The Tax Structure Mistake Costing Solo Attorneys Thousands
If you're a solo attorney or small firm owner earning over six figures — there's a good chance you're leaving $10,000 to $30,000 on the table every year.
The culprit?
The wrong business structure.
At Shahbaz & Associates, we’ve worked with dozens of legal professionals who set up a simple LLC, never changed it — and unknowingly overpaid the IRS year after year.
Let’s walk through what’s happening — and what you can do to fix it.
1. You're Paying Self-Employment Tax on All Your Income
If you're operating as a sole proprietor or single-member LLC, you’re paying self-employment tax (15.3%) on your entire net income.
🧾 On $200,000 of income, that’s over $30,000 just in self-employment tax.
2. The S Corp Election Can Cut That in Half
With an S Corporation, you can:
- Pay yourself a reasonable salary (which is subject to payroll taxes)
- Take the rest of your profits as distributions, which aren’t subject to self-employment tax
📉 That same $200K income might only have $100K subject to payroll tax — slashing your SE tax in half.
3. Most CPAs Don’t Know Legal Practices Well Enough
We’ve seen generalist accountants set up the wrong structure because they:
- Don’t understand contingency fee income
- Don’t model cash flow correctly
- Can’t advise on quarterly estimates for high-income attorneys
At Shahbaz & Associates, we build custom tax strategies specific to your practice — whether you’re a PI attorney, immigration lawyer, or estate planning solo.
4. You Can Layer In Retirement and Health Savings
Once structured correctly, you can start building in:
- Solo 401(k) contributions up to $66,000
- Defined benefit plans if your income is high and consistent
- HSA contributions to lower taxable income while covering medical costs
💡 These strategies compound savings year over year — and can double as long-term planning tools.
5. Structuring Isn’t Just About Tax — It’s About Growth
The right structure:
- Makes your business bankable
- Helps you qualify for law firm lines of credit
- Sets the stage for adding partners or building out a team
You Know the Law. We Know the Tax Code.
We speak lawyer — and we build tax plans for attorneys who want to grow smarter, keep more of what they earn, and stop wondering if they’re missing something.