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Solo & Small Law Firms

The Solo Lawyer Tax

Sometimes, it just plain sucks being a solo. (Yes, you actually read that at MyShingle!)

Not only must solos suffer the indignity of getting paid less in cases where they outperform their big firm colleagues, but in many instances, solos also pay more for products and services than larger firms. Call it the solo tax. There are two varieties of the solo tax, direct and indirect.

With a direct solo tax, a single lawyer pays more for a product or service because he or she doesn’t receive the benefit of a volume discount. Some recent examples I’ve stumbled across include:

  • Lawline, an online CLE provider that charges solo lawyers $399/year for unlimited CLE but the same package costs only $250 per lawyer in firms of two more.
  • Westlaw Formbuilder, a new and somewhat intriguing product offered by Westlaw that allows lawyers to complete forms online, while accessing the research or rationale for each entry, costs $79.20 a month for a year-long subscription for a single attorney to the National Business Transactions Solutions database, but $108.00 per year for a law firm of three. Split three ways, the subscription costs around $35/year per lawyer instead of the $79.20 that a stand-alone solo pays. (Prices on the Westlaw products vary but you can play around with the pricing in the side menu bar at the Westlaw Formbuilder site.

Of course, most companies don’t make their pricing transparent so it’s difficult to determine whether they charge more for solos or not. But except for many of the cloud providers which charge a per head irrespective of size, my guess is that many companies offer incremental discounts for larger sized firms.

I wouldn’t complain if companies allowed solos to “buddy up” and divvy up the price of these services so that we could at least receive the same per-unit rate as larger operations. But in most cases, vendrs don’t permit independent law firms to share costs.

On the other hand, while the ability for solos to share services would reduce their costs, the resulting savings aren’t enormously significant – $150/year for the Lawline CLE or $55/month for the Westlaw Formbuilder – or $600/year. Sure, the extra solo tax adds up and in particular, hurts newer cash-strapped solos. Still, in the greater scheme of things, most direct solo taxes won’t make or break a firm.

What harms solos more than the “direct” solo tax is the indirect solo tax — essentially, the inability to share in the benefits that accrue to a firm when it purchases a costly product. Take my industry, for example. Conferences and online presentations often start at $500/head and can cost as much as $1500 or more. Sometimes, the conferences offer a good opportunity to network, so it’s important to attend in person for face time, but other times, conferences supply really useful information. As a solo, I can’t spare both the lost work time, not to mention the price of admission, to attend all of these events. However, my colleagues at a large firm can dispatch one member to the conference to take notes and pick up materials – and everyone in the practice group or the firm can enjoy the benefits. Meanwhile, other firm members to attend other conferences and share what they learn, – so essentially, the firm gains information and has a presence at 10 conferences, even though they’ve effectively paid $1500 for each member. By contrast, if I wanted to cover all of those conferences, I’d have to fork over $15,000.

The same is true with many subscription services. A law firm can subscribe to a specialized online research service or magazine service for one or two members and then share the knowledge throughout the firm. Of course, firms can’t lawfully buy one subscription and allow others to share the password, or make copies of a publication to circulate around the office. But certainly, if someone in the firm spots an interesting piece of information in one of the publications, they’ll pass it around.

So what’s the solution? One approach that I’d like to see is increased collaboration between solos, both those in the same practice area as well as across practice areas. To date, however, my experience organizing with other solos has been less than stellar as it’s difficult to gather a core group. On the other hand, buddying up with other solos for a discount subscription rate isn’t always worthwhile because the incremental savings available to two firms that share a package may not be significant – and indeed, not even as great as if two lawyers within a firm shared a product. As for coordinating a group where one member would attend a conference and share the knowledge with others, none of the solos whom I’ve tried to collaborate with were interested in this approach.

In my view, the more preferable solution is for service providers to offer significant discounts to solos. Incidentally, the ABA has actually taken this approach, with a $225 membership for solos of ten years or more, and declining for solos with less experience (though by the time you add up section memberships, you’re still looking at a bill of close to $400). Alternatively, companies could allow two solos to team up and simply split the cost of a single subscription down the line, or offer substantial savings to solos who aggregate to buy a product.

I know from working with advertisers at my blog that the solo market is disparate and hard to reach, which is why many companies never even gave solos a glance until the market fell apart and only solos were left standing. Even so, getting in front of a solo audience usually entails paying money to bar associations for advertising which can be expensive as well. My guess is that by taking the money spent on ads and offering bonafide solo discounts, companies would enjoy an enormous word of mouth benefit.

Ironically, the burden of the solo tax will increase rather than decrease as technology advances. True, on the one hand, technology has made once-costly services like legal research, online document storage or phone service so cheap — or even free — that they’re more affordable than ever. At the same time, far more sophisticated products and services are emerging as a result of technology – guided search in e-discovery, Practical Law Company, with all kinds of expert-drafted tools and templates for preparing documents for sophisticated clients, and more. Without access to these tools to streamline workload and come up to speed on new issues, solo lawyers will fall behind. And rather than level the playing field, technology will have widened the gap between large and small, making it tougher for solos to compete. At the end of the day, we all bear the cost of the solo tax in the form of increased legal fees or lower quality of representation for clients whose lawyers can’t afford these tools.

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