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Legal Necessities and Management Preferences
Becoming comfortable with tracking expenses is an essential part of small business management.
Every business has individualized financial needs. Expenditures depend as much on the requirements for regulatory compliance as on management preferences.
As an attorney, I usually analyze how small businesses choose to spend money in light of four categories: costs necessary to open the business in a legally sound manner, recurring expenses, one-time expenditures, and closing or wind-up obligations.
This approach helps business owners evaluate the cost of counsel and potential legal liabilities by comparison to existing commitments, which matters when deciding how much to invest in papering agreements and resolving disputes. It’s particularly useful for accidental landlords, who don’t always start out treating the rental property as the business it is.
To illustrate this framework, I’ve included a partial snapshot of behind-the-scenes expenses for Attuned Legal® below, but it’s not comprehensive. Nondisclosure clauses bind the firm not to share the amount paid for certain products or services. Also, like many small business owners, I’ve experimented with things that didn’t work out, which I’m skipping over in this post.
|Illinois limited liability company registration
|$150 (initial fee)
|$1,263 (first year)
|Association membership to access insurance
|$270 ($100 partial year + $170 renewal)
|Illinois Supreme Court law firm registration
|$50 (initial fee, good for one year)
The table above shows the absolutely necessary opening costs before Attuned Legal® could start serving clients. There’s a thought process behind each item, including my choice of a limited liability company structure and the specific insurance coverage I bought.
Some notable expenses missing from this table are my yearly law license renewal, Justice Entrepreneurs Project (JEP) legal incubator participation fees, and additional professional association memberships. Those costs don’t belong in this list because they’d still benefit me even if I didn’t open Attuned Legal®.
Also, when I hatched the idea for the firm, I was still working for a different employer, so I chose to pay a total of $279 for some additional services to make the business registration process happen with less personal involvement. Specifically, I paid $125 for one year of registered agent service, $50 to have the EIN filing completed and scanned for me, and $104 for limited liability company filing and a template operating agreement.
The firm’s recurring expenses include domain names, web and email hosting, cloud data storage, phone lines, office space, mail scanning, graphics software, insurance, professional associations, yearly business and law firm registration renewals, proprietary legal research materials, and assistants.
When the cost of a lifetime license for a program or reference material that the firm actually uses works out better than subscription products, Attuned Legal® purchases software and certain library resources as one-time expenditures. Examples include website themes and plugins, professional PDF editing software, and refresher courses for evergreen topics. Admittedly, firm management also has a bit of an AppSumo habit—but I like that the effort that goes into building out a proof of concept using a lifetime deal isn’t lost in subscription costs later on.
Another category of one-time expenditures for Attuned Legal® is legal services that the firm pays other attorneys to provide, such as trademark registration. I find it valuable to have the perspective of another licensed attorney who isn’t involved in the firm’s day-to-day operations when handling any legal issues that come up with running the business.
Don’t worry, I have no plans to sell or close Attuned Legal® anytime soon! However, part of running a legally sound business is making sure that the firm has enough funds to fulfill all contracted expenditures. Right now, one of our contracts runs through 2026, so that money is set aside in case the firm has to buy out the remainder.
Financial Management Strategy
Attuned Legal® tracks all expenses by fiscal year in a spreadsheet with four columns: Purpose, Vendor, Total (Yearly), and Notes. The spreadsheet can be used for calculations and always shows a running total. The expense-tracking spreadsheet doesn’t include any income, because comparing income and expenses is a different type of analysis.
I experimented with more complex, automated systems before returning to the basics. Here’s why this simple approach helps me with firm management:
- It’s a single, big-picture dashboard that I can interpret and maintain myself.
- Putting the Purpose column first allows easy sorting when multiple vendors, such as cloud storage providers or virtual assistants, fit the same service category.
- There’s no division between one-time and recurring expenses, so I’m less likely to accidentally duplicate resources.
- The Notes column allows me to mark renewals, cancellations, and projected pricing over the life of contracts, as well as whether an item was bought on a lifetime deal.
- Whenever the firm tries a new product, such as a new payment processor, user experiences can also be tracked as Notes.
Attuned Legal® files copies of paid invoices in cloud storage folders organized by fiscal year. Using the professional PDF editing software mentioned in the one-time expenditures section, the firm combines all paid invoices for a specific provider into a single document for that vendor for the fiscal year. This streamlines verifying the accuracy of the spreadsheet and makes it easy to locate the documents needed to write posts like this!
From a management perspective, keeping the firm’s financial systems simple is crucial. Even though I sometimes have assistants assigned to handle the mechanics of these tasks, I always need to be able to fill in any gaps quickly so that I’m aware of the firm’s fiscal commitments. Attuned Legal® focuses on serving low-to-middle-income people and small businesses, and keeping expenses under control is central to the firm’s mission.