Can a Texas lawyer form a limited liability partnership with nonlawyer professionals like engineers and accountants to share revenue from common clients?

Plain-English summary

The question (PEC No. 93-3) was whether a Texas attorney could establish a registered limited liability partnership (LLP) with nonlawyer licensed professionals, under which the attorney and the other professionals would share contiguous office space and share expenses, overhead, and revenue from common clients. The proposing attorney had a transactional business practice and wanted to add professional engineers, accountants/bookkeepers, and land-services providers as partners to complement that practice.

The Committee started from the point that the Disciplinary Rules do not prohibit a lawyer from sharing office space and expenses with nonlawyers, so long as the lawyer complies with the other rules (confidentiality under Rule 1.05, the conflict rules 1.06, 1.07, and 1.08, and the communication rules 7.01 through 7.04). The problem was the proposed partnership and fee-sharing.

The Committee concluded the arrangement was barred on two independent grounds. First, Rule 5.04(b) provides that a lawyer shall not form a partnership with a nonlawyer if any of the partnership's activities consist of the practice of law; because the proposed LLP would be a type of partnership and one of its activities would be performing legal services, the lawyer would violate Rule 5.04(b). The Committee noted that the legislation authorizing LLPs did not modify this rule. Second, Rule 5.04(a) bars a lawyer from sharing legal fees with a nonlawyer, and the proposed arrangement would share legal-services revenue with nonlawyers, so it would violate Rule 5.04(a) as well. The Committee added that the nonlawyers being licensed professionals in their own fields did not make the arrangement permissible.

Currency note

This opinion was issued in 1994, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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 Treat this page as historical context, not current guidance.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 form an LLP with nonlawyer professionals if the partnership provides legal services?

A: The Committee concluded no. Rule 5.04(b) bars forming any partnership with a nonlawyer if any of the partnership's activities consist of the practice of law, and an LLP is a type of partnership.

Q: Did the statute authorizing LLPs change the rule?

A: The Committee concluded it did not. The legislation authorizing the establishment of LLPs did not modify Rule 5.04(b).

Q: Does it matter that the nonlawyer partners are themselves licensed professionals?

A: The Committee concluded it does not. Sharing legal-services revenue with nonlawyers violates Rule 5.04(a), and the fact that the nonlawyers are licensed in their own fields did not make the arrangement permissible.

Q: Could the lawyer at least share office space and expenses with the nonlawyer professionals?

A: The opinion notes the Disciplinary Rules do not prohibit sharing office space and expenses with nonlawyers, provided the lawyer complies with the confidentiality, conflict, and communication rules; the bar was on partnership and fee-sharing, not on shared space.

Background and rules framework

The opinion interprets Texas Disciplinary Rule 5.04 (professional independence of a lawyer; ABA Model Rule 5.4), specifically subsection (b), which prohibits a lawyer from forming a partnership with a nonlawyer if any of the partnership's activities consist of the practice of law, and subsection (a), which prohibits a lawyer or law firm from sharing or promising to share legal fees with a nonlawyer. The opinion also lists the rules a lawyer who shares office space with nonlawyers must still observe: Rule 1.05 (confidentiality), Rules 1.06, 1.07, and 1.08 (conflicts), and Rules 7.01 through 7.04 (communications about a lawyer's services).

Citations and references

Rules of Professional Conduct:

• MR 5.4 (professional independence of a lawyer)
• Texas Disciplinary Rules 5.04(a) and 5.04(b); also referencing Rules 1.05, 1.06, 1.07, 1.08, and 7.01 through 7.04

See also

• TX Ethics Op. 498: A Salaried Lawyer at a Nonlawyer-Owned Corporation
• TX Ethics Op. 502: Remitting Fees to a Nonprofit Lawyer Referral Service
• TX Ethics Op. 503: Sharing Court-Awarded Fees With a Nonprofit Referrer
• TX Ethics Op. 508: A Firm Leasing Its Lawyers From a Leasing Company

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-493/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_493.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative. A dash separating two phrases in the statement of facts appeared in the source as an unreadable encoded character; it has been restored as a hyphen.

QUESTION PRESENTED

[PEC No. 93-3]
Do the Texas Disciplinary Rules of Professional Conduct permit a Texas attorney to establish a Texas Registered Limited Liability Partnership ("LLP") with persons who are not licensed attorneys but who are licensed professionals in their fields under which the attorney and the other licensed professionals would share contiguous office space and share expenses, overhead and revenue from common clients?

STATEMENT OF FACTS

A licensed Texas attorney with a private practice focusing on business related areas (transactional matters-contracts, property, oil and gas) wishes to expand the range of services offered to clients. The attorney proposes to establish an LLP with professional engineers, accountants/bookkeepers and persons providing land related services who would be expected to complement the attorney's practice. It is proposed that the attorney and these professionals, as partners in the LLP, would share contiguous office space and share expenses, overhead and revenue from common clients.

DISCUSSION

The Texas Disciplinary Rules of Professional Conduct (the "Disciplinary Rules") do not prohibit an attorney from sharing office space and expenses with non-attorneys. An attorney in such arrangement is required to comply with all requirements of the Disciplinary Rules, including but not limited to the rules requiring preservation of clients' confidential information (Rule 1.05 [FN1]), rules prohibiting conflicts of interest (Rules 1.06, 1.07 and 1.08), and rules restricting communications concerning a lawyer's practice (Rules 7.01, 7.02, 7.03, and 7.04).

However, Rule 5.04(b) provides that "[a] lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law." This rule was not modified by the enactment of legislation authorizing the establishment of LLPs. Since the proposed LLP would be a type of partnership and one of the activities of the partnership would be the performance of legal services, a lawyer would violate Rule 5.04(b) by entering into an LLP arrangement with non-lawyers.

Moreover, any arrangement that involved sharing legal services income with non-attorneys would violate Rule 5.04(a), which provides, with exceptions not here relevant, that "[a] lawyer or law firm shall not share or promise to share legal fees with a non-lawyer. . . ." Since the proposed arrangement would involve the sharing of fees for legal services with non-lawyers, the lawyer would violate Rule 5.04(a) by entering into such an arrangement. The fact that the non-lawyers in the arrangement are professionals subject to the licensing requirements of their professions would not make the arrangement permissible for the lawyer.

Under the Disciplinary Rules, a lawyer may not establish an LLP or other partnership with one or more non-lawyer professionals if one of the activities of the LLP or other partnership would be to provide legal services. In addition, a lawyer may not enter into an arrangement under which fees for the lawyer's legal services would be shared with non-lawyer professionals with whom the lawyer shares office space and expenses.

FN1 All citations to Rules are to the provisions of the Texas Disciplinary Rules of Professional Conduct as currently in effect.

CONCLUSION

Under the Disciplinary Rules, a lawyer may not establish an LLP or other partnership with one or more non-lawyer professionals if one of the activities of the LLP or other partnership would be to provide legal services. In addition, a lawyer may not enter into an arrangement under which fees for the lawyer's legal services would be shared with non-lawyer professionals with whom the lawyer shares office space and expenses.

Tex. Comm. On Professional Ethics, Op. 493 (1994)