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Top Tax Planning Moves for Solo vs. Multi-Attorney Firms
Whether you’re running a solo estate planning practice or managing a growing litigation firm with associates and staff, your tax planning strategy can’t be one-size-fits-all. Yet, too many attorneys fall into the trap of using the same basic approach—until they’re hit with surprise tax bills, missed deductions, or inefficient entity setups.
The reality? Tax moves that benefit solo firms can hurt multi-attorney firms—and vice versa.
This guide breaks down the key tax planning strategies for both solo and multi-attorney law firms so you can reduce liability, improve cash flow, and plan for long-term profitability based on your firm’s structure.
🔹 Solo Law Firms: Tax Strategy Built Around Flexibility and Control
Solo attorneys often wear all the hats—owner, executor, marketer, manager. That means tax planning should prioritize simplicity, cash flow visibility, and personal benefit.
1. Entity Structure: Sole Proprietor vs. S Corporation
Many solo attorneys start as sole proprietors, but as income grows past ~$75,000–$100,000 annually, switching to an S Corporation can unlock major tax savings.
- Why it matters: With an S Corp, you can split income into reasonable salary + distributions, which lowers self-employment taxes.
- Caution: You must run proper payroll and file the correct forms (1120-S, W-2, etc.)—a misstep here is a compliance nightmare.
2. Solo 401(k) or SEP IRA Contributions
Solo firms have a huge advantage here. With no employees, you can contribute both as the employee and employer:
- Solo 401(k): Up to $70,000 in 2025 (including catch-up if over 50)
- SEP IRA: Up to 25% of net income, maxing out at $70,000
💡 Solo 401(k)s are often better if you want to contribute more at lower income levels.
3. Home Office and Auto Deductions
Solo attorneys working from home can leverage:
- Home office deduction (square footage or actual expenses)
- Mileage or auto expense deduction for firm-related travel
Just be sure your records are airtight. Use tools like MileIQ or QuickBooks Self-Employed to stay audit-proof.
4. Quarterly Tax Estimates Based on Actuals
Most solo firm owners overpay because they’re using last year’s numbers or static software estimates. With better bookkeeping, you can forecast your real-time profit and adjust payments quarterly to avoid overpayment or penalties.
🔸 Multi-Attorney Firms: Strategy Centers on Payroll, Growth, and Systems
When you’re managing a team—even a small one—tax planning becomes a balancing act between profit distribution, payroll, and growth reinvestment.
1. Owner Compensation + Reasonable Wages
If you’re operating as an S Corp or Partnership, the IRS expects you to run:
- Payroll for active partners (if S Corp)
- Distributions properly allocated
- Payroll taxes and benefits managed correctly
✅ Misclassifying draws, bonuses, or partner pay can trigger IRS audits—especially as firms cross the $250k+ income threshold.
2. Retirement Contributions for Multi-Member Firms
Now that you have employees, you must:
- Follow nondiscrimination rules
- Offer fair contribution percentages
- Choose plans like a Safe Harbor 401(k) or SEP IRA with uniform percentage
Firm contributions are deductible and can help attract/retain talent—but they also require administrative structure.
3. Accelerating or Delaying Expenses Strategically
Larger firms may benefit from timing deductions to manage profit margins or estimated taxes.
- Prepay expenses in high-income years
- Delay income (if on accrual method) to reduce taxable income
- Use Section 179 to deduct major investments (equipment, software) in the current year
🔗 Learn more about Section 179 for law firms here.
4. Planning for Quarterly Distributions
Multi-attorney firms often distribute profits quarterly—but if these aren’t based on cash flow, not just revenue, you risk overdrawing or underpaying taxes.
At Prestige Accounting, we help growing firms create distribution models that account for:
- Overhead
- Taxes
- Future hires
- Emergency reserves
5. Tax Credits for Growth Investments
Many firms miss out on available tax credits, such as:
- Research & Development (R&D) Credits for legal tech or internal innovation
- Work Opportunity Tax Credit (WOTC) if hiring from underrepresented groups
- ADA Tax Credit for accessibility improvements
These can be huge wins—but they require intentional tracking.
⚖️ Solo vs. Multi-Attorney Firm Tax Strategy Recap
|
Tax Move
|
Solo Firm
|
Multi-Attorney Firm
|
|
Entity Setup
|
Sole Prop or S Corp
|
S Corp or Partnership
|
|
Retirement Plans
|
Solo 401(k), SEP IRA
|
Safe Harbor 401(k), SIMPLE IRA
|
|
Payroll
|
Optional (S Corp only)
|
Mandatory
|
|
Tax Timing
|
Simplified
|
Needs planning & modeling
|
|
Home Office
|
High value
|
Often not used
|
|
Expense Deductions
|
Flexible
|
Requires oversight
|
|
Profit Distributions
|
Informal (draws)
|
Structured
|
|
Credits
|
Few
|
Multiple available
|
📊 The Bottom Line: One Size Doesn’t Fit Any Firm
No two law firms are the same—and your tax strategy shouldn’t be either.
Whether you’re a solo estate planner pulling six figures or a multi-attorney litigation firm hitting $1M+, the wrong structure or misused deduction could cost you tens of thousands.
The good news? With proper tax planning, you don’t need to overpay.
💬Ready to Get Personalized Tax Help?
Don’t guess your way through Q4. Whether you’re solo or managing a team, our legal-focused CPA firm can guide your strategy.
