Can Michigan lawyers organize their firm as a professional limited liability company, and what must they call it and disclose to clients?

Plain-English summary

The Committee considered whether MRPC 1.8(h), which bars a lawyer from prospectively limiting malpractice liability to a client except as permitted by law and with independent representation, prevents lawyers from using a limited liability company structure for their firms, and if not, what disclosures clients are owed. The Michigan Limited Liability Company Act specifically allows formation of professional limited liability companies for the rendition of legal services, alongside professional corporations, partnerships, and proprietorships.

The Committee read the LLC Act's provisions (closely paralleling the Professional Services Corporation Act) to keep existing law on the professional relationship and standards of professional conduct fully in force. A member, manager, employee, or agent of a professional limited liability company remains personally and fully liable for negligent or wrongful acts or misconduct committed by the lawyer or by a person under the lawyer's direct supervision while rendering professional services; the company itself is liable up to the full value of its property. So selecting the LLC form does not affect the liability of a lawyer rendering services, a lawyer charged with supervisory responsibilities, or the firm, though it does eliminate vicarious liability of partners in certain circumstances.

The Committee concluded that, because ethics rules require no disclosure of the business aspects of a professional corporation beyond its existence, lawyers in a professional limited liability company have no ethical obligation to disclose details of the business arrangement other than what the law requires, namely that the company name contain "Professional Limited Liability Company" or the abbreviation "P.L.L.C." or "P.L.C." (citing MRPC 7.1 and 7.4).

Currency note

This opinion was issued in 1994 and interprets the Michigan Rules of Professional Conduct, the Michigan Limited Liability Company Act, and the Professional Service Corporation Act as they then stood. The MRPC and the underlying statutes have since been amended, and later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules and statutes before relying on any specific rule, name requirement, or liability statement mentioned here.

Common questions

Q: Can a Michigan law firm be organized as a limited liability company?

A: Per the opinion, yes. The Committee concluded the Michigan Limited Liability Company Act allows formation of a professional limited liability company for the rendition of legal services, and MRPC 1.8(h) does not prohibit it.

Q: Does an LLC shield a lawyer from personal malpractice liability?

A: The opinion concluded it does not for the lawyer's own work or work the lawyer supervises. At the time of the opinion, a member, manager, employee, or agent remained personally and fully liable for his or her own negligent or wrongful acts and those of persons under his or her direct supervision, though the form could eliminate certain vicarious liability of partners.

Q: What must a professional LLC law firm be called?

A: The opinion concluded the company name must contain the words "Professional Limited Liability Company" or the abbreviation "P.L.L.C." or "P.L.C."

Background and rules framework

The opinion interprets MRPC 1.8(h) (limits on agreements restricting malpractice liability; the Model Rule 1.8(h) counterpart) together with MRPC 7.1 (Communications Concerning a Lawyer's Services) and MRPC 7.4 (fields of practice). The analysis rests on the Michigan Limited Liability Company Act (MCL 450.4101 et seq.) and parallels in the Professional Service Corporation Act, which preserve professional-conduct standards and personal liability for one's own and supervised work.

Citations and references

Rules of Professional Conduct:

• MR 1.8 / MRPC 1.8(h) (agreements limiting malpractice liability)
• MR 7.1 / MRPC 7.1 (communications concerning a lawyer's services)
• MR 7.4 / MRPC 7.4 (fields of practice)

Statutes:

• MCL 450.4101 et seq. (Michigan Limited Liability Company Act)
• MCL 450.4901(1); MCL 450.905(2) and (3) (professional services; liability)

See also

• Mich Ethics Op. RI-90: Retired Shareholder's Name in Firm Name
• Mich Ethics Op. RI-144: Firm Name Implying a Partnership
• Mich Ethics Op. RI-246: "Law Offices" on a Solo's Letterhead

Source

• Landing page: https://www.michbar.org/opinions/ethics/numbered_opinions?OpinionID=866&Type=6

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

R-17

January 14, 1994

SYLLABUS

It is permissible for a lawyer to form a professional limited liability company. The name of the company must contain the words "Professional Limited Liability Company" or the abbreviation "P.L.L.C." or "P.L.C."

A lawyer's selection of a limited liability company does not affect the liability of a lawyer rendering services to a client, a lawyer charged with supervisory responsibilities in reference to the rendition of services, or the firm.

References: MRPC 1.8(h), 7.1, 7.4; MCL 450.4101 et seq; MCL 450.4901(1); MCL 450.905(2) and (3).

TEXT

The issue under discussion is whether MRPC 1.8(h) prevents lawyers from using a limited liability company structure for their law firms and secondly, if not, what disclosures or explanations must be made to clients.

MRPC 1.8(h) states:

"A lawyer shall not:

"(1) make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement; or

"(2) settle a claim for such liability with an unrepresented client or former client without first advising that person in writing that independent representation is appropriate in connection therewith."

The Michigan Limited Liability Company Act, MCL 450.4101; MSA 21.198(4101), specifically allows for the formation of professional limited liability companies including those formed for rendition of legal services. Therefore, in addition to professional corporations under MCL 450.221 et seq, partnerships and proprietorships, a group of lawyers forming a law firm in this state may also consider the limited liability company structure. MCL 450.4901(1) states:

"A limited liability company may be formed under this Act for the purpose of rendering 1 or more professional services, as defined in Section 4902."

"Professional service" as defined in the Act includes attorney-at-law. MCL 450.905(2) and (3) state:

"(2) This act shall not be construed to abolish, repeal, modify, restrict, or limit the law now in effect applicable to the professional relationship and liabilities between the person furnishing the professional services and the person receiving such professional services and to the standards for professional conduct. A member, manager, employee, or agent of a professional limited liability company shall remain personally and fully liable and accountable for any negligent or wrongful acts or misconduct committed by him or her, or by any person under his or her direct supervision and control, while rendering professional services on behalf of the company to the person for whom the professional services were being rendered.

"(3) The limited liability company shall be liable up to the full value of its property for any negligent or wrongful acts or misconduct committed by any of its members, managers, employees or agents while they are engaged on behalf of the company in the rendering of professional services."

The statutory language of the Limited Liability Company Act Section 4905(2) and (3) closely parallels that of the Professional Services Corporation Act at MCL 450.226; MSA 21.315(6). Both acts make it clear that existing law regulating the professional relationship between the person furnishing the professional service and the person receiving the service continue to be governed by "standards of professional conduct." Explicitly, therefore, the Michigan Rules of Professional Conduct promulgated by the Supreme Court, specifically MRPC 1.8(h), still apply in the professional corporation or limited liability company structure.

A lawyer's selection of a limited liability company will not affect the liability of a lawyer rendering services to a client, a lawyer charged with supervisory responsibilities in reference to the rendition of services, or the firm. That selection will, however, eliminate vicarious liability of partners in certain circumstances.

Since ethics rules do not currently require disclosures or explanations to be made to a client regarding the business aspects of a professional corporation other than the fact that the professional corporation exists, lawyers belonging to a professional limited liability company do not have any ethical obligations to disclose the details of their business arrangement other than those legally required, i.e., that the name of the limited liability company shall contain the words "Professional Limited Liability Company" or the abbreviation "P.L.L.C." or "P.L.C." See MRPC 7.1 and 7.4.