Can a Wisconsin law firm incorporate as a service corporation, and how must its name and any profit-sharing plan be handled?
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This page answers the general question as of 1962. Ezel answers yours: whether it's allowed on your facts, under the current rules of professional conduct in your state, with citations.
Plain-English summary
Informal Opinion 1/62 addressed lawyers carrying on the practice of law as a corporation for federal tax purposes, following the passage of Chapter 350, Laws of 1961. The committee had resolved to withhold official action pending the release of ABA Opinion 303 and stressed that it expressed no opinion on whether any federal tax advantage could be gained, nor on the advisability of adopting the corporate form.
On the merits the committee members were in accord with the ABA opinion that lawyers rendering legal services must be personally responsible to the client, as required by Canon 35 of the Canons of Professional Ethics. They subscribed to the ABA committee's discussion of limited liability, centralized management, continuity of life, and transferability of interests, and gave a special warning that under Canon 34 it is ethically improper for lawyers to join in a profit-sharing plan that includes nonlawyers as beneficiaries; it remains proper to pay nonlawyer employees out of fees, presently or on a deferred basis. The opinion summarized that the substance, not the form, of the entity controls, and noted that DR 2-102(B), DR 3-102(A), and DR 5-107(C) would give the same result.
On the firm name, the opinion stated that a law corporation may not have a name offensive to the Canons; the firm name should remain the same, with Chapter 350's requirement that a corporate designation be attached. The Act required the corporate name to end with "Chartered," "Limited," "Service Corporation," or "S.C.," and the name must not be misleading or deceptive.
Currency note
This opinion was issued in 1962, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it applied the former Canons of Professional Ethics (Canons 34 and 35) and the Code of Professional Responsibility (DR 2-102(B), DR 3-102(A), DR 5-107(C)). The current counterparts addressing professional independence and fee-sharing with nonlawyers are SCR 20:5.4 / Model Rule 5.4, and firm-name limits now sit in SCR 20:7.1 / Model Rule 7.1. 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: Could Wisconsin lawyers practice through a service corporation under Chapter 350?
A: The committee did not formally bless or condemn the corporate form; it withheld a formal opinion pending ABA Opinion 303 and conveyed only its members' thoughts, stressing that substance, not form, controls and that each lawyer and the corporation must observe the Canons.
Q: Did incorporating change a lawyer's responsibility to the client?
A: No. The opinion agreed with the ABA that lawyers rendering legal services must remain personally responsible to the client, as required by Canon 35.
Q: Could a nonlawyer be included in the firm's profit-sharing plan?
A: No. The opinion gave a special warning that, under Canon 34, it is ethically improper to include nonlawyers as beneficiaries of a profit-sharing plan, though paying nonlawyer employees out of fees, currently or on a deferred basis, was proper.
Q: What did the firm's corporate name have to show?
A: The name had to add a corporate designation required by Chapter 350 ("Chartered," "Limited," "Service Corporation," or "S.C."), could not be offensive to the Canons, and could not be misleading or deceptive.
Background and rules framework
The opinion rested on the former Canons of Professional Ethics (Canon 34 on division of fees and Canon 35 on the lawyer's personal responsibility) and noted parallel Code provisions DR 2-102(B), DR 3-102(A), and DR 5-107(C). The current counterparts are SCR 20:5.4 / Model Rule 5.4 (professional independence; restrictions on sharing fees with and forming partnerships with nonlawyers) and SCR 20:7.1 / Model Rule 7.1 (firm names and communications that must not be false or misleading).
Citations and references
Rules of Professional Conduct:
- Model Rule 5.4 / SCR 20:5.4 (professional independence; fee-sharing with nonlawyers); former Canon 34, DR 3-102(A), DR 5-107(C)
- Model Rule 7.1 / SCR 20:7.1 (firm names; false or misleading communications); former DR 2-102(B)
Other opinions cited:
- ABA Formal Opinion 303 (propriety of practicing law in corporate form): the committee withheld formal action pending its release
See also
- WI Ethics Op. E-76-10: "And Company" in a Firm Name
- WI Ethics Op. E-84-4: Division of Legal Fees With a Layperson
Source
- Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
- Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/I-1-62.pdf
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