7 Tips for Solo Practitioner Lawyers to Maximize Their Billable Hours

In the competitive and fast-paced legal industry, solo practitioners face unique challenges, particularly when it comes to managing and maximizing billable hours. Unlike larger firms that have departments dedicated to different aspects of the business, solo lawyers often wear multiple hats, from handling client cases to managing administrative tasks. However, with strategic planning and the right tools, solo practitioners can efficiently maximize their billable hours, ensuring a successful practice. Here are seven practical tips to help solo lawyers make the most out of their working hours:

1. Leverage Technology

Investing in the right technology is crucial for solo practitioners looking to streamline their workflow and increase productivity. Legal practice management software can automate administrative tasks such as scheduling, billing, and client communication, freeing up more time for billable work. Additionally, adopting document automation tools can significantly reduce the time spent on drafting legal documents.

2. Implement Time Tracking from Day One

Effective time management starts with accurate time tracking. Utilize digital time tracking tools to record every minute spent on a client’s work, including phone calls, emails, and research. This practice not only ensures that you are billing accurately but also helps in identifying non-billable tasks that might be consuming a significant portion of your time.

3. Set Clear Boundaries

For solo practitioners, work can easily spill over into personal time, making it difficult to maintain a work-life balance. Establishing clear boundaries between work and personal time can help you stay focused and productive during work hours. This includes setting specific work hours and communicating your availability to clients.

4. Prioritize Tasks

Not all tasks are created equal. Prioritize tasks based on urgency and importance, focusing on billable work that directly contributes to your revenue. Consider delegating or outsourcing non-billable tasks, such as administrative duties or marketing efforts, to free up more time for client work.

5. Batch Similar Tasks

Batching involves grouping similar tasks and tackling them together in a dedicated time block. This method reduces the mental load and time lost in switching between different types of tasks. For instance, designate specific times for client meetings, email correspondence, and legal research to improve efficiency.

6. Maintain a Healthy Work-Life Balance

Burnout is a real risk for solo practitioners who try to maximize billable hours at the expense of their well-being. Ensure you’re taking regular breaks and setting aside time for personal activities and rest. A well-rested lawyer is more productive and can provide better service to clients.

7. Continuously Evaluate and Adjust Your Strategies

The legal industry and your practice will evolve, so it’s important to regularly assess your productivity and billing practices. This might involve reviewing your billing rates, evaluating new technology solutions, or adjusting your work habits based on what’s working and what’s not.

By implementing these seven tips, solo practitioner lawyers can more effectively manage their time, maximize billable hours, and build a thriving practice. Remember, the goal is not only to increase productivity but also to maintain a high quality of service for your clients and a balanced life for yourself.

The Advantages of Incorporating your Professional Practice

Since November 1st, 2001, professionals have been entitled to incorporating their practice under the Business Corporations Act as provincial governments changed their incorporation laws to include professionals [1]. Incorporating a professional practice is a pivotal step forward in securing financial advantages. Whether it be through tax deferrals, individual pension plans, health and welfare trusts, the lifetime capital gains exemption, and/or limited shareholder liability, incorporating enables professionals to benefit from potential advantages that would not be available if they operated under sole proprietorship.

Tax Deferral

Tax legislation makes a corporation a separate taxpayer and its own legal entity [1]. Deferring taxes may single handedly be the most beneficial aspect of incorporating your legal practice. The income earned within a corporation is taxed at two separate levels: at the corporate level and then again at the personal level when the income gets distributed [2]. Once you incorporate, tax rates for the corporation become significantly lower than personal tax rates. There is flexibility that lies in deferring personal taxation as corporate surplus inside the corporation. This can defer one’s personal income taxes and although these tax-deferred funds will be withdrawn at some point in time, it is clear that the compounding effect can be very beneficial over long periods of time [3].

Income earned from operating your professional practice within a corporation is taxed at a lower corporate tax rate than the income you may earn under sole proprietorship. Sole proprietors are taxed at an individual marginal tax rate, for which the highest marginal tax rate for individuals in some provinces and territories was higher than 50% for 2018 [4]. The marginal income tax rate will increase for an individual as income increases. On the contrary, professional income earned within a corporation is subject to being taxed at a lower corporate tax rate. In 2018, this rate ranged from 26.5% – 31%, which is significantly lower than the former figure [5]. Lower corporate tax rates for active business income leaves professionals with more after tax income within the corporation to invest at their discretion.

Furthermore, corporations that are legally defined as a Canadian controlled private corporation (CCPC), can benefit from the federal small business deduction. This benefit lowers the tax rate even further on the first $500,000 of active business income [4]. This figure is known as the ‘business limit’ and it varies by province/territory. The small business deduction rate also varies by province and territory, and the combined federal and provincial tax on income subject to the small business rate ranged from 12% to 22% in 2018 [5]. That is definitely not bad a tax rate that would otherwise be 38%, which is what the corporate would have to pay according to Part I of the Income Tax Act [2].

Small Business Deduction Limits/Rates
(2019)
Small Business
Limit
Rate %Combined Fed/Prov. Rate%
Federal$500,0009.00 
Provincial:   
 Alberta$500,0003.0012.00
 British Columbia$500,0002.0011.00
 Manitoba$425,0000.009.00
 New Brunswick$500,0002.5011.50
 Newfoundland and Labrador$500,0003.0012.00
 Northwest Territories$500,0004.0013.00
 Nova Scotia$350,0003.0012.00
 Nunavut$500,0004.0013.00
 Ontario$500,0003.5012.50
 Prince Edward Island$500,0003.5012.50
 Quebec$500,000  
 Without MPP* 8.0017.00
 MPP* 4.0013.00
 Saskatchewan$500,0002.0011.00
 Yukon$500,000  
 Without MPP* 2.0011.00
MPP* 1.5010.50

*Manufacturing and Processing Profits Tax Credit

IPP’s

An individual pension plan (IPP) is specifically designed for an incorporated professional and/or business owner of an incorporated company, age 40 or over [1]. With that said, it is not to say that someone under 40 cannot contribute to an IPP. An IPP is funded by corporate assets with the intention of providing post-career income to the contributor. IPP investments grow on a tax-deferred basis and usually provide higher contributions than those permitted by Registered Retirement Savings Plans (RRSP’s) [1]. Additionally, fees incurred from setting up and administering an IPP are tax deductible by the employer [1].

Health and Welfare Trusts

A health and welfare plan is a corporate arrangement set up by the employer and can provide employees compensation for medical and/or dental expenses. Coverage extends from the incorporated professionals to those employed by the corporation. This plan can provide coverage for medical expenses incurred outside of provincial or insurance plans. This tax-free benefit can make medical and dental expenses tax deductible for the corporation [5].

Lifetime Capital Gains Exemption

Each Canadian was entitled to a capital gains exemption of up to $848,252 in 2018 and this figure is indexed annually [4]. The Lifetime Capital Gains Exemption (LCGE) enables shareholders to reap the benefits of significant tax breaks on capital gained through the sale of private company shares. This is solely applicable to qualified small business corporation sales but is a benefit every Canadian is entitled to. Family members who own shares of a single professional corporation can multiply the LCGE available upon the sale of the qualified small business corporation, resulting in significant tax savings [3].

Limited Shareholder Liability

Incorporating your professional practice limits the liability of the corporation’s shareholders. Unless a shareholder has provided a personal guarantee, they are not subject to responsibility for the corporation’s liabilities. Nonetheless, a professional corporation does not protect individuals from personal liability for negligence [5].

Closing Remarks

Incorporating your professional practice provides endless potential for possible tax breaks, retirement savings, health benefits, minimizing capital gains on the disposition of private company shares, and protection from potential legal liabilities. With that said, professionals operating in different fields should definitely consider incorporating their practice as it is a simple process that presents an abundance of opportunity for one’s welfare. If you are still not sure about what incorporating can do for you, contact a professional who knows exactly how to help.

Greater Toronto Area based lawyer, Dezso Farkas, who operates under FARKAS LEGAL PROFESSIONAL CORPORATION, has helped many professionals incorporate their practice from start to finish. He has advised corporations and caters his services to their needs in order to maximize potential benefits. He believes in helping businesses grow and enabling business owners to benefit from the advantages that can be sought through incorporation. For professional advice please feel free to contact Mr. Farkas at (416) 735-6645.

-Narvir Goindi

[1] RBC. ‘Is incorporating your professional practice right for you?’ (2018) 6:2 Investment, tax and lifestyle perspectives from RBC Wealth Management Services. https://www.rbcwealthmanagement.com/ca/en/research-insights/is-incorporating-your-professional-practice-right-for-you/detail/

[2] Service Ontario. ‘Incorporating a business corporation’ (2019) Business and economy. https://www.ontario.ca/page/incorporating-business-corporation

[3] Rotfleisch & Samulovitch P.C. ‘Lawyers Advantages of Incorporation – Ontario Tax Lawyer Comments’ (2019) Taxpage.com. https://taxpage.com/articles-and-tips/incorporation/lawyers-advantages/

[4] TurboTax Canada. ‘Lifetime Capital Gains Exemption’. (2019) SAVINGS & INVESTMENTS. https://turbotax.intuit.ca/tips/lifetime-capital-gains-exemption-6258

[5] Acton, Alan. ‘Should you incorporate your legal practice?’ (2010) CANADIAN LAWYER. https://www.canadianlawyermag.com/news/general/should-you-incorporate-your-legal-practice/267749