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February 15, 2017

Things They Don't Tell You in Law School


Law school is great for learning the theory of law, but not so much the reality of law practice.  As soon as I graduated from law school, I got my limited license to practice law and started going to court (I was also studying for the bar during this time).  As soon as I passed the bar and got my law license, all the professional fees and taxes that they forget to tell you about in law school began to hit me.  One of the reasons I started my blog was to help other law students navigate their way through law school, because I always felt like there were not many resources for people like me when I was in school (at least not many people I could relate to that were recent graduates).  For today's blog post, I wanted to share some of the taxes and fees they don't necessarily tell you about it law school but that you need to brace yourself for, especially if you decide to go solo or join forces with a smaller practice.  I joined my brother's practice immediately after I passed the bar in July 2013, and practiced with him for close to three years before beginning my current position (see more about it here and here).  

*I am only licensed to practice law in Tennessee (all Tennessee state courts and the federal district court for the Middle District of Tennessee).  I am not sure what other states charge, but many states have similar taxes.

A few taxes in Tennessee:

1. Professional Privilege Tax: $400.00
The professional privilege tax is an annual tax imposed on anyone holding an active license or registration to practice certain professions, including law. Professionals holding a professional license in the state of Tennessee must pay $400 by June 1 each year.  Our state legislature is proposing to phase this tax out, thank goodness!


2. Board of Professional Responsibility ("BPR") Annual Tax- $170.00
In Tennessee, attorneys have to file an annual registration statement plus a fee of $170 to the Board of Professional Responsibility during their birth month.  I get hit with the professional privilege tax of $400 in June, then have to turn around and pay this tax in July.  Be sure to plan for these fees each year, especially if you have a summer birthday.

3. Quarterly Self-Employment Taxes
This one is especially painful if you are self-employed.  It is so painful to have to write a check to Uncle Sam each quarter for money that you worked hard to earn.  You still have to pay these taxes if you work for a company/firm, but one benefit to working for a company is that the taxes come straight out of your paycheck and you never see the amount.  If you are self-employed, the best thing to do is to pay your self-employment taxes each quarter (instead of waiting until is time to file).  I recommend meeting with an accountant and having her estimate how much you should pay each quarter.  

4. Continuing Legal Education ("CLE")
In Tennessee, all attorneys must complete a total of fifteen CLE credits each year by December 31st.  Seven hours have to be live in a classroom and three hours must be ethics.  CLE's range in price.  Some can be as cheap as $25 (usually if you are in some kind of professional organization and pay annual dues), but most are more expensive and can cost up to several hundred dollars for a couple of hours.  Check your state and county bar association for upcoming CLEs.  Also, reach out to your law school alumni association to find cheaper CLE's.  In Tennessee, you do not have to get CLE credits the year you pass the bar exam.

5. Health Insurance 
My advice to anyone thinking about leaving a secure job to go solo is to consult with an insurance agent and get several quotes for health insurance.  It may be more expensive than you had in mind, although with all the changes happening in Washington, it is hard to say what will happen over the next few months.  My health insurance nearly TRIPLED from 2013-2016 and was anything but affordable (plus, the coverage was not great). With that being said, don't stay in a non-fulfilling position and punch a time card each day just to get free health or reduced health insurance.  Use that as an incentive to work that much harder. You will also want to account for professional liability insurance, so be sure to get several quotes.

6. Overhead Expenses
If you have office space, the overhead expenses add up fast.  Of course, payroll is the biggest expense.  You will need to budget for an assistant, rent, utilities, internet (and access to Lexis/Westlaw if you choose to subscribe- check your local law school library first, my law school provides free access to attorneys.  Also, contact your local bar association to ask if there are any law schools or law libraries that provide free access before spending hundreds of dollars on it each year).  Not to mention, all of the other expenses that come along with operating a law office.

I hope this helps!  Please feel free to email me or comment below if you have any questions!

6 comments:

  1. Savannah Reynolds2/15/2017

    I've always been curious as to where you attended law school?

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    1. Hi, Savannah! I went to Nashville School of Law!

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  2. Such great information! Super helpful for a new attorney, like myself. Although I'm currently in-house at a financial institution, I'm keeping an open-mind regarding future career opportunities. I've always dreamed of starting my own E&T practice. Hope you'll consider doing more posts like this.

    Lauren xo // The Right to Remain Fabulous

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    1. Hi, Lauren! Thanks so much for reading and for your comment. Congrats on becoming an attorney! I plan on writing more posts like this. There are so many things they don't tell you in law school! xo

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  3. Great post! I definitely did not know about all of these things either before becoming a lawyer in TN!

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    1. Thanks, JM! I had no idea until I had to start paying all these myself! Law students need to know- especially before they "hang their own shingle" and start getting hit with taxes every time they turn around!

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