Today’s challenges define who we are and how we do business. PwC’s Law Firm Services (LFS) is a practice made up of professionals dedicated to adding value in the areas of audit, tax, and advisory services to law firms and their partners throughout the world.
As business advisors to approximately 40% of the Am Law 100 firms, we’ve helped our clients identify growth opportunities and solve some of their most complex business issues for over 50 years.
Tax technical updates
Industry insight: Surveys
How PwC can help
How PwC can help
PwC is a leading provider of audit, tax and advisory services to law firms based in the United States and abroad. Our law firm services practice is organized to fully leverage our comprehensive suite of technical knowledge in order to assist firms with key planning opportunities, including: the annual audit, assurance services, partner and partnership tax compliance and planning services, HR services, and disputes and investigations. Our strong international network of law firm services professionals help law firms with global operations address key business issues.
Law firm key business issues
Sustainable cost reduction
In addition to cutting costs in the short term, firms need to make sure the measures they put into place are sustainable. The cost reduction methods used by many firms rarely result in savings that are sustainable over the long term. True cost drivers and the firm's spend culture need to be addressed. Without considering these factors, any resulting cost savings will likely be short-term gains that gradually disappear.
Today's economic crisis and recession have made cost-cutting a priority for many law firms. As firm's look for ways to reduce costs, many are choosing to reduce headcount, because although people are often a firm's greatest asset, they can also be the greatest expense. There has never been a more critical time to re-evaluate people's roles and abilities to drive growth and sustain change. We help firms with talent management issues such as evaluating their structure surrounding workforce planning and management, building more flexible compensation models and looking at ways to reduce their workforce while maintaining their pivotal talent.
Structuring global expansions or acquisitions
As law firms expand their global presence and serve an increasing number of international clients, local experience is critical to working effectively overseas. A firm considering expansion through a merger or acquisition needs to consider its tax and structural issues to facilitate a smooth transition. We leverage our international network of Law Firm Services tax professionals to help firms manage the structural and tax implications for all countries.
Performing due diligence on M&A candidates
Many law firms participate in mergers and acquisitions as a way to expand their practice and stay competitive. If your law firm is considering this route, you should also consider due diligence prior to the transaction. In addition to helping with the structure of the transaction, we help clients analyze the target in order to:
Evaluate the quality of earning
Determine if appropriate accounting systems and controls are in place
Identify potential tax exposures or opportunities from prior year returns
Managing international assignment policies and costs
International law firms develop and strengthen their multinational experience by encouraging qualified lawyers across their network to practice together. However, before sending employees overseas, a firm should establish an equalization or protection policy for foreign assignees' pay and benefits that allow it to offer compelling and attractive packages without having a significant adverse impact on profitability.
Firms also need to consider the unique requirements for partners when establishing foreign assignment packages and policies for partners accepting foreign assignments. We work with clients to develop a plan for assignees and partners, to implement that plan across their network, and to prepare US and foreign returns.
Managing payables and receivables
For partnerships concentrating on reducing the "days outstanding" to reduce working capital needs and bank borrowings, the process of tracking, identifying, and reconciling payables and receivables is critical. We work with law firms to analyze and, if necessary, reengineer, their accounting procedures and administrative policies to better manage payables and receivables.
Understanding foreign tax credit opportunities
The Internal Revenue Code limits the amount of foreign tax credits (FTCs) that partners of global partnerships can claim. As global law firms become more profitable outside of the US and their partners pay more foreign taxes, the tax rate on their income outside the US can become greater than the US rate, causing excess credits. We work with partnerships to:
Analyze sourcing of revenue to determine how revenue is allocated to countries where the services are performed
Develop a system to analyze overhead cost allocations to foreign offices
Converting general partnerships to limited liability partnership
Many general partnerships consider converting to Limited Liability Partnerships (LLPs). However, not all countries recognize US LLPs, so firms contemplating a transition need to consider how LLPs operate within each country and the different implications of the transition.
Our Law Firm Services professionals look at the structure of your firm, where and how it operates, and its current tax issues in order to assess how a firm may mitigate potential tax issues in each jurisdiction where it operates.
Implementing defined benefit plans
Retirement planning for partners has evolved during the last 20 years. Law firms have been migrating from retirement systems based on unfunded deferred compensation plans to qualified retirement plans that allow partners to fund their own retirement without adversely affecting other partners.
The focus today is on allowing partners to fund their own retirement plans instead of having younger or newer partners pay for retired partners. To help address this issue, PwC has designed the Lawyer Equity Optimizer (LEO) plan to help partners self-fund their retirement without negatively impacting current profits. LEO helps firms to:
Lessen the impact on profits caused by unfunded deferred compensation plans
Achieve a more rational and modern approach to retirement planning for partners
Increasing depreciation deductions by analyzing costs
Firms that build or make improvements to their office space are required to depreciate leasehold improvements over a period of 39 years. Because of the long depreciation period, the partners that pay for the improvements seldom realize the tax benefits from the depreciation.
Employing a retroactive cost segregation study or a current cost segregation study, our Law Firm Services professionals help firms identify assets that can be depreciated over a shorter period. Our team of accountants and engineers coordinate to identify personal property embedded in the leasehold improvements, so that they can be separately depreciated over 5, 7, or 10 years.
In the information-intensive world of law firms, knowledge management initiatives can provide a competitive advantage. However, calculating your firm's return on investment and facilitating long-term use is often difficult.
The challenges of creating a structure and governance to meet current and future needs demand a formalized strategic knowledge management plan and a clear quality assurance program. Our Law Firm Service professionals are experienced in helping clients implement a knowledge management function designed to help your firm grow its business, improve attorney productivity and enhance client satisfaction