Rimon Law Blog

Many small business owners incorporate their businesses not only for legal protection, but also to reduce owners’ payroll taxes through S-Corp tax election with the IRS. One advantage of an S-Corp is that it gives business owners the ability to reduce their self employment taxes. Any small business owner who has not made an S-Corp election and uses Schedule C for their personal tax return for 2010 is subject to both employer and employee FICA and Medicare payroll taxes at 15.3% up to $106,800, 2.9% Medicare for Schedule C net income greater than $106,800, and California SDI for 1.1% up to 93,316. If a business owner pays himself/herself a “reasonable salary”, the rest of the net income is not subject to these payroll taxes.

Monday’s article in the San Francisco Daily Journal by Jill Redhage asked the question whether virtual law firms will “be a lasting feature of the legal industry?”  (Among the virtual law firms discussed in the article as examples of this new trend was our own firm, Rimon Law Group, so we certainly hope the answer is yes. )  The article cites some critics of the model that identify certain challenges faced by virtual law firms, such as quality control, collaboration and training. To be sure, quality control, collaboration and training pose important problems for any business, virtual or not.  Virtual organizations, however, are forced to come up with different solutions to these problems.  This process becomes especially interesting when, in seeking these solutions, we develop tools that are more useful than their traditional counterparts, and that are equally useful for colleagues who are in the same office as one another or spread across the globe.

In my mind, the question whether virtual law firms are here to stay is no different than the question whether virtual organizations of any kind are here to stay.  And in that regard, Cisco’s Mark Chandler gets it right: being virtual isn’t black or white, it’s a continuum along which organizations adopt more or less “virtual techniques”.  (With Cisco as perhaps the leading producer of these techniques, he should know.) These techniques are often ones that lead to improved quality, efficiency and collaboration.  The advantage that virtual law firms have is that they are forced to adopt such best practices rather than clinging to traditional processes.  Traditional organizations and firms can also play smart, although they’re not required to.  In this way, virtual law firms are like small mammals during the cretaceous period that were forced to adapt under environmental stresses.  Traditional law firms that survive and thrive during the present shift may be those that learn well from their smaller and more nimble counterparts.

(For an interesting presentation that discusses virtual best practices, check out this keynote from BizTech Day featuring the CEOs of Elance and Odesk as well as Tim Ferriss – http://www.biztechday.com/how-to-build-a-virtual-organization/)