2) Banking Matters
One of the first tasks I undertook was setting up my bank accounts. I figured this would take some time to sort out and is a requisite to owning and managing any law practice, so why not start there? And so, with energy and determination, I got on my bike and rode into Boston to setup some business bank accounts.
As a basic matter, I needed two bank accounts, both pursuant to the Massachusetts Rules of Professional Conduct. A business account to hold my business's money (Mass.R.Prof.C. 1.15(f)(2)) and an IOLTA account to hold my client's money (Mass.R.Prof.C. 1.15(b)). The IOLTA account, for which Rule 1.15 was mostly enacted, ensures that client property is secured and segregated from the lawyers' personal property. As a personal injury attorney, an IOLTA account is standard for holding any settlement or judgment money received on behalf of the client pre-disbursement. The nice thing about IOLTA accounts is that the interest, paltry when considered for each account individually, is pooled and used to fund legal aid projects through the Massachusetts Legal Assistance Corporation.
Before setting up a business or IOLTA account, you should first determine how you want your business to be organized. There are competing theories, advantages, and disadvantages to each which have been analyzed in detail. I decided to organize my business as a Sole Proprietorship, meaning my business and personal incomes are one-in-the-same in the eyes of the law. As a Sole Proprietor in Massachusetts, under G.L. c. 110 S. 5 you are required to file a Business Certificate with your city clerk. Here is a link to Boston's. This is also where we will begin to keep a tally of charges, because the filing fee is $65.00. Welcome to investing in yourself; let's hope it pays off!
Of course, not all challenges are readily apparent. No sooner do I get into Boston to setup my bank accounts than I notice my bike is slowing down unbidden. A quick investigation confirms my rear tire, which I had been warned was on its last legs, has run out of legs. Thankfully, Urban AdvenTours, my go-to downtown bike shop, got me in right away and got a new tread and tube installed immediately (they have saved my bike many times). Calamity (having to ride the T) averted and only 20 minutes spent, and so I head to my local TD Bank, where I keep my personal bank accounts.
It is here that I learn two things. 1) setting up a business checking account is easy and 2) setting up an IOLTA account is hard. Turns out, you need two documents to setup an IOLTA account that I did not have: a Tax ID Number and an Attorney's Notice of Enrollment form. The first was easy to get online through the IRS. The second could be found at the MA IOLTA Committee's website.
I then decided to open the IOLTA account at Citizens Bank, as I was told keeping personal and IOLTA accounts as far from each other as possible was the best way to avoid to accidentally depositing money into the wrong account (perhaps the biggest no-no there is in the lawyer world). Citizens also has no minimum balance on IOLTA accounts and requires only $100.00 to open the account, which can then be used to purchase checks for the account, so really no cost to open or hold the account (we'll get to checks later). Note that, under Mass.R.Prof.C. 1.15(b)(2)(i), you can keep no more of your personal money in the IOLTA account other than what is necessary to pay bank charges.
Back at TD, I decided to open a Business Interest Checking Plus Account, which requires a $2,500.00 minimum balance but has no maintenance fees and pays interest (however pathetic it may be right now). I also opened a Business Credit Card account to help keep track of business expenses for tax purposes. So far pretty cost-neutral ($65.00 to register the business name, Law Offices of Samuel A. Segal, and $2,600.00 moved into business and IOLTA accounts), but the expenses are coming.