Can lawyers who share an office but keep separate finances, staff, and trust accounts call themselves an LLP 'law firm' partnership?

Plain-English summary

A group of lawyers proposed to practice as the "XYZ Law Firm," a registered limited liability partnership with a single location whose letterhead, signage, and telephone listings would identify them as partners. They would buy a professional liability policy in the partnership's name but would not share profits except case by case, would file no partnership tax return, would obtain separate employer identification numbers and file individual returns, would maintain individual trust accounts and individual business licenses, and would each hire their own support staff. The building owners operate it as "Acme Executive Park," some of whose owners are XYZ members, and a shared receptionist's salary is split among the XYZ members. The inquiry asked whether this arrangement complies with Rule 7.5(d).

The committee concluded that representing that these lawyers "practice in a partnership" would be misleading to the public under the circumstances. Rule 7.1 prohibits misleading or deceptive communications about a lawyer or the lawyer's services, and Rule 7.5(d) provides that lawyers may state or imply that they practice in a partnership or other organization only when that is the fact. Comment 2 explains that lawyers sharing office facilities, but not in fact associated in a law firm, may not denominate themselves as, for example, "Smith and Jones," because that title suggests they practice law together as a firm. The committee said the purpose of Rule 7.5(d) is not merely technical accuracy in trade names but the obligation to scrupulously avoid misleading the public, citing California Opinion 1997-150 and Michigan Opinion RI-45.

The committee declined to opine on the legal definition of "partnership" but noted that a partnership is commonly understood to involve sharing profits (citing S.C. Code Ann. Section 33-41-210, Commissioner v. Culbertson, and IRS Form 1065), so the public will reasonably believe a firm designated as a partnership shares profits rather than being an aggregation of independent practices. Under the proposed arrangement, the lawyers would share very little, with no indication they have agreed to handle one another's clients or appear on one another's behalf, separate licenses, their own employees (apart from one shared receptionist), and separate trust accounts. Even assuming the lawyers are "partners" in some sense (co-tenants, co-insureds), they are not "practicing in a partnership"; the trade name must reflect the reality of the law practice, not the office lease or insurance arrangements, and designating three largely independent practices as an LLP would mislead the public.

In practice

The opinion holds that, under South Carolina Rules 7.1 and 7.5(d), lawyers may state or imply that they practice in a partnership only when that is the fact, and the proposed "XYZ Law Firm" LLP designation would mislead the public because the lawyers are largely independent practices that do not share profits and keep separate staff, licenses, and trust accounts. The opinion treats sharing an office lease, a liability policy, and a receptionist as insufficient to make the lawyers a partnership in practice, and requires the trade name to reflect the reality of the practice rather than the office or insurance arrangements. The opinion does not define "partnership" but relies on the common understanding that a partnership shares profits.

Common questions

Q: Can office-sharing lawyers who don't share profits call themselves an LLP law firm?

A: No. The committee said designating largely independent practices that do not share profits as a partnership or LLP would mislead the public under Rules 7.1 and 7.5(d).

Q: When may lawyers hold themselves out as a partnership?

A: Only when it is the fact. The committee said Rule 7.5(d) permits stating or implying a partnership only when that is true, and comment 2 says office-sharers not actually associated in a firm may not use a name that suggests they practice together.

Q: Do shared office space, a shared insurance policy, and a shared receptionist make a partnership?

A: No. The committee said even if the lawyers are "partners" as co-tenants or co-insureds, they are not "practicing in a partnership," and the trade name must reflect the reality of the practice, not the lease or insurance arrangements.

Q: Why does sharing profits matter?

A: Because the public expects it. The committee said a partnership is commonly understood to involve sharing profits, so the public will reasonably believe a firm called a partnership shares profits rather than being an aggregation of independent practices.

Background and rules framework

The opinion interprets South Carolina Rule 7.1 (no false or misleading communications) and Rule 7.5(d) (lawyers may state or imply a partnership only when that is the fact), with comment 2, which correspond to the like-numbered Model Rules of the period. The analysis turns on whether the public would be misled, informed by the common understanding (drawn from state partnership law and tax authorities) that a partnership shares profits.

Citations and references

Rules of Professional Conduct:

• MR 7.5 / SC Rule 7.5(d) and Comment 2 (stating or implying a partnership only when it is the fact)
• MR 7.1 / SC Rule 7.1 (no misleading or deceptive communications)

Statutes:

• S.C. Code Ann. Section 33-41-210 (defining partnership as an association to carry on a business for profit)

Cases:

• Commissioner v. Culbertson, 337 U.S. 733 (1949), partnership as an organization for the production of income

Other opinions cited:

• Cal. Ethics Op. 1997-150 (1997); Mich. Ethics Op. RI-45 (disclosure of shared-facility arrangements; honesty about the nature of a practice)

See also

• SC Bar Ethics Op. 10-06: Practicing in Two Firms
• SC Bar Ethics Op. 07-05: One Professional Name and a Different Firm Name
• SC Bar Ethics Op. 12-09: Out-of-State Firm Billboards

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-12-12/
• Original PDF: https://www.scbar.org/media/leqhxw2k/12-12.pdf

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 12-12

SC Rules of Professional Conduct: 7.1, 7.5

Facts:

A group of lawyers intend to practice as law partners in a partnership known as the “XYZ Law Firm”. The “XYZ Law Firm” will be a registered Limited Liability Partnership. The lawyers intend to purchase a professional liability insurance policy in the name of “XYZ” partnership which will insure the professional practice of the firm and its members. The firm will have a single location. The firm’s letterhead, signage, and telephone listings will identify the practice as the “XYZ Law Firm” and list its members as partners.

While the partners of the “XYZ Law Firm” intend to share expenses, they do not intend to share profits except on a case by case basis. Because the partners will not share profits, the firm will not file a tax return. The individual partners have, or will obtain, separate employer identification numbers and will file individual tax returns for the income generated by their professional activities. The lawyers will maintain individual trust accounts and obtain individual business licenses from the City where the firm is located. Each lawyer intends to hire his or her own support staff, who will work under the employer identification number of the individual lawyer.

The owners of the building where the “XYZ Law Firm” is located operate the building as “Acme Executive Park.” Some of the owners of “Acme Executive Park” will be members of the “XYZ Law Firm.” “Acme Executive Park” has a separate employer identification number issued to it. “Acme Executive Park” employs a receptionist whose salary is shared by the members of the “XYZ Law Firm.”

Question presented:

Under the circumstances described above, do the lawyers practicing in “XYZ Law Firm” comply with Rule 7.5(d) of the South Carolina Rules of Professional Conduct?

Summary of Opinion:

Lawyers may state or imply that they practice in a partnership only when such statement or implication is accurate and not misleading. SCRPC 7.1, 7.5(d). Under the circumstances described by the inquirer, it would be misleading to represent to the public that he is “practicing in a partnership.”

Opinion:

The Committee believes that the inquirer’s representation that he “practices in a partnership” will be misleading to the public under the circumstances described. Rule 7.1 prohibits “misleading” or “deceptive” communications about a lawyer or lawyer’s services. Rule 7.5(d) provides that “[l]awyers may state or imply that they practice in a partnership or other organization only when that is the fact.” Comment 2 to Rule 7.5 explains that “[w]ith regard to paragraph (d), lawyers sharing office facilities, but who are not in fact associated with each other in a law firm, may not denominate themselves as, for example, ‘Smith and Jones,’ for that title suggests that they are practicing law together as a firm.”

The purpose of Rule 7.5(d) is not merely to require trade names to be technically accurate but to impose on counsel the obligation scrupulously to avoid misleading the public. See, e.g., Cal. Ethics Op. 1997-150 (1997) (“Attorneys sharing facilities or staff must affirmatively disclose to the public and to clients the nature of their shared arrangement when the arrangement tends to confuse, deceive, or mislead the public.”); Mich. Ethics Op. RI-45 (“In sum, the rules require that lawyers be honest and clear in the representations which they make to the public regarding the nature of their practices. . . . Consumers of legal services have a right to understand what individual or entity they can look to for the provision of legal services and who they can hold responsible for the manner in which those services are provided.”)

This Committee does not purport to render an opinion as to the legal definition of “partnership.” Nevertheless, certain background legal principles are relevant to the extent they bear on how the public will perceive an attorney’s representation in regards to practicing in a partnership or LLP.

A partnership is commonly understood to involve the sharing of profits between partners. See, e.g., S.C. CODE ANN. § 33-41-210 (“A partnership is an association of two or more persons to carry on as co-owners a business for profit and includes, for all purposes of the laws of this State, a registered limited liability partnership.”) (emphasis added); Commissioner v. Culbertson, 337 U.S. 733, 740 (1949) (“[A] partnership is... an organization for the production of income to which each partner contributes one or both of the ingredients of income—capital or services.”); IRS Form 1065 (“A partnership is the relationship between two or more persons who join to carry on a trade or business, with each person contributing money, property, labor, or skill and each expecting to share in the profits and losses of the business . . .”) (emphasis added).

While this Committee does not opine that a partnership cannot exist without sharing profits, such an arrangement is unusual and contrary to the common understanding of the term. Members of the public will reasonably believe that a firm designated as a partnership shares profits and is not merely an aggregation of independent law practices.

Under the arrangement described above, attorneys X, Y and Z will share very little. No indication exists that they have agreed to deal with one another’s clients or to appear on one another’s behalf. They will not share profits, except on designated cases, and will obtain separate business licenses, hire their own employees (other than a single shared receptionist), and maintain separate trust accounts. While they apparently intend to seek shared liability insurance coverage, their ability to obtain such coverage is uncertain, given that their practices are in every meaningful sense independent of each other.

Even assuming that attorneys X, Y and Z are “partners” in some sense (as co-tenants, insured parties, etc.,) they are not “practicing in a partnership.” The inquirer’s trade name must reflect the reality of his law practice, not the status of his office lease or insurance arrangements. Designating three largely independent law practices as an LLP will undoubtedly mislead the public.