May lawyers form a professional corporation under Oklahoma's Professional Corporation Act and practice law in that form?

Plain-English summary

After Oklahoma passed the Professional Corporation Act (Senate Bill No. 399), the committee received numerous requests for an opinion on whether lawyers could form a professional corporation and practice law in that form without violating the canons. It had earlier deferred to the ABA's standing committee, but as no ABA opinion was forthcoming and lawyers wanted the Act's tax advantages, the committee addressed the question before year-end.

The committee observed that historically the general practice of law by corporations had been disfavored, but that the reported objections almost always involved lawyers employed by a lay corporation, where a lay agency was inserted between lawyer and client in both professional judgment and monetary reward. It found that Canons 33, 35, and 47 did not contemplate a professional-service corporation, and that the Act's safeguards eliminate any conflict with Canons 35 and 47: the professional relationship is fully protected, individual lawyer liability is not limited, and no layman or lay agency can control the practitioner. It reasoned that the corporation would not itself practice law; it would be composed of qualified bar members practicing as they do in partnership, using the corporate form only as a method of business organization.

The committee therefore opined that corporate-form practice does not itself violate any canon, but added that nothing in the canons affirmatively permits it, that the Legislature has no authority to permit the corporate practice of law (a prerogative of the Supreme Court), and that lawyers should refrain from organizing under the Act until the Supreme Court makes known its approval. It suggested the Executive Council seek an order authorizing such practice, that the Court be asked to apply Canon 33's partnership restrictions to professional corporations, and that the Council be authorized to prescribe rules on corporate names. It cautioned that the corporation must not be a cloak for conduct that would otherwise violate the canons, and distinguished ABA Opinion No. 283 (on a Massachusetts-type business trust) as arising from a materially different factual situation.

Currency note

This opinion was issued in 1961, decades before Oklahoma replaced its original Rules of Professional Conduct (patterned on the ABA Canons of Professional Ethics) with the Oklahoma Rules of Professional Conduct (adopted 1988) and the later Ethics 2000 revisions. The opinion expressly conditioned corporate-form practice on later Supreme Court approval, and the law on professional corporations and law-firm organization has since developed. 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: Did the committee say corporate-form law practice violates the canons?

A: No. It concluded that practicing law in the corporate form permitted by the Act does not itself involve a violation of any existing canon, because the Act's safeguards prevent lay control and protect the lawyer-client relationship.

Q: Could lawyers go ahead and incorporate after this opinion?

A: No. The committee said lawyers should refrain until the Supreme Court of Oklahoma makes known its approval, because authorizing corporate practice is the court's prerogative, not the Legislature's.

Q: Would forming a corporation relax any of a lawyer's duties?

A: No. The committee said nothing in the opinion relieves the individual lawyer from complying with the letter and spirit of the canons, and the corporation must not be a cloak for otherwise-prohibited conduct.

Background and rules framework

The opinion interpreted Canons 33, 35, and 47 of the Canons of Professional Ethics, adopted in Oklahoma by rule of the state Supreme Court, against the new Professional Corporation Act, focusing on the canons' concern with lay agencies controlling a lawyer's judgment and fees. It distinguished ABA Opinion No. 283. The opinion predates the Model Rules and made no Model Rule citation.

Citations and references

Rules of Professional Conduct:

• Canon 33 (ABA Canons of Professional Ethics, adopted by the Oklahoma Bar): partnership and firm-name restrictions.
• Canon 35 (ABA Canons of Professional Ethics, adopted by the Oklahoma Bar): a lay agency must not intervene between lawyer and client.
• Canon 47 (ABA Canons of Professional Ethics, adopted by the Oklahoma Bar): a lawyer must not aid the unauthorized practice of law.

Other opinions cited:

• ABA Formal Opinion No. 283 (1950): practice of law as a Massachusetts-type business trust, distinguished on its facts.

See also

• Okla. Bar Ethics Op. 207: Insurance company ad announcing a lawyer as a special representative
• Okla. Bar Ethics Op. 183: Firm name "John Doe and Associates"
• Okla. Bar Ethics Op. 214: FAA "qualified examiners" list and "Bonded-Lawyers"

Source

• Landing page: https://www.okbar.org/ethics/ethics-opinion-no-213/

Original opinion text

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

Adopted December 14, 1961

Since the passage of the “Professional Corporation Act” (Senate Bill No. 399), this Committee, both directly and through the State Bar Association, has received numerous requests for an advisory opinion as to whether or not a lawyer or firm of lawyers may form a professional corporation and practice law as such without violating the existing Canons of Professional Ethics as the same have been heretofore construed.

Some time ago the Executive Council specifically requested such an opinion of this Committee, but it was called to its attention that several of the states had adopted similar acts and the Standing Committee on Professional Ethics of the American Bar Association had been asked to express its opinion and, pending such expression, any opinion of this Committee should be withheld. However, no opinion from the American Bar Association’s Committee has been forthcoming and it is felt that if lawyers are to be permitted to have the advantages of the Professional Corporation Act, it would be highly desirable to remove any doubt on the ethical question prior to the end of the calendar year.

INQUIRY

Do the Canons of Professional Ethics prohibit a lawyer or a firm of lawyers from forming a corporation under the Professional Corporation Act of the State of Oklahoma and practicing law in such form?

OPINION

Historically, the general practice of law by corporations, like the practice of medicine, has been prohibited by the ethical concepts of the so-called learned professions, and even in certain instances, by law. The reported cases, however, and the opinions of the various grievance committees of the bar associations almost without exception involve the practice of law by lawyers in the employ of a lay corporation; and in these opinions the serious objection resulted from the insertion of the lay agency between the lawyer and his client or the physician and his patient, both in the control of his professional opinion and the control of his monetary reward. The existing Canons of Professional Ethics of the American Bar Association which, of course, are, by rule of the Supreme Court of Oklahoma, the rules of conduct for the Members of the Bar of this State, clearly reveal that a professional service type corporation was not contemplated by either Canons 33, 35, or 47. For that reason, we see no need to dwell further in this opinion upon the numerous prior opinions of courts and association committees dealing with the corporate practice of law or medicine. A study of the Professional Corporation Act reveals that the safeguards inherent within the Act itself are such that a compliance with the Act eliminates the possibility of conflict with Canons 35 and 47, in that the time-honored relationship between the professional man and his client is fully protected, the liability of the individual lawyer is not limited, and there is no possibility of laymen or lay agencies controlling the individual practitioner.

It is further apparent from the wording of the Act that the professional corporation will not as such “practice law.” It will simply be composed of qualified Members of the Bar who do in the same manner that they presently practice in partnership form. The corporate form will simply be utilized as a method of business organization by a group of lawyers and will, of course, make available to them the advantages now available to corporate officials and personnel under the Internal Revenue Code.

We are, therefore, of the opinion that the practice of law in the corporate form. as permitted by the Professional Corporation Act, does not in itself involve a violation of any existing canon of professional ethics.

We are further of the opinion, however, that nothing in the existing canons of ethics specifically permits such practice, and that while the Legislature of the State has full authority to enact legislation making provision for this type of corporation, it has no authority to permit the corporate practice of law. Under the laws and constitution of this State, that is a prerogative of the Supreme Court. Therefore, in view of the traditional objections to corporate practice, we are of the opinion that until such time as the Supreme Court of this State has made known its approval of lawyers’ utilizing the provisions of the Professional Corporation Act, the lawyers of this State should refrain from so organizing.

It is suggested that the Executive Council immediately seek an order from the Supreme Court authorizing lawyers to utilize the provisions of the Professional Corporation Act.

It is also suggested that the Supreme Court be asked to find that all of the provisions and restrictions contained in Canon 33 relative to partnerships apply with equal force to professional corporations and, further, to authorize the Executive Council to prescribe such rules concerning corporate names as it sees fit, pursuant to Section 7 of said Act.

Nothing in this opinion should be construed to in any way relieve the individual lawyer from complying with both the letter and spirit of all of the existing canons of professional ethics and, by the same token, he must not permit the corporation of which he is a member to be a cloak for conduct which would otherwise be in violation of the canons.

We feel that some reference should be made to Opinion No. 283 rendered by the American Bar Committee on Professional Ethics in 1950, which might be construed to be at variance with this opinion. In that instance, the inquiry made to that Committee involved the practice of law in the form of a business or Massachusetts-type trust. While some of the language used by the Committee in that opinion would appear to be contrary to the views herein expressed, we believe that the statutory authority of the Professional Corporation Act together with the safeguards inherent in the Act itself creates a factual situation so different from that under consideration in Opinion 283 that the two opinions can be clearly distinguished even if the American Bar Association Committee opinion were binding.