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OBA Ethics Counsel

Ethics Opinion No. 283

Adopted November 22, 1974

INQUIRY

The Board of Governors has referred to the Committee the following question submitted by an attorney:

Is it proper for an individual attorney to form a professional corporation, which professional corporation then becomes a partner in the law partnership in which the individual attorney was formerly a partner?

OPINION

It is not ethically improper for an attorney to form a professional corporation, which corporation becomes a partner in the law partnership in which the attorney was formerly a partner, provided that the nature of the corporate partner is indicated in the partnership's professional cards and notices, letterheads, law list listings, and otherwise as may be necessary to avoid misleading the public.

DR 3-101(A) provides that:

"A lawyer shall not aid a non-lawyer in the unauthorized practice of law."

DR 3-102(A) provides, with certain inapplicable exceptions, that:

"A lawyer or law firm shall not share legal fees with a non-lawyer, ..."

DR 3-103(A) provides that:

"A lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law."

Since a professional corporation organized to render legal services is itself a non-lawyer, it might be argued that a lawyer or law firm may neither share legal fees nor form a law partnership with such a corporation.

The Committee rejects that argument.

The Ethical Considerations show that these Disciplinary Rules are directed to prevention of the unauthorized practice of law by laymen, for the protection of the public. Canon 3, Code of Professional Responsibility. That purpose is fulfilled by operation of the provisions of the Professional Corporation Act, Title 18 O.S.1971 § 801 et seq.1 The Act permits one or more individuals, each of whom is licensed to practice law, to incorporate a professional corporation. The general purpose of the Act is to make available to professional persons, including attorneys, the benefits of the corporate form for the business aspects of their practices while preserving the established professional aspects of the personal relationship between the professional person and those he serves.

The professional corporation may render professional services only through duly licensed persons, and the Act does not alter any law applicable to the relationship of the person's rendering and receiving professional services, including liability arising out of such professional services. The Act does not restrict or limit the authority or duty of the licensing body. No professional corporation may do any act prohibited to be done by the licensed professional person.

Stock in a professional corporation may be issued or transferred only to a person who is duly licensed to render the specific professional services as those for which the corporation was organized. No person may be a director, shareholder or officer (other than secretary) of a professional corporation who is not an individual duly licensed to render such professional services, and a professional corporation may render professional services only through its officers, employees and agents who are duly licensed to render such services.

For these reasons the Committee concludes that a professional corporation organized for the purpose of rendering legal services pursuant to Title 18 O.S.1971 § 801, et seq., should not be deemed a "non-lawyer" within the purview of DR 3-101, 3-102 or 3-103. There is no valid ethical objection to an attorney availing himself of the benefits of the corporate form for the business aspects of his practice and, at the same time, availing himself of the benefits of partnership with other lawyers for the practice of their common profession.2

One qualification of this conclusion must be observed.

EC 2-11 provides in pertinent part:

"The use of a trade name or an assumed name could mislead laymen concerning the identity, responsibility, and status of those practicing thereunder. Accordingly, a lawyer in private practice should practice only under his own name, the name of a lawyer employing him, a partnership name composed of one or more of the lawyers practicing in a partnership, or if permitted by law, in the name of a professional corporation, which should be clearly designated as such."

As previously noted, Title 18 O.S.1971 § 801, et seq., permits the organization of and rendering of legal services by a professional corporation.

EC 2-13 provides that:

"In order to avoid the possibility of misleading persons with whom he deals, a lawyer should be scrupulous in the representation of his professional status. He should not hold himself out as being a partner or associate of a law firm if he is not one in fact, and thus should not hold himself out as a partner or associate if he only shares offices with another lawyer."

DR 2-102 provides in part that:

"(B) a lawyer in private practice shall not practice under a trade name, a name that is misleading as to the identity of the lawyer or lawyers practicing under such name, or a firm name containing names other than those of one or more of the lawyers in the firm, except that the name of a professional corporation or professional association may contain 'P.C.' or 'P.A.' or similar symbols indicating the nature of the organization, ..." 3

"(C) A lawyer shall not hold himself out as having a partnership with one or more lawyers unless they are in fact partners."

Assimilating the foregoing authorities, the Committee holds the opinion that there is no ethical obstacle to a professional corporation properly organized under the laws of Oklahoma to render legal services becoming a partner in any partnership in which an individual lawyer might ethically be a partner, subject only to the requirement that the nature and relationship of the partners and the attorneys employed by them, and each of them, must be held out clearly to the public.

Where, as in the facts under consideration, the professional corporation is in effect replacing the individual attorney in an existing law firm, there is perhaps a greater possibility that persons having previous dealings with the firm would be misled concerning the nature and relationship of the partners, and this change should be called to the attention of such persons. Otherwise, the Committee sees no distinction between the facts under consideration and a situation where a professional corporation enters into a partnership with which the attorney organizing the corporation has had no previous connection.

1 The Code of Professional Responsibility expressly recognizes that regulation of the practice of law is accomplished principally by the respective states. EC 3-9.

2 On the propriety of partnerships among lawyers, generally, see Drinker, Legal Ethics, pp. 203-209.

3 Apparently, in Oklahoma, Title 18 O.S.1971 § 807 makes "Corporation", "Incorporated," or an abbreviation thereof mandatory.