Can a lawyer co-own a corporation with nonlawyers that helps homeowners win real estate tax reductions and pays out profits by share?
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This page answers the general question as of 1993. Ezel answers yours: whether it's allowed on your facts, under the current New York Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer asked whether he could form a corporation with two nonlawyers to help homeowners obtain reductions in their real estate tax assessments. The lawyer and the two nonlawyers would be the shareholders; the lawyer would be employed by the corporation as counsel to file and submit the tax-reduction petitions, and profits and losses would be distributed in proportion to each shareholder's number of shares.
The committee noted that the inquirer himself acknowledged that filing and submitting the petitions would be the practice of law. Given that concession, the committee explained that the corporation's furnishing of those legal services would violate Judiciary Law Section 495, which bars a corporation from making it a business to practice law or render legal services through lawyers in its employ. Participating in that arrangement would therefore be improper under DR 7-102(A)(8) (a lawyer shall not knowingly engage in illegal conduct) and DR 3-101(A) (aiding a nonlawyer in the unauthorized practice of law). The committee cited People v. Lawrence Preska Assocs. and People v. Peoples Trust Co. for the purpose of Section 495: preventing corporations from interposing themselves in the attorney-client relationship and shifting the lawyer's loyalty to the corporation.
The committee added that even if the arrangement did comply with the Judiciary Law, the profit-and-loss distribution would independently be improper. Because the corporation's revenue would come at least in part from legal services, distributing that revenue among the lawyer and the nonlawyer shareholders would violate DR 3-102(A), which prohibits sharing legal fees with nonlawyers. Quoting N.Y. State 618 (1991), the committee explained that the rule protects a lawyer's independence by preventing nonlawyers from owning an interest in, or having a financial inducement to direct, the practice of law.
Currency note
This opinion was issued in 1993, under New York's former Code of Professional Responsibility, which New York replaced with the Rules of Professional Conduct in 2009. The provisions on the unauthorized practice of law and on sharing fees with nonlawyers have since been renumbered and revised. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can a lawyer and nonlawyers co-own a company that provides the lawyer's legal services?
A: No. The committee concluded that where the company furnishes legal services through a lawyer it employs, the arrangement violates Judiciary Law Section 495, and a lawyer may not participate (DR 7-102(A)(8), DR 3-101(A)).
Q: Why was the profit split a separate problem?
A: Because the corporation's revenue came partly from legal services, distributing it to nonlawyer shareholders would share legal fees with nonlawyers in violation of DR 3-102(A), independent of the Judiciary Law issue.
Q: Did the committee decide whether the tax-reduction work is the practice of law?
A: It did not need to. The committee generally does not pass on questions of law, and the inquirer had conceded that filing and submitting the petitions would constitute the practice of law.
Background and rules framework
The opinion interpreted DR 3-101(A) (aiding unauthorized practice), DR 3-102(A) (sharing legal fees with a nonlawyer), and DR 7-102(A)(8) (knowingly engaging in illegal conduct) of New York's former Code, together with Judiciary Law Section 495. The closest Model Rule analogues are Rule 5.4 (professional independence; sharing fees with nonlawyers), Rule 5.5 (unauthorized practice), and Rule 8.4 (misconduct). New York replaced the Code with the Rules of Professional Conduct in 2009; the provisions cited here are historical.
Citations and references
Rules of Professional Conduct:
- MR 5.4 (professional independence of a lawyer; sharing fees with nonlawyers)
- MR 5.5 (unauthorized practice of law)
- MR 8.4 (misconduct)
- NY DR 3-101(A), DR 3-102(A), DR 7-102(A)(8)
Statutes:
- N.Y. Judiciary Law Section 495 (corporations practicing law)
Cases:
- People v. Lawrence Preska Assocs. Inc., 90 Misc. 2d 59, 393 N.Y.S.2d 650 (1977): purpose of Section 495
- People v. Peoples Trust Co., 180 A.D. 494, 167 N.Y.S. 767 (1917): purpose of Section 495
Other opinions cited:
- N.Y. State 618 (1991): purpose of the rule against sharing fees with nonlawyers
See also
- NY State Bar Op. 662: Affiliating with a nonlawyer in tax proceedings
- NY State Bar Op. 651: Percentage fee to a bar referral service
- NY State Bar Op. 636: Selling standard will forms to the public
Source
- Landing page: https://nysba.org/opinion-644/
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