Bank Accounts

You will need to set up three types of bank accounts. First, in accordance with state law you must establish an IOLTA account for client funds. The account earns interest that is paid into the state's IOLTA fund to be used for pro bono activities. One IOLTA account can be used for all clients, but it is imperative to keep accurate records on deposits for each client. It is important to carefully review the specific rules and regulations related to managing IOLTA funds. Failure to properly manage client funds is a common cause for disciplinary actions. Chapter Seven of this book reviews the issues related to IOLTA accounts in greater detail.

Second, you should maintain an interest-bearing operating account. All cash receipts other than those required to be placed into a trust account are placed into the operating account. This account is used for all expenses, accounts payable, and salaries.

Third, if you have employees, you should maintain a zero based payroll account. You can arrange with your bank and your payroll service for the correct amount of money to be transferred into the payroll account monthly or bi- monthly. On pay day the bank will automatically transfer the needed funds from the operating account into the payroll account.