A solo lawyer leaving a big firm to start their own practice
Setting up the trust account, deciding between sole practice and PC from day one, and structuring the operation to handle Law Society compliance from the first transaction.
Industries
Accounting for legal practices
Accounting and tax planning for solo lawyers, boutique firms, mid-size firms, and notaries across Canada. Built for practices managing trust accounts, contingency fees, multi-province operations, and Law Society compliance.
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The reality of running a legal practice
Legal practices have an operational structure that few other professional services share. Money received from clients sits in a trust account, separated from operating funds, until the work is done. Real estate lawyers handle high transaction volume passing through the trust each month. Personal injury lawyers may wait two or three years on contingency cases before any revenue is recognized. Each practice area carries its own revenue recognition challenge.
On top of revenue complexity, every Law Society in Canada has its own trust account rules, monthly reconciliation requirements, and spot audit regime. Disbursements like court filing fees and expert witness fees pass through the firm without being treated as revenue. Choosing between sole practice, Professional Corporation, or LLP is not just a structural decision, each comes with tax implications.
We work with everyone from solo lawyers leaving a big firm to start their own practice, to boutique firms growing from two to ten lawyers, to mid-size firms transitioning between partnership structures.
Our experience with legal practices
- 01
Trust accounts and Law Society compliance
Every provincial Law Society requires strict separation between trust funds and operating funds, monthly reconciliation, and annual reporting. Spot audits happen without warning. Solid bookkeeping is what keeps the trust account audit-ready.
- 02
Revenue recognition (retainers, contingency fees, WIP)
Retainers held in trust become revenue only when the work is performed. Contingency fees in personal injury cases are recognized only at settlement, sometimes years out. Work in Progress accounting tracks unbilled time as an asset. Each model has different treatment and different tax timing.
- 03
Disbursements vs professional fees
Court filing fees, expert witness fees, and other disbursements paid on behalf of the client pass through the practice without being revenue. Professional fees for legal work are revenue and subject to GST/HST. Mixing them on the invoice creates issues with both the regulator and CRA.
- 04
PC, partnership, and LLP structure choices
Operating as a sole practitioner, Professional Corporation, or LLP depends on practice size, asset protection needs, and tax planning goals. Each has its own tax treatment and different factors that need to be considered. Read more about tax planning.
- 05
Multi-province practice management
Practicing in more than one province creates overlapping requirements: GST/HST registration and place of supply rules that determine which province's rate applies. The setup must be intentional from day one. Read more about GST/HST/PST.
Common situations we see
A real estate lawyer with high trust account volume
Real estate transactions move large sums through the trust account each month. Reconciliation needs to be tight, the timing of release of funds needs to be tracked, and reporting to the Law Society needs to be clean. The volume makes manual processes break.
A personal injury lawyer with contingency fee revenue
Contingency cases can take two or three years to settle. Revenue cannot be recognized until settlement. Work in Progress and case-related expenses accumulate without offsetting revenue.
A boutique firm expanding from 2 to 5 lawyers
Whether to keep operating as a partnership, transition to LLP for liability protection, or have each lawyer hold their own PC. The structure decision affects taxes, regulatory obligations, and how income flows to the partners.
A lawyer facing a Law Society spot audit
When the audit is scheduled, the trust reconciliation needs to be clean for every month going back, the retainer agreements need to map to recognized revenue, and the supporting records need to be in order.
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