Getting Paid in Trade: Barter can be a boon for cash-strapped practitionersAuthor(s): JILL SCHACHNER CHANENSource: ABA Journal, Vol. 83, No. 12 (DECEMBER 1997), pp. 82-83Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/27840158 .

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i SOLO NETWORK

Getting Paid in Trade Barter can be a boon for cash-strapped practitioners BY JILL SCHACHNER CHANEN

When Ted Karatinos and his law partner hung a shingle after graduating from law school, they had one guiding principle for their fledgling practice: Keep cash expen ditures to a minimum.

Although the pair knew they would have to spend some money to open their doors, they felt certain they could do so without using up their cash reserves. So when a col league offered to trade accounting services for corporate legal work, Karatinos immediately recognized the value of bartering.

Before long, he had acquired a

sign for his office storefront and a fresh coat of interior paint in ex

change for handling a domestic re lations matter for the signmaker and an eviction for the painter.

"Those kinds of things really helped us get rolling at the begin ning." he says. He also saved his firm, Seeley & Karatinos in St. Pe tersburg, Fla., nearly $600 in office supplies by bartering his services with an office supply store. "That is a chunk of change for a small law firm just starting out."

While cash certainly is the more common medium of exchange for lawyers, nothing in the ABA

Model Rules of Professional Con duct requires lawyers to accept only cash for fees, says Arthur Garwin, professionalism counsel for the ABA Center for Professional Responsibility.

The nature of bartering, though, could provoke scrutiny because of the potential appearance of impro priety. For example, Garwin says, a lawyer could have more infor mation than the client of what the bartered service is worth. Trans actions with a client must be made at arm's length.

Karatinos, a member of the board of editors of the ABA Young Lawyers Division newsletter, says he initiated many of the trades with local businesses and was surprised to find how many were receptive to the idea. To expand his network of trade partners, he has also joined a national trade exchange, in which members typically pay a fee and offer services in exchange for a

certain number of credits. (Garwin cautions that barter

ing legal services through a trade exchange could raise an ethics issue because of a 1979 ABA Infor

Ted Karatinos bartered legal services for the sign that graces his St. Petersburg office.

mal Ethics Opinion based on the now-supplanted Model Code of Pro fessional Responsibility. His ad vice: Ask the state bar before join ing an exchange.)

While bartering helped Karati nos maintain cash reserves, other small-firm and solo practitioners who have traded legal services say

this ancient economic system also can be an excellent way to forge loyal client relationships.

"Bartering engenders a lot of loyalty from clients because it

shows that you are willing to work with them when they may not have the cash immediately," says Patri cia Galligan of the San Diego law firm of Ferry Galligan & Associates.

Galligan started bartering when a vendor from whom she had leased office equipment approached her about bartering toner cartridges

Ideas Exchange The ABA Journal and Solosez, an ABA e-mail forum for solo and small-firm lawyers, have teamed up to let ABA members share advice online on this month's Solo Network topic. Excerpts from the ongoing discussion appear below. To join the chat group, send this message to listserver@abanet.org: subscribe solosez your e-mail address (no other words are necessary). Or preview Solosez at www.abanet.org/solo/home.html on the Internet.

On bartering From Jo Fray, Boston:

While I don't "barter services," I do have an arrangement with several col leagues that we will represent each other in fee arbitration or fee collection cases.

In some instances, we have man

aged to get the fee translated into

a promissory note with a provision for attorney fees if legal action is neces sary to collect. Otherwise, no money is paid. Usually a sumptuous dinner is sufficient.

From Bob Bowers, New Bern, N.C.: When I was much younger, I was

approached fairly often to barter my

82 ABA JOURNAL / DECEMBER 1997 ABAJ/DENNIS OSBORNE

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for legal services. Galligan says she was receptive to the idea because she knew her office would need the toner and she had some excess time. She did not, however, expect the arrangement to produce the lasting business relationship it did.

The office supply vendor, who has since expanded his business substantially, has become a large, cash-paying client. "It made my cli ent appreciate me, and now I have a very loyal client," she says.

Russell Nelson, the director of marketing for the national trade exchange ITEX and publisher of Barter Age magazine, concurs with Galligan's observations.

"Barter will bring you new cus tomers," Nelson says. "You do not trade with people who are cash cus tomers. The idea is to bring in new business to take up your surplus time or product."

Remember the 1RS A tax and estate planning law

yer, Galligan cautions that services and property received by barter are taxable income that must be report ed. When bartering work for toner, she billed the vendor like any other client. She required him to supply an invoice for the cartridges, which she reported as income. At year's end, she also completed Internal Revenue Service 1099 forms to make sure her accounts were con

sistent with her client's. Galligan has stopped bartering

because of the burdens of reporting the income for tax purposes, but she still recommends it as a way to get a new law practice off the ground. Plus, no one ever knows when the toner cartridge might run dry be fore a big case.

services for divorces. Since I needed money to support my hungry wife and little children, I explained that such an arrangement was not available.

I did have a guy who wanted to make some shelves to pay me for a title examination and to close the loan on his house. Another client, a CPA, walked in while we were discussing this bartered arrangement and explained the tax ram ifications. He paid me; I paid him.

From an unidentified participant: I have always found this interest

ing: You pay taxes on bartered ser vices, but you get no charitable deduc tion for pro bono work.

Competition If you have some ideas about improving OUT justice SySt?lfly then this is an opportunity to put them down on paper.

The ABA Journal, through a bequest from the late Judge Erskine M. Ross of Los Angeles, sponsors a writing competition for ABA members each year on a current legal topic.

For 1998, the topic is "How to strengthen public trust in the justice system.9' Co-sponsors for this competition are the Coalition for Justice and the Ad Hoc

Committee on State Justice Initiatives.

Contest information and rules are available by writing to Ross Essay Contest, ABA Journal, 750 N. Lake Shore Drive, Chicago, IL 60611; by fax to (312) 988-6014; by e-mail to abajoumai@abanet.org; or by calling (312) 988-6011.

Entry deadline is February 1,1998. The winner will receive a $7,500 cash prize and a paid trip to the 1998 ABA Annual Meeting in August in Toronto .

ABA JOURNAL /DECEMBER 1997 83

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