The legal profession can be an unusual one as far as accountancy goes, so it’s often useful to engage with an accountancy firm which understands the sector as well as your particular business. We’ll go over a few things to consider when shopping around for a new accountant for your law firm.
How is your legal firm structured?
Are you a solicitor working by yourself, or a member of a multi-partner law firm? This is important because the business structure you use affects the way that you report and pay tax as well as your other record-keeping and reporting obligations.
In turn, this might impact the type of accountancy services you might need, and the level of support you get from your accountant!
For example
General partnerships are one of the most commonly used business structures in the legal industry.
The partners must submit a tax return for the partnership itself, but the partnership doesn’t actually pay any tax as an entity.
Instead, each partner pays tax on their share of the profits, so they’ll need to submit their own tax returns as well as filing one for the partnership – it can get a bit complicated!
What accountancy services do legal professionals need?
A solicitor working as a sole trader might have fairly different needs compared to those of a larger law firm operating as a limited company with directors, shareholders and investors to think about.
Along with helping you to be more tax-efficient and managing your tax returns, a good accountant will normally also offer the accounting services you need on a day-to-day basis, as well as more niche or specialised skills. For instance:
- Bookkeeping to help you stay on top of your record-keeping duties and follow up on unpaid bills
- Payroll services to deal with paying staff wages correctly, PAYE, and pensions
- Even if you work by yourself as the sole director of your own limited company, you might still need payroll support to pay yourself using a tax-efficient salary!
- Creating, analysing and explaining your financial data in a way which actually helps you to grow your business
The accounting services that your law firm needs are very likely to change as your business develops. If you’re considering your long-term options, look at accounting practices offering ‘room to grow’, so you can add (or remove) additional services as needed.
Do solicitors have to have an accountant?
Not necessarily, but hiring an accountant can be extremely useful, helping you meet your obligations as a business, not just as a legal professional.
It’s not all about compliance though! Just like you get to see the nitty-gritty of what’s going on with your clients, we see behind the scenes of lots of different types of businesses. This experience and knowledge can be used elsewhere, to help you be as efficient as possible.
How do I choose an accountant to work with my law firm?
Like any big purchase that you make, shop around and do your research! Hiring an accountant who specialises in the legal industry will help in some respects, but it’s just as valuable to make sure they have experience working with a wide range of businesses.
Although it may be tempting to choose a tiny practice where you’re a major client, it also pays to make sure there’s cover if someone goes on holiday or becomes unwell. The accountancy firm you go with should be able to offer you a dedicated service, but with enough qualified accountants to provide a pool of experience for you to tap into. It can be frustrating if you find yourself being passed around from one advisor to the next.
Which leads us to our next point. It makes life much easier if your accountant can provide all of the services that you need! Things get confusing if one firm takes care of your VAT return, whilst another deals with payroll.
How do I background-check an accountant?
It goes without saying that the accountant you choose must be appropriately qualified. Given that in the UK, anyone can call themselves an ‘accountant’, make sure you check their references!
Your accountant should be an accredited member of one of the big professional accountancy bodies such as ACCA, ICEAW or CIMA. These impose strict rules around practice management and ethics.
Learn more about our accounting services for legal professionals and law firms. Call 020 3355 4047 to chat to the team, or get an instant online quote.
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