Does an out-of-state law firm organized as a professional corporation have to register in Illinois if one shareholder practices there in the firm's name?

Plain-English summary

A professional corporation registered to practice law in State X has two shareholders, both admitted there and one also admitted in Illinois. The PC is not registered to practice in Illinois under Rule 721, but the Illinois-admitted lawyer practices in Illinois and corresponds with clients on letterhead and email signature blocks identifying the firm as a professional corporation. The committee was asked whether the PC is engaged in the practice of law in Illinois under Rule 721(a) so that it must apply for a certificate of registration.

The opinion applies Illinois Supreme Court Rule 721(c), under which no corporation may engage in the practice of law in Illinois without a certificate of registration. As long as at least one shareholder of an out-of-state PC is admitted in Illinois, the firm may obtain a Rule 721 certificate. The committee notes that only a firm registered under Rule 721 lets its shareholders benefit from the limited liability for errors and omissions afforded by Rule 722 (subject to the Rule 722(b) insurance requirement), because a firm must be engaged in the practice of law in Illinois pursuant to Rule 721 to be a "limited liability entity."

The committee cites Ford Motor Credit Co. v. Sperry (Rule 721 gives licensed lawyers the option to organize as professional service corporations for limited-liability protection; failure to register did not make the representation unauthorized practice) and Joseph P. Storto, P.C. v. Becker (a firm's failure to register did not void the client's fee agreement absent harm). Because the Illinois-admitted shareholder practices law in Illinois and holds the practice out as a professional corporation, the committee concludes the firm's registration under Rule 721 is required.

In practice

Under this opinion, an out-of-state professional corporation must register with the Illinois Supreme Court under Rule 721 when one of its Illinois-admitted shareholders practices law in Illinois in the firm's name. The opinion holds that registration is what makes the firm "engaged in the practice of law in Illinois pursuant to Rule 721," and only a registered firm's shareholders get the Rule 722 limited-liability protection (with the Rule 722(b) insurance requirement).

Common questions

Q: Must an out-of-state law PC register in Illinois?

A: Per the opinion, yes, if an Illinois-admitted shareholder practices law in Illinois in the PC's name; Rule 721(c) requires a certificate of registration to engage in the practice of law in Illinois.

Q: What does Rule 721 registration give the firm?

A: The opinion notes that only a Rule 721-registered firm's shareholders receive the Rule 722 limited liability for errors and omissions, provided the firm maintains the Rule 722(b) minimum insurance or financial responsibility.

Q: Does failing to register make the representation unauthorized practice or void the fee agreement?

A: The opinion cites Ford Motor Credit Co. v. Sperry (failure to register was not unauthorized practice) and Joseph P. Storto, P.C. v. Becker (failure to register did not void the client's fee agreement absent harm), while still concluding registration is required here.

Background and rules framework

The opinion interprets Illinois Supreme Court Rule 721 (registration of professional corporations and other entities to practice law) and Rule 722 (limited liability), in the context of holding a firm out as a professional corporation on letterhead, which implicates the professional independence and firm-name principles reflected in Rules 5.5 and 7.5.

Citations and references

Rules:

• Illinois Supreme Court Rule 721(a), (c): certificate of registration to practice law as an entity
• Illinois Supreme Court Rule 722(a), (b): limited liability and insurance requirements

Cases:

• Ford Motor Credit Co. v. Sperry, 214 Ill. 2d 371, 827 N.E.2d 422 (2005), Rule 721 and limited liability; registration failure not unauthorized practice
• Joseph P. Storto, P.C. v. Becker, 341 Ill. App. 3d 337, 792 N.E.2d 384 (2003), registration failure did not void fee agreement absent harm

See also

• ISBA Ethics Op. 22-04: Use of Deceased or Retired Partners' Names in a Firm Name
• ISBA Ethics Op. 12-17: Non-Illinois Licensed Lawyer Representing a Party in Illinois
• NY State Bar Op. 1023: Of Counsel to an Out-of-State Firm With a Trade Name

Source

• Landing page: https://www.isba.org/ethics/opinions/1601