Limited Liability Entities For Law Firms With Charts Part Allan

							Limited Liability Entities For
Law Firms (With Charts) (Part 1)
                                                                         Allan G. Donn




“LLC” refers to limited liability company; “LLP,” to limited liability partnership;
and “PC,” to professional corporation.

A. Introduction

1. The level of protection that an LLC gives a professional practice against vic-
   arious professional liability in a given jurisdiction depends on the answers to
   the following questions.

    a. Does the statute providing for the limited liability entity permit the use of
       the entity for the conduct of a professional practice?

    b. Does the statute governing the conduct of the particular profession permit
       the use of the limited liability entity?



Allan G. Donn is a member of the Norfolk, Virginia, firm of Willcox & Savage, PC. He has been
the chair of the Joint Editorial Board on the Unincorporated Organizations Act of the National
Conference of Commissioners on Uniform State Laws and the ABA, which reviews and recom-
mends changes to the Uniform Laws. He was the ABA Adviser to the Revised Uniform
Partnership Act Drafting Committee. Sheldon Banoff and Robert Keatinge assisted in the prepa-
ration of this outline.
     A complete set of the course materials from which this outline was drawn may be purchased
from ALI-ABA. Call 1-800-CLE-NEWS and ask for Customer Service. Have the order number of
the course materials—VME0219—handy.


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48 ALI-ABA Business Law Course Materials Journal                          October 2004



    c. Does the state body regulating the particular profession, including the
       state supreme court in the case of law practice, permit the conduct of that
       profession by the limited liability entity?

    d. If the particular profession may be conducted in the form of the limited lia-
       bility entity, does that entity protect against vicarious liability?

    e. Do the rules of ethics of the particular profession permit the conduct of a
       profession by the limited liability entity?

B. Forms Of Limited Liability Business Organization Permitted
   For the Practice Of Law

1. PC. Every state permits lawyers to practice in the form of professional corpo-
   rations or professional associations. See J.F. Rydstrom, Annot., Practice by At-
   torneys and Physicians as Corporate Entities or Associations under Professional
   Service Corporation Statutes, 4 A.L.R. 3d 383.

2. LLC:

    a. Express Statutory Authorization Of Professional LLCs. In the following states,
       either no further enabling statute or rule is required for the practice of law,
       or such a statute or rule exists:

       i.    Alabama—Ala. Code §§10-12-4(s) and 10-12-45;

       ii.   Arizona—Ariz. Rev. Stat. §29-841 through -847;

       iii. Arkansas—Ark. Code Ann. §4-32-106(a) (“professional service”
       specifically includes law. §4-32-102(m));

       iv.   Connecticut—Conn. Gen. Stat. §34-119(b);

       v.    District of Columbia—D.C. Code §29-1001(24);

       vi. Florida—Fla. Stat. Ann. §621.051, Sup. Ct. Rule of Prof’l Conduct 4-
       8.6(a);

       vii. Georgia—Ga. Code Ann. §§14-11-201(b) and -1107(f); t. Rule of the
       State Bar 1-203(4)(v);

       viii. Idaho—Idaho Code §53-615;
                                                  Limited Liability Entities 49



ix. Illinois—805 Ill. Comp. Stat. 180/55-2 (1996 amendment makes LLC act
applicable to lawyers but only to the extent and under terms and condi-
tions specified by the Supreme Court). Supreme Court Rule 721(a) amend-
ed February 5, 1997, to allow LLCs as well as professional service corpo-
rations and professional associations to engage in law practice;

x. Indiana—Ind. Code §23-18-8-2-2(15); Admission and Discipline Rule 27
(Effective January 1, 1998);

xi. Iowa—Iowa Code §490A.1501 to -1519;

xii. Kansas—Kan. Att’y Gen. Op. No. 96-34 (1996); Kan. Att’y Gen. Op.
No. 92-23 (1992);

xiii. Kentucky—Sup. Ct. Rule 3.022(f);

xiv. Louisiana—La. Rev. Stat §12:1301.A(2) (includes “profession” within
definition of “business”); La.R.S. §37:213. (LLC of licensed persons may
practice law);

xv. Maine—31 Me. Rev. Stat. Ann. tit. 31 §611;

xvi. Maryland—Md. Code Ann. Corps. & Ass’ns §4A-203(7);

xvii. Massachusetts—Mass. Gen. Laws Chap. 156C, §6(a); Mass. Sup. Jud.
Ct. Rule Rule 3:06(1);

xviii. Michigan—Mich. Comp. Laws. Ann. §450.4901(1);

xix. Minnesota—Minn. Stat. §319B.03;

xx. Mississippi—Miss. Code Ann. §79-29-901;

xxi. Montana—Mont. Code Ann. §35-8-1301 through 1307C. Rule of Prof’l
Conduct 5.4(d);

xxii. Nebraska—S.Ct. Rule for Ltd. Liab. Prof’l Orgs. I.A (Effective Dec. 1,
1999);

xxiii. New Hampshire—N.H. Rev. Stat. Ann. §§304-C:1 through C:19; S.Ct.
Rule 41;

xxiv. New York—N.Y. Ltd. Liab. Co. Law §1201-1216;
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       xxv. North Carolina—N.C. Gen. Stat. §57C-2-01(c); Rules of N.C. State Bar,
       Subchapter 1E, Section .0100, reprinted in Annotated Rules of North
       Carolina;

       xxvi. Ohio—Ohio Rev. Code Ann. §1705.03(c)(6); Sup Ct. Gov’t Bar Rule
       III, Sect. 1;

       xxvii. Oklahoma—By 1995 amendment the “Professional Corporation
       Act” became the “Professional Entity Act” and provided that a “profes-
       sional entity,” which includes an LLC, may be formed to render a “pro-
       fessional service,” which includes the practice of law. Okla. Stat. tit. 18,
       §§806,803.6.h;

       xxviii. Oregon—Or. Rev. Stat. §63.074 (1995 amendment deleted prohibi-
       tion against professionals);

       xxix. Pennsylvania—15 Pa. Cons. Stat. §§8911(a) and 8966(a). Pa. Sup. Ct.
       Rule of Prof’l Conduct Rule 5.4(d)(4);

       xxx. Rhode Island—R.I. Gen. Laws §7-16-3.1 (2002);

       xxxi. Tenn.—Tenn. Code Ann. §48-248-101 through 48-248-409; S.Ct. Rule
       8, DR 5-107(c);

       xxxii. Texas—Tex. Rev. Civ. Stat. art. 1528n, Part 11;

       xxxiii. Utah—Utah Code Ann. §48-2c-104;

       xxxiv. Vermont—Vt. Stat. Ann., tit. 11 §3001 (3) (includes “profession”
       within definition of “business”);

       xxxv. Virginia—Va. Code Ann. §§13.1-1100 to -1122; §54.1-3909. Va. Code
       §54.1-3902 provides that no PLLC shall render the professional services of
       attorneys without compliance with specified requirements and registra-
       tion; Rules of the Virginia Supreme Court Part 6, Section IV, Paragraph 14,
       provides for issuance of certificate of registration to a professional law cor-
       poration, professional LLC and LLP and provides a Code of Ethics gov-
       erning the practice of law through professional PCs and LLCs;

       xxxvi. Washington—Wash. Rev. Code §25.15.045(1);

       xxxvii. West Virginia—Sup. Ct. Rule of Prof’l Conduct 5.7(a);