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OBA Ethics Counsel

Ethics Opinion No. 25

Adopted March 25, 1932

The Board of Governors is in receipt of the following communication:

"Has the State Bar of Oklahoma ever passed upon whether or not the following constitutes unlawful practice of law?

An accountant firm, which among other things handles tax matters for a foreign corporation, undertakes on behalf of its clients to prepare the necessary papers for securing license to do business in Oklahoma and to take the necessary steps to obtain such license, including the filing of such papers and securing the acceptance thereof by the proper authorities. This is done not in an isolated case, but as a general practice.

Doubtless in some instances, this work is being done for non-resident corporations, which have heretofore been doing business in this State without having paid the necessary license fees. Would the securing of a permit by such accountants under these circumstances, including whatever adjustment might be necessary with reference to payment of license fees for having done business in the past, constitute the unlawful practice of the law on the part of such accountants?

Furthermore, it is quite possible under our statutes and decisions that a foreign corporation might, under certain circumstances, acquire and hold title to property in this state, from which it would derive an income taxable under our state laws without having done or transacted business within the state within the meaning of the statute requiring a foreign corporation doing business in the state to secure a permit to do business and to pay the necessary license fees. The advising of the foreign corporation to secure a permit in this state, therefore, necessarily involves the determination of whether the foreign corporation contemplates doing business in the state. Consequently, would the acts of the accountant in advising with a foreign corporation as to whether it should or should not secure a permit to do business constitute unlawful practice of law?

It is my understanding that this practice is more or less prevalent among accountant firms, and arises particularly in connection with the preparation of state income tax returns for corporations doing business in the state and not having heretofore obtained licenses. At this time there is probably more of this work than at any other time, owing to the fact that since the income tax law became effective, it is quite imperative that these matters be decided at this time.

It is also my understanding that certain accountant firms are engaged in the business of preparing incorporation papers for their clients and doing the other necessary work in obtaining licenses, etc.

If the State Bar of Oklahoma has not rendered an opinion upon this matter, would it be asking too much to ask that it render an opinion at this time?"

In response to the inquiry:

The subject of what constitutes the practice of law has received the attention of the Board of Governors in Opinion No. 1 (April, 1931 issue, State Bar Journal) and Opinion No. 11 (December, 1931 issue, State Bar Journal) reference to which is hereby made.

In In re Pace, 170 App. Div. 818, 156 N.Y.S. 641, it was held that incorporation of corporations and the furnishing of forms, information and personal attention in connection therewith is practicing law. In that case it was said:

"It is true that the Legislature has made it so simple and apparently easy to incorporate a company that it often happens that laymen, guided by stationers' blanks undertake to perfect incorporation without legal advice, and sometimes without untoward consequences. But this does not prove that the incorporation of a company according to statutes does not involve, properly speaking, legal advice, which in practically every case is requisite if there is to be assurance that the work, when done, has been done legally and properly. There is necessary the interpretation of statutes, the preparation of the proper papers, and a consideration of the nature of the corporation to be formed in order that it may meet the needs of its projectors. All this calls for the application of legal knowledge and skill and the consequent rendering of legal advice and services.

Naturally the degree of legal skill varies greatly with the nature and purposes of the projected corporation, but in all some degree is required. It would be absurd to hold that the preparation of the papers requisite for the incorporation of a company and the incidental advice necessarily given in connection therewith do not call for legal services and are not included within the definition of the 'practice of law'."

The Board of Governors is of the opinion that the incorporation of corporations, etc., constitutes practicing law.

The Board of Governors is also of the opinion that the determination of whether or not it is necessary for a foreign corporation to obtain a license in a given state and the giving of advice in connection therewith and the preparation of the necessary papers for securing a license permitting a foreign corporation to do business in a state also constitutes the practice of law, because it involved the interpretation of statutes, the preparation of proper papers and calls for the application of legal knowledge and skill and the consequent rendering of legal advice and services.

This opinion is fortified by a consideration of Opinion 31 of the Committee of the American Bar Association on Professional Ethics and Grievances Concerning Matters of Professional Conduct reported in Volume 56 of the Reports of the American Bar Association (1931) wherein it is held:

"The preparation of articles of incorporation, of corporate by-laws and the necessary papers for the exchange of corporate stock for property or services, seems clearly to require both knowledge of law and the application thereof, and the committee does not believe that there is any question but that such conduct is 'practicing law'."

It is the opinion of the Board of Governors that an accounting firm engaged in the foregoing activities violates the provisions of Sections 46 and 48 of the State Bar Act, and is accordingly guilty of the commission of a misdemeanor.

It is also the opinion of the Board of Governors that an accounting firm so engaged is guilty of contempt of court, should be cited therefor, and unless the practice is discontinued should be enjoined from further engaging in the practice of law.

See People ex rel. Illinois State Bar Ass'n v. People's Stockyards State Bank, 344 Ill. 462, 176 N.E. 901; Dworken v. Apartment House Owners' etc., 38 Ohio App. 265, 176 N.E. 577.