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April 1, 2008

Special Lawyers' Edition - What Logistics Teach Us About The Successful Practice Of Law

#Tax Advisor, #2008 Archived

Logistics can variously be described as controlling the flow of goods and services. For lawyers, this includes controlling the flow of information, energy, and people, between point A and point B to meet the needs of clients Efficiently and Effectively. Let me illustrate this point with two cases.

Case #1. Recently, I was at lunch with a Banker, who was discussing his friend's divorce. This divorce also involved the sale of various business assets in various types of entities. Regarding the sale of their assets, neither party to the divorce, nor their lawyer, had the slightest idea as to tax impact on the sale of these assets. Therefore, they were also clueless as to what cash would be left and in whose hands.

The Banker did not understand why the attorneys were not providing advice on the tax impact of the sale. I explained that many times the attorney does not believe that the tax issues are their concern and that it will be dealt with by the client.

If the lawyer had chosen to collaborate with a Tax Attorney, the legal resolution of the divorce would have been improved. All the parties would have known the tax consequences and would have adjusted the settlement to take that result into account. How can we achieve this better solution, given the fact that most law firms do not even have a tax attorney on staff?

Collaboration. Having the right Expertise at the right time and the right place.

Earlier this week, I was consulting with another attorney in a medium-sized firm regarding a business transaction. The client's CPA had recommended a reorganization of a partnership with the sale of assets. While the client regarded him as a "tax and business lawyer", his lack of expertise in Partnership Tax did not prepare him to question the solution proffered by the accountant. I collaborated with this attorney, and provided expert tax advice at the right time. The law firm recommended changes in the business transaction, which avoided significant taxable gains for their client and a potentially embarrassing error on the part of the firm.

By collaborating, each firm was able to bring together their complementary expertise to meet the needs of the client in a cost effective and mutually beneficial manner.

The Issue: Law firms cannot afford to have an expert in every area. However, law firms must be able to respond effectively and innovatively to the needs of their clients.

The Solution: An informal network of experts among law firms permits the most cost effective and innovative solutions to be brought directly to the client.

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