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Freelancing 101 – 10 Tricks of the Trade
Before jumping into your own business venture, build a solid foundation.
By Mary Meinzinger Urisko, Esq.

September/October 2000 Issue

More legal assistants are stepping out, escaping the 9 a.m. to 5 p.m. grind and opening up independent contract businesses. Opportunities for such endeavors abound from media relations to software engineers to contract paralegals.

Before one can become a sole proprietor, a solid business foundation must be laid. The following 10 tricks of the trade make for good bricks and mortar for any freelance business.

Before Starting, Learn as Much as Possible
Freelance paralegal Martha Matthews from Columbus, Ohio, and owner of Martha S. Matthews Inc., a probate and tax law paralegal service, recommends that anyone who is starting his or her own business “begin by locating a SCORE seminar.” SCORE, the Service Corps of Retired Executives, presents seminars on various topics, and counsels anyone interested in starting a new business. Topics that Matthews found of critical importance were record keeping, accounting, and tax liability, because these are areas “where any new business owner can get into trouble, and where most do.” SCORE’s Web site is at www.score.org.

Another useful site offers advice to freelancers in the communications profession. Located on the Web at www.freelanceonline.com, the site offers tips that are applicable to freelancers in most professions. Browsers can find tips such as the following:

“You also need to think about the tax consequences of your freelance income. In the United States, self-employment income is subject to the full Social Security/Medicare tax, currently 15.3 percent, as well as federal, state, and local income tax. Similar rules apply in Canada.”

The site addresses the need to either increase withholdings from other full-time employment to cover an anticipated tax bill from freelancing, or, if the taxpayer’s income is derived solely from freelancing, to file quarterly estimates and pay the tax in advance.

Other helpful Web sites include, www.irs.gov, the IRS Web page that contains many forms as well as information on starting a small business. It links to the Small Business Administration’s Web site, www.sba.gov, which is full of advice on starting your own small business.

Start with Some Savings
According to Matthews and Sue Katherman, a freelance probate paralegal from Columbus, Ohio, and owner of Susan L. Katherman Probate Paralegal, it can take anywhere from three to six months before enough work is completed to receive payment.

It’s necessary to start with enough savings to support yourself and to run the business for several months. There can also be down periods after the business is up and running, so it’s important to have money saved to cover the months when no income is generated.

The amount of money that’s necessary to save varies with the expenses of the individual business, but a minimum of three months worth of expenses is typically recommended.

Know the Ethical Rules — Avoid UPL
The American Bar Association’s (ABA) 1999 Survey of Unauthorized Practice of Law Committees, indicates that 28 states authorize nonlawyers to perform some form of legal services in limited areas.

Of those 28 states, 17 allow paralegals to perform some legal services under the supervision of a lawyer, six allow nonlawyers to draft legal documents, eight allow realtors to draft documents for real estate transactions and 16 allow nonlawyers to attend (and some states allow participation) in administrative hearings. Twelve of the 28 jurisdictions permitting some nonlawyer practice don’t regulate or license nonlawyers. However, 16 states contemplate more active enforcement, including prosecuting disbarred attorneys. On the other hand, many states are considering permitting more authorized, regulated nonattorney practice by legal assistants, certified public accountants, real estate professionals and public adjusters.

The time is ripe to freelance as a paralegal — if you know what constitutes and how to avoid the unauthorized practice of law (UPL).

To avoid UPL, carefully check the legal specialty in which you’re interested in freelancing before setting up a practice. For more information on what types of tasks nonlawyers can perform by state, review the ABA survey.

Practice Ethically
Attorneys may express concern over both conflicts of interest and client confidentiality. The way to handle conflicts of interest is to keep conflicts records, just as if you were working in a law firm. Anything from a simple card file to a more complex computer program should be maintained. To persuade attorneys that you will keep client information confidential, you need a thorough knowledge of the ethical rules regarding confidentiality.

Providing a copy of the ethical rules of the National Association of Legal Assistants (NALA) or the National Federation of Paralegal Associations (NFPA) — whichever you’re associated with — to the attorneys demonstrates that you’re educated in ethics, too.

Determine How Much to Charge
This can be tricky. Matthews said she took the billing rate that the law firm was using for her when she left the firm after eight years of practice and divided it into thirds: one-third to salary, one-third to law firm profits, one-third to overhead. She then cut out a third for the law firm’s profit and multiplied the firm’s billing rate for her by two-thirds to come up with the rate that she should charge. For example, the firm billed time out at $75 per hour; she multiplied $75 by two-thirds and rounded up to arrive at $50 per hour for the rate to charge. It’s advisable to run your rates by someone else in your geographical area to make sure your rates aren’t significantly out of line.

It’s also a good idea to set aside a regular time, such as one day per month, to prepare that month’s bills. If time isn’t set aside, it’s too easy for more than a month to pass without sending out bills. This can cause an interruption in income stream and make it difficult to pay office expenses, and so on.

Evaluate Whether to Use a Contract
While not all paralegals enter into contracts with the attorneys they work for, most agree the better business practice is to use one. It’s easier to resolve some disputes by referring to a contract, and it’s evidence of the agreement if a collection action becomes necessary. Freelance paralegals who don’t use contracts know and trust the attorneys they work with.

What provisions should be included in a freelance contract? Katherman includes the following in her contract: a confidentiality provision, a monthly billing requirement, a services to be performed provision that explains her work is subject to attorney supervision as required by state law, the attorney will review her work before submitting it to a court, she will not have any client contact unless instructed or approved by the attorney, and that she will not give any legal advice.

Listed next are specific payment and time provisions, and last is an independent contractor provision stating that she’s an independent contractor and not an employee of the attorney.

Decide If You Should Rent Office Space, Equipment
Some freelance paralegals work out of their homes and others work out of rented office space. The decision depends on your personal preference and discipline. Let’s face it — how many people have the discipline to research a thorny tax issue when they could be unloading the dishwasher?

Another consideration is professional appearance. Is an office necessary to create credibility with the attorneys in the marketplace?

Matthews and Katherman feel it is. Lee Davis, on the other hand, has offices set up in her home in Phoenix. Davis, the owner of Lee Davis & Associates Inc., has worked successfully this way for many years. It’s really a matter of professional perception in the local legal market.

Set Up a Web Site, Network, Promote Your Business
Many excellent Web sites exist for freelance legal assistants. One particularly impressive site is the Colorado Freelance Paralegal Network’s Web site (www.paralegalsfreelance.com).

The site provides persuasive business reasons for attorneys to use the services of freelancer paralegals, such as cost benefits. The site also offers another valuable tool in the form of its directory of freelance paralegals.

This directory lists the freelancers in order alphabetically both by name and by legal specialty.

Another method of getting business is to use your contacts within the legal community: Other freelance paralegals and attorneys.

In Columbus and Denver, freelancers meet to discuss issues impacting the profession. This not only provides the group with support, it also provides them with an opportunity to refer overflow work to new freelancers, or those who have less business than others.

Another way to network would be to join local or state bar association sections in the area of your legal specialty.

Promote Tax Advantages Gained by Using Contract Paralegals
Regardless of whether you maintain a Web site, advertise or get business through networking, freelance paralegals need to promote the benefits of hiring a freelancer.

One major benefit to an employer hiring a freelancer is that the employer doesn’t have to withhold income, Social Security and other taxes.

Additionally, the employer doesn’t have to pay the freelance paralegal employment benefits such as health insurance and retirement benefits. Independent contractors obtain these benefits on their own.

In many cases, freelance paralegals also provide their own equipment such as computers and software, and they typically work out of either their homes or their own offices.

Consider What Insurance is Necessary to Protect Your Business Venture
Again, this is an individual choice, and it’s one that’s made based on assets that need protecting, whether the business is incorporated and client’s demands.

“Most attorneys don’t ask for insurance, but the banks that I do work for require it,” Matthews said.

Matthews’ said her liability and personal property insurance cost her about $2,000 per year in premiums.

Freelancing can provide professional opportunities for an experienced legal assistant, in terms of income potential, flexibility, variety of work assignments and attorneys.

However, most independent paralegals don’t recommend freelancing immediately after graduation, because the necessary experience and contacts in the community need to be established to get the business going.

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