It’s unfortunate, but lawyers do sometimes have to close their practice. Reasons may include retirement, mergers, illness, death or financial stress. In 2012, 18 National List Law Firm Members either closed their practice or merged with another law firm.
Do you have a “Law Firm Succession Plan”?
In these uncertain financial times, and considering unforeseen personal problems that might arise, having a Succession Plan, or at least knowing something about what the process would entail, could help you feel more prepared for any eventuality.
What if you become disabled or incapacitated?
No one expects it to happen to them, but for the same reasons that we all carry health and life insurance, lawyers should have an agreement in place that states what they want to happen should they suddenly become unable to run their practice. An excellent example of such an agreement can be found here: http://ethics.calbar.ca.gov/AttorneySurrogacy.aspx, with the following explanation: “The State Bar Attorney Surrogacy program provides a model agreement for the designation of an attorney to administer a lawyer’s law practice in the event that the lawyer becomes disabled or incapacitated. The agreement details the typical responsibilities of the lawyers involved in an ‘Agreement to Close Law Practice in the Future’ and is intended to facilitate compliance with Business and Professions Code Section 6185 and relevant provisions of the Probate Code.” This agreement is specifically for the state of California. Check with your local state bar association for an agreement that may include specifics for the state in which you practice.
What to consider if you want or need to close your practice?
We assume that most lawyers would want to sell their practice if it becomes necessary to give up ownership. The State Bar of California also gives some good guidelines for selling a practice. On p. 7 it states what may be the obvious: “Since few, if any lawyers regularly buy or sell practices, the lawyer rarely has any expertise or experience in setting the price or terms for his or her own practice. A lawyer buying or selling a law practice is well advised to get [professional] help.”
An article in Law Practice Today states: “In 1989, California became the first state to adopt a rule of professional conduct (Rule 2-300) that specifically permits the sale of a law practice. The American Bar Association, through the efforts of the General Practice Section, then adopted a similar rule, Model Rule 1.17. Two years ago, through the efforts of the ABA’s Standing Committee on Sole & Small Firm Practitioners, the ABA adopted a modification that permits lawyers to sell part (not all) of their practices. Several states have since adopted the ABA’s new version, and more than 40 states now have some version of the ABA rule and permit the sale of a law practice. The remaining states are in various phases of rethinking this issue.” This same article lists a number of ethical issues that must be considered when negotiating the purchase or sale of a law practice.
Be safe and smart. Do the research!
Before you consider simply closing or selling your law practice, you’ll want to do the research on ethical considerations, your state’s laws and on how others are doing it. Kaulkin Ginsberg is a leading authority on the valuation of privately owned companies within outsourced business services (OBS). Follow the link to find out more about their services.
Contact us for help.
If you are a lawyer who is considering closing your practice for whatever reason, we suggest that you contact The National List of Attorneys to discuss opportunities. We might know of an opportunity for you to either sell your practice or merge with another firm. We are aware of law firms in the industry expanding into multiple states that may have an interest in acquiring your assets. NL has had experience arranging mergers and acquisitions for our law firm members in the past, so if you are considering selling or merging, or if you would like to speak to us regarding what to do when leaving your practice, please contact Beverly Unrath or Randy Nicola.
By Beverly Unrath