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Branching Out On Your Own?

Things to consider before going it alone as a freelancer.

By Stacey Hunt, CLA, CAS, and Veronica DeCoster

 

Paralegals often entertain the idea of becoming self-employed for a variety of reasons: a retiring boss, downsizing, flexibility or a desire for independence. Whatever the reason, it isn’t a decision that should be taken lightly. While working from home sounds enviable — and often it is — there are some definite downsides that bear careful consideration.

This article will take you through the pros and cons of choosing to become a freelance paralegal. Most importantly, it will arm you with information on how to operate a successful business while
maintaining your sanity.

Do You Have What It Takes?

The best thing about being self-employed is you are your own boss. You have ultimate autonomy as to when, where, how long and how hard you work. Other than meeting the deadlines imposed by your attorney clients, you answer to no one. You get to enjoy professional interaction with a variety of firms without subjecting yourself to office politics. It’s an opportunity to expand your field of practice to meet the needs of the diverse firms that retain you. And most of all, nothing can match the sense of entrepreneurial satisfaction achieved by sending out a stack of bills and watching the checks come rolling in ... all made out to you.

On the flip side, the worst thing about being self-employed is you are your own boss. There is no one but yourself to turn to when your paycheck doesn’t come in. There is no guarantee one month will be as profitable as the next. No one is paying you sick time or vacation time; paid holidays will be a thing of the past, unless you choose to work on them. Promoting your business is an ongoing necessity, even if it isn’t something that comes naturally to you. You have to pay for your own health insurance and fund your own retirement. You might be handed projects that none of the office paralegals care to tackle. And your “office” is open round-the-clock.

Making the decision to freelance is a balancing act that requires weighing the potential ups and downs to determine whether it’s right for you. If you are a self-starter, you might be driven to work more hours than there are in a day. On the other hand, if not, you must resist the temptation to be distracted by personal tasks or social engagements that steal your billable hours. Remember the only structure your business will have is what you create, but it’s your creation, not something imposed on you by an employer.

The most important thing is to know yourself: Do you have the discipline to “get to work” when there is no one to answer to?

Once you decide to take the plunge, some preparations are in order.

Walk Before You Run

One of the biggest mistakes some paralegals make is jumping into freelancing without having a solid foundation of law office experience. No amount of education can substitute for hands-on training in managing case files, meeting local court requirements, and knowing, without being told, the necessary procedural steps to accomplish your task. Given the nature of freelance work, your attorney clients will not have time to hold your hand, and you will be expected to work with minimal supervision. Law firm experience also exposes you to many different personalities and styles. This will teach you to be more adaptable to the quirks of your attorney clients.

An often overlooked benefit of working in a law office is the networking opportunity. For example, a litigation paralegal is in daily contact with the staff members of opposing firms. Each of these firms is a potential source of work when the time comes for you to start marketing your business. If you have earned the respect of staff members, they will more readily recommend you to their attorney employers.

Therefore, it isn’t advisable to try to forge a freelance career directly out of paralegal school. Take the time to establish yourself in the legal community and absorb as much practical knowledge as possible.

Once you have acquired the requisite experience, your next step is to build a nest egg. This serves two purposes. First, you will need to outlay at least $5,000 for equipment, furniture, reference materials, software and supplies. Second, you might need to supplement your income with savings while your business is being established or during the occasional slow times.

Unless you are independently wealthy or the recipient of a substantial inheritance, your nest egg will probably come from your paycheck.

The best time to start soliciting business is while you still have the comfort of steady employment.

In fact, many paralegals launch their freelance businesses at home in the evenings while maintaining their full-time positions. Ethically, you should exercise great discretion in the assignments you accept to avoid any possibility of a conflict of interest. Since you will be working with multiple law firms, which may end up representing opposing interests, ethics require you to maintain a system for conflict checks.

While law firms have sophisticated software for this purpose, it isn’t necessary for you to incur this expense. Simply keep a log of the names of all parties or individuals, companies or entities involved in the cases or matters in which you have performed work. Before taking on a new assignment, search this log to make sure you have not worked for a competing interest. If you find you have, all is not lost. You need not automatically decline the project. Disclose the potential conflict to both sides and see if you can obtain a waiver. If not, politely decline the new assignment. The professional respect and trust you will garner by recognizing and disclosing the conflict will reap benefits in the future.

Once you know the business is out there, you will feel more comfortable cutting the cord with your firm. Always leave on good terms, however, because your former employer could become one of your future clients.

An excellent source of referrals is through your local paralegal association. Some associations keep a resumé bank of members who freelance and match them with attorneys needing contract work performed. Often attorneys will leave it up to their existing paralegals to find other legal assistants to help with overflow work. Friendships made at association meetings might give you an advantage in that you could be the first person they think of when that time comes.

Another avenue to consider: Responding to advertisements from firms or corporations seeking permanent employees. The task of finding the right employee can be a protracted one. Having someone in place to pinch-hit in the interim — even if only temporarily — can offer employers the safety net they need to conduct a thorough search without being rushed. With a properly worded pitch, you can educate employers on the value of temporary paralegal work to keep things moving while they search for their ideal candidate.

Setting Up Shop

Although most people already have a home computer, you will probably want a computer exclusively for your business use. Your family must understand this computer isn’t for sharing. You would not want to come home to find your son or daughter accidentally deleted the trial brief you had been working on for two days while making room for downloading MP3s. The computer should be set up on a comfortable, ergonomically correct work station.

Most firms use either Microsoft Word or Corel WordPerfect for their word processing program. For maximum compatibility, it’s strongly recommended you have both programs installed on your computer and be knowledgeable in the operation of each. Your computer files should be password protected to ensure confidentiality. Although time and billing software is convenient, it isn’t absolutely necessary. Adequate bills can be created in any word processing or spreadsheet program. You can either track your billable time on the computer or on hard copies, such as time sheets, a calendar or personal organizer, depending on your personal preference.

Another helpful tool is a calendaring program, such as Microsoft Outlook, to track your appointments and project due dates. You might need specialized software specific in the area of law in which you practice. Having access to an online research service is invaluable. Most importantly, you must have a reliable backup system and use it regularly. Some attorneys may even require this of you as a condition of contracting with their firms.

To create professional documents, you will need a high-quality laser or ink-jet printer. A high-speed Internet connection for performing online research or transmitting completed materials to your clients is a necessity. You must have a separate land line or cell phone so you are able to take calls in your home office while online. Documents referencing case information should be kept in a locked file cabinet. And, of course, you will need a reliable vehicle.

What Are You Worth?

One of the toughest things you will have to determine is how much to bill for your time. If you charge too much, you will not get any work.

On the other hand, if you start low, you may encounter resistance to a rate increase. You will also need to consider your extemporaneous costs of doing business, such as paying your own Social Security, health care insurance, disability insurance, vacation pay and so forth. Some strategies for establishing your rate might include:

  • Talking to other freelancers, who might be willing to share their rate information with you, or talk to firms you know that retain freelancers to see what they charge. Your rate should be comparable for the type of work performed.
  • Asking what rate firms bill for their in-house paralegals. Your rate should leave them a comfortable profit margin.
  • If you have particular expertise or many years of experience, you might feel comfortable charging slightly more than the going rate.
  • Consider basing your rate on the type of project. For example, offer a basic rate for simpler tasks (summarizing depositions) and an advanced rate for more complex work (researching and drafting dispositive motions).
  • Another possibility is to bill the client on a “per project” basis, also known as value billing.

Once you have properly researched your potential billing rate, it’s time to consider how you are going to get paid. There are some options to consider when billing, but you should coordinate with your attorney clients on how they want to be billed. The easiest method for you would be to bill all clients at the end of each month. However, this might not work for all of your clients. Some firms might want you to bill them at the conclusion of each project. Others might have a billing cycle that ends at a different day of the month, such as the 20th, which means they would need your bill by the 15th of each month. Include language on your bill such as “Payment due within 30 days” so the recipient knows when you expect to be paid.

It might also be wise, when entering into business arrangements with firms or corporations, to ask about their billing cycle. Some law firms and corporations have policies that state they will pay within a certain time period following receipt of an invoice. Be sure to look into this matter so you can adapt or negotiate accordingly.

Business can also still be done on a handshake, but you might find firms ask for a more formal expression of your business agreement. There might be a variety of reasons for this, the most important being to protect the firm from violating Internal Revenue Service (IRS) and workers’ compensation laws should there be a question of whether you are an employee rather than an independent contractor. Independent contractor agreements can also define the firm’s expectations, the amount you will charge and the scope of your project.

Look for sample independent contractor agreements in the form’s books published in your state.

Getting the Job Done

Working for attorneys as a freelance paralegal isn’t much different than working for them in-house. Many of the same rules apply. For example, you should always try to get your assignments in writing, if possible, and don’t hesitate to ask questions if you need further clarification. Pin the attorney down on a deadline for the project, and meet or beat it. Also try to get some parameters on how much time you should spend on the project, so there are no surprises when the firm receives your bill.

Since you will not be working down the hall, make sure you have all the information you need before you leave with the assignment. If you find you need further guidance once you actually begin your work, using e-mail to communicate with the attorney will provide you a written record of the additional instructions.

Each law firm has its own particular way of formatting such things as legal memoranda, deposition and record summaries, agreements, contracts and the like. For the sake of consistency, and for your own efficiency, obtain samples of any forms you might need for your project. If the firm doesn’t have samples available, feel free to use something that worked successfully for another firm. One of the benefits of freelancing is your exposure to many different methods of streamlining the practice of law and your ability to share those ideas.

Establish with your attorney client the manner in which completed projects are to be transmitted. Possible choices are to e-mail them to the firm or deliver them on a disk. Because the firm will need to have an electronic version of the project in its computer network for editing or future reference, hard copies alone will not suffice.

For maximum client satisfaction, you should be willing to be flexible. There might be occasions when the attorney client doesn’t wish you to take files off-site and wants the project completed in his or her office. Although you may prefer to take the work home, compromise is often required in order to keep the assignment. And if you thought rushes would be a thing of the past, think again. It’s a fact of life that freelance paralegals are called in at the last minute to help with unanticipated work crunches or last minute trial preparation. You may want to leave some flex time in your work schedule for these expected “unexpected” situations. To make this more palatable, you may want to build a rush fee into your billing rates.

Keeping in Contact

It isn’t always true that absence makes the heart grow fonder. Where self-employment is concerned, the old cliché “out of sight, out of mind” often applies, so it’s important to maintain open lines of communication.

Initially, marketing will get you started, and in the long term, it will keep you going. In “Paralegal Career Guide,” Third Edition, author Chere B. Estrin recommended marketing on a continuous basis.
“Many freelancers have down periods because they were too busy working on one assignment to market for the next. ... It’s better to present yourself to a firm as booked up and looking ahead for the next assignment, than willing to take almost anything.”

Marketing can be as easy as dropping flyers in attorney drop boxes at the courthouse or placing an advertisement in the local bar association newsletter. More sophisticated ideas include writing articles for the bar association on procedural issues or use of paralegals, or volunteering to hold brown bag seminars for local firms on a familiar topic.

Be careful not to get so focused on courting new clients that you neglect your established ones. There is greater security in having a handful of clients who use you exclusively than in getting piecemeal work from multiple clients who retain you for a single assignment only. Sending holiday cards and gifts to your clients or inviting them to lunch is one way to help keep your name at the top of their lists. Another nice touch would be to bring the firm a basket of cookies or other goodies for no reason other than to express your gratitude for their business.

Don’t forget the other people who help you in your day-to-day business. A box of chocolates for the law librarian who helps you with your research or the process server who delivers your subpoenas will be appreciated and not forgotten.

Avoid Cabin Fever

One of the great dangers of working from home is you can never get away from the office. It’s imperative you separate your work space from your living environment so you can literally “leave” work at the end of the day. Moreover, creating a separate work space will lessen the likelihood of your family intruding during your work hours. Establishing these boundaries for you and your family will maintain your productivity during work time and allow you to relax during your off hours.

When you are getting your business off the ground, you may need to be prepared to take all projects offered so you can prove yourself and establish your clientele. This may require some long hours, but will give you the reputation of reliability. Once you have created your niche and are convinced there is enough work to keep you busy, you should begin to feel more comfortable declining assignments that will overburden you.

While it’s never easy to say “no” to a potential or current client, your sanity may depend on it. You should overcome the fear that turning a client down will turn him or her away for good. If you have a solid reputation and a good working relationship with your clients, an occasional “no” will cause no harm.

An alternative to saying no is to have an on-call relationship with another freelancer, with whom you can subcontract to take on your overflow work. This person should be someone with skills comparable to your own, so you don’t have to redo or edit the work before turning it in. A relationship like this can allow you to take a vacation with piece of mind.

The Taxman

Since you are a paralegal and not a bean counter, it would be wise to defer tax preparation to a bookkeeper or accountant (unless, of course, you are a tax paralegal). Your energy is better spent staying abreast of the law, not keeping up with the ever-changing availability of itemized deductions.
There are a variety of tricks you might not be aware of which could be money out of your pocket when tax time rolls around.

You will need to track all business expenditures, as well as all monies coming in, so those figures can be turned over to your tax preparer in a usable format. Opening a separate business checking account will consolidate your accounts payable and accounts receivable into one ledger. You should keep copies of every invoice, every check received and every expense receipt. These amounts can be posted to a manual ledger, an electronic spreadsheet or financial software, such as Quicken, for transmission to your tax preparer. If record keeping doesn’t come naturally to you, a bookkeeper can also help you set up a system and choose software to make your life easier.

There are many ways to run afoul of the IRS. The easiest is not paying your taxes. Make sure you budget for your state and federal quarterly estimated tax payments, as well as any additional amount you might owe with your annual tax return. Make sure your bookkeeper has the necessary information for issuing 1099’s to your subcontractors. In the event you are audited, you will need documentation proving your business income and deductions.

A more subtle danger is the possibility of inadvertently losing your independent contractor status in the eyes of the IRS. Should that happen, both you and your attorney client may face monetary penalties. The IRS draws a distinction between employees and independent contractors based on several criteria.

Paralegals who have only one attorney client or who don’t exercise enough independence in how they perform their work are at risk of being considered employees of the attorney. Your tax advisor is your best resource in determining whether you have crossed the line to employee status.

The Decision Is Yours

There are a myriad of issues to consider before proceeding to launch your own freelance paralegal business. The effort is by no means cut and dry, and having a solid foundation of paralegal experience and a network of professional peers to fall back on is imperative. However, if freelancing is right for you, it can be a tremendously rewarding and fulfilling experience. With hard work and the support of your family, your paralegal career will take on new dimensions as you expand your role in the legal community.

Online Legal Research Resources

Company Name Cost/Service Provided Contact Information
West Group Basic state level plan ranges from $60/month for 10 hours to $160/month for unlimited hours. (800) 762-5272
www.westlaw.com
LexisNexis Ranges from $80-$170/month for unlimited use depending on the amount of materials included in the plan. (800) 227-4908
www.lexisnexis.com
American LegalNet Service includes California and 9th Circuit Cases, U.S. Supreme Court Decisions, California and Federal Codes and Rules, California and Federal Regulations, California Forms and more; $39/month if paid monthly; $19/month if paid annually. (800) 293-2771
www.americanlegalnet.com
LoisLaw Service covers case and statutory law and court rules for all 50 states and federal, access to law libraries and bankruptcy court and more; cost is $79/month for state only or $99/month for your state plus federal. (800) 364-2512
www.loislaw.com

 

 

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