How a Crypto Attorney Saved Over $60K Per Year In Taxes While Building A Scalable Firm

The Challenge

After four years at a large tech focused firm, Daniel launched his own boutique practice with a partner. Each attorney operated through a separate professional corporation and split profits informally.

Income was not the problem. Profit projections were:

• Roughly $200K to $500K in year one
• Roughly $300K to $600K in year two

The real issues were structural:

• No clear long term partnership model for adding future partners
• Growing self employment tax exposure without a framework to manage it
• Inconsistent handling of legitimate business deductions
• New Jersey state taxes hitting hard while the federal deduction on state taxes was capped
• No coordinated retirement contribution plan
• Bookkeeping that was good enough for filing, but not good enough for planning

Daniel wanted clarity. What structure should he be building toward, which elections were actually worth it at his income level, and how could he reduce taxes without turning himself into a part time controller.

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The Gelt Strategic Approach

Our goal was to design a structure that fit his growth plans and protected his time, without giving him a 50 step checklist to run on his own.

1. Clarifying the long term firm structure

We started by mapping where the firm was likely heading over the next five to ten years rather than just patching the current setup.

Key decisions:

• A central firm level structure that can house multiple partners
• Each partner owning through their own professional entity for flexibility in compensation and benefits
• A framework for profit sharing that can adjust as new partners come in

The actual legal entities and timing were tailored to Daniel, but the headline is simple. He now has a clear model for how the firm will look once there are three to five partners instead of two attorneys splitting revenue informally.

2. Reducing self-employment tax in a controlled way

Given the profit range, we evaluated structures that allow part of his earnings to be treated as active compensation and part as business profit, with the goal of reducing exposure to full self employment tax on every dollar.

We:

• Set conservative compensation targets that align with what a comparable attorney would earn in the market
• Modeled how different splits between salary and profit would affect tax and retirement contributions
• Built a review cadence so compensation can be revisited as the firm stabilizes

The specific mechanics are implemented behind the scenes with his payroll and tax team. From Daniel’s perspective, he has a simple target number and knows why it was chosen.

3. Systematizing deductions instead of guessing

Rather than handing him a long list of tax code citations, we created a practical spending and documentation framework with three buckets:

1. Core operating expenses such as software, research tools and professional dues
2. Work related use of home and travel with clear guidelines on what counts and what needs documentation
3. One time purchases and equipment with rules of thumb on when they are treated as current expenses versus longer term assets

The outcome is that Daniel and his bookkeeper know what to track, what to flag, and what to send to the tax team, without turning every purchase into a debate.

4. Using New Jersey specific rules to improve federal outcomes

New Jersey offers a special election for certain business owners that can effectively convert some personal state income tax into a deductible business level expense.

We:

• Confirmed he was a good candidate based on his entity choice and profit expectations
• Modeled the potential federal savings net of state level tradeoffs and compliance costs
• Slotted the election into his roadmap for the year it becomes most beneficial

The detailed filing mechanics sit with his CPA. What matters for Daniel is that part of a tax he was going to pay anyway now works harder for him at the federal level.

5. Aligning retirement planning with business reality

Instead of picking a retirement plan in a vacuum, we anchored it to his projected earnings and the compensation structure above.

The plan:

• Prioritize a flexible retirement account design that gives him both employee and employer style contributions
• Scale contributions based on actual year end results rather than fixed dollar commitments
• Use lower income years strategically for Roth focused planning when they arise

He now has a contribution range for different profit scenarios and knows what to do when he lands in each tier.

6. Upgrading bookkeeping from compliance to strategy

Finally, we helped Daniel turn bookkeeping into a tool rather than a headache.

We:

• Recommended engaging a bookkeeper who understands professional service firms
• Defined a simple chart of accounts that mirrors his planning categories
• Set expectations for monthly reporting so we can refresh projections and tax strategy during the year, not just after it ends

This gives him clean, decision ready numbers without pulling him into the weeds.

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Results & Implementation Roadmap

Immediate impact

Within the first planning cycle, Daniel:

• Identified projected annual tax savings of over $60K from a mix of entity choices, elections and better use of deductions
• Gained clarity on the salary range that keeps him compliant and supports his retirement plan
• Put an actual firm structure plan on paper that can accommodate new partners without starting from scratch

Next 12 months

Daniel’s execution roadmap is deliberately simple:

1. Finalize and implement the chosen structure with his legal and tax team
2. Launch a payroll process that reflects the new compensation targets
3. Make the New Jersey election in the year it becomes advantageous
4. Fully outsource bookkeeping and move to monthly, categorized financials
5. Set up retirement contributions with ranges tied to quarterly profit

Long term positioning

Over the next several years, as additional partners join, the firm can:

• Slot new partners into the existing structure rather than redesigning each time
• Adjust ownership and compensation levers without redoing entity documents
• Continue to refine tax strategy as income grows and regulations shift

Daniel now feels less like a high earning employee of his own firm and more like the owner of a deliberately designed business.

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Conclusion

Daniel did not need a 40 page tax memo. He needed a clear structure, a handful of key elections, and a way to keep his options open as the firm grows.

By aligning entity design, tax strategy, retirement planning and bookkeeping, he turned a fast growing crypto law practice into a business that can save over $60K per year in taxes at current levels and is built to scale with new partners.

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I went from guessing at tax time to having an actual plan. I know what I am paying myself, why we chose that number, and how the structure will work when we add partners. It feels like a real firm now, not just a busy practice.

— Daniel, NJ Attorney