Accounting for Lawyers and Law Firms

Accounting for lawyers and law firms in Ontario

Featherly Services works with sole practitioners and small firms across the Greater Toronto Area and Ontario. We keep the trust side and the general side of your books separate, reconciled, and current, and we handle the firm's T2 and your personal return.

The short answer

A law firm has two sets of books: its own accounts and the trust account. Trust records must reconcile monthly to the penny, and the Law Society can audit without notice. The firm's operating side still needs proper HST, T2, and owner-compensation planning.

What's Different

What makes accounting for lawyers and law firms different

Trust accounting

Client funds sit in a mixed trust account kept strictly apart from the firm's operating account. We maintain trust ledgers and client sub-ledgers and reconcile them every month.

LSO By-Law 9 records

The Law Society sets record-keeping requirements for trust and general accounts. Clean, current records are the best protection if a spot audit happens.

HST on legal fees

Legal services are taxable for HST, so fees and disbursements need correct treatment on your returns, including which disbursements are taxable.

Professional corporations

Many lawyers practise through a professional corporation. Salary, dividends, and retained earnings need to be planned alongside your personal return.

Partners and associates

Partnership income allocation, associate compensation, and shared overhead all shape how income is reported and who owes what.

Retainers and unbilled work

Unearned retainers are held in trust, and work in progress affects when revenue is recognized. Getting the timing right keeps your financial statements honest.

Common Mistakes

What we see go wrong

  • Treating trust reconciliations as a year-end task instead of a monthly one
  • Letting a general bookkeeper code trust and operating transactions together
  • Misjudging which disbursements carry HST
  • Not planning owner pay against the firm's profit until filing time
  • Missing routine deductions such as LSO fees, LawPRO premiums, and continuing education costs

What we handle for you

  • Monthly bookkeeping in QuickBooks Online
  • Corporate tax return (T2) and your personal return (T1), coordinated
  • GST/HST returns and input tax credit tracking
  • Trust ledger maintenance and monthly trust reconciliations
  • Year-round advice, not just at filing time

Pricing: bookkeeping from $500 a month, T2 returns from $2,000. Priced by volume and complexity, quoted after a free intro call.

Book a Free Intro Call
FAQ

Common questions from lawyers and law firms

Do lawyers charge HST?

Legal services are generally taxable, so lawyers charge HST on their fees. Disbursements can be taxable or not depending on what they are.

How often must trust accounts be reconciled?

Monthly. The trust ledger, the client sub-ledgers, and the bank statement should all agree, and the records must be available if the Law Society asks for them.

Do you handle trust bookkeeping?

Yes. We maintain the trust ledgers and monthly reconciliations alongside the firm's general books. Professional-conduct and licensing questions stay with your firm and the Law Society.

Do you work with sole practitioners and small firms?

Yes. We are fully remote and work with lawyers across Ontario using shared QuickBooks Online access and secure document sharing.

Fully Remote

Talk to a CPA who already works with lawyers and law firms.

We serve clients across the Greater Toronto Area, including Toronto, Mississauga, Markham, Vaughan, Brampton, Oakville, Hamilton, Ottawa, Oshawa, and all of Ontario. Book a free 20-minute intro call. No pressure, no sales pitch.

Book a Free Intro Call