield

It took six months, and on February 29, 2016, the Department of Commerce and the European Commission publicly released the EU-US Privacy Shield Framework. This framework, which replaces the Safe Harbor program, provides a legal mechanism for companies to transfer personal data from the EU to the US. It will be enforced by the Federal Trade Commission (FTC). The Privacy Shield is designed to provide companies on both sides of the Atlantic with a method to comply with the EU data protection requirements when transferring personal data from the EU to US in support of transatlantic commerce.

What are the requirements for a company to use the Privacy Shield?

  • U.S.-based company
  • Required to self-certify to Department of Commerce
  • Publicize commitment to adhere to the Privacy Shield Principals
  • Must publicly disclose Privacy Policy
  • Must actually implement the principles
  • Must provide a detailed description of activities involving EU residents’ personal data and its related privacy policies.
  • Must be signed by a corporate officer
  • Make arbitration available for disputes
  • All data subjects must be provided with a declaration of the company’s participation in the Privacy Shield program, a statement of right of access to their personal data, and the identification of the arbitration forum for disputes.

Under the Privacy Shield, companies are still committed to the highest level of protection of the data they collect, handle and transfer. They want the best for their customers, consumers, clients, vendors and employees.

There are six key principles that any company which handles personal data should adhere to whether or not they transfer data from the EU to the US. They are:

  1. Inform individuals on how their data is collect, shared and stored – through the Privacy Notice/Privacy Policy
  2. Only collect what is absolutely necessary for business purposes and allowed by law
  3. Ensure accountability for how data is transferred and handled
  4. Be transparent with actions and stick to privacy commitments made to consumers, customers, clients, vendors and employees
  5. Cooperate with enforcement agencies
  6. Keep good records

For more information about complying with these new rules, please contact Virtual Paralegal Services.

 

Bookmark and Share

The Pros and Cons of a Cayman LLC

July 8th, 2016 By Virtual Paralegal Services

Note: This is the last in the series about Cayman LLCs.

Like Delaware LLCs, a Cayman LLC is a corporate body with a legal status that is separate from its members. Unlike the Cayman Islands exempted limited partnership, the Cayman LLC structure offers members some protection from personal liability.

The members of the LLC have substantial authority to set the internal rules and structure of the business. Cayman LLCs can be managed by one member, a group of members, all the members together, or by a non-member designated to act on behalf of the business. Managers are restricted by the Duty of Care, but are otherwise free to pursue the goals of the LLC in the ways they see fit. Cayman Islands law does not even require these businesses to file their LLC agreements with the Registrar of Companies.

Members of a Cayman LLC have greater flexibility to handle the profits or losses of the business. The absence of shares or share capital funds means members can distribute the proceeds of the business based on internal contractual arrangements. This makes managing a Cayman LLC a much simpler task than overseeing a Cayman exempted company.

In short, Cayman LLCs approach the flexibility of a Cayman exempted limited partnership, while maintaining the liability shield and legal status of a Cayman exempted company.

The drawbacks of the Cayman LLC

There are few drawbacks to the Cayman LLC that are not also true of other offshore arrangements. For people who have never before participated in offshore business ventures, the fees and reporting requirements of the Internal Revenue Service may come as a surprise. For clients who already use Cayman partnerships or exempted companies, there should be no surprises in forming an LLC.

Unlike Delaware LLCs, there is no similar provision in the Bill to create Series LLCs. The Cayman Islands already has a legal entity known as a Segregated Portfolio Company that serves a similar business purpose to the Series LLC. It is unclear if the Cayman LLC will eventually copy the Delaware LLC in incorporating a series arrangement.

If you need additional assistance when it comes to Cayman LLCs, please contact us. We can help.

Bookmark and Share