Can a licensed lawyer own stock in a law firm professional services corporation without being an employee or a practicing shareholder?

Plain-English summary

The inquiry concerned a lawyer owning stock in a law firm organized as a professional services corporation, where that lawyer is not an employee of the corporation and does not practice law as a shareholder of it.

The committee first noted that its rules do not permit it to respond to inquiries that ask legal questions, and that it could not answer the question about the purchase of shares because it believed that question was a legal one. The committee then stated that, in its opinion, there do not appear to be any RPCs which prohibit a duly licensed lawyer from owning shares in a professional services corporation with which he is neither practicing law nor an employee. The committee added that its response was premised on the information contained in the inquirer's May 7, 1998 letter.

Currency note

This opinion was issued in 1998, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. The opinion did not cite a specific RPC; the professional-independence and firm-ownership rules (ABA Model Rule 5.4 and Washington's RPC 5.4) have since been amended, so verify current rules before relying on this opinion.

Common questions

Q: Can a lawyer passively own shares in a law-firm professional services corporation?

A: The committee stated that no RPCs appear to prohibit a duly licensed lawyer from owning shares in a professional services corporation with which the lawyer is neither practicing law nor employed.

Q: Did the committee fully answer the share-purchase question?

A: No. The committee said the question about the purchase of shares was a legal question it could not answer, and limited its response to noting the absence of any RPC prohibition.

Background and rules framework

The opinion did not cite a specific Rule of Professional Conduct. The committee distinguished the legal question about purchasing shares (outside its charter) from the ethics question, and concluded that no RPC appeared to prohibit a duly licensed lawyer from holding passive shares in a professional services corporation at which the lawyer neither practices nor is employed.

Citations and references

Rules of Professional Conduct:

• The opinion did not cite a specific Rule of Professional Conduct.

See also

• WA Ethics Op. 1830: Splitting Fees Across Firms
• WA Ethics Op. 1816: Paralegal-Run Branch Office
• WA Ethics Op. 1812: Referral Fee After a Conflict

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1021

Original opinion text

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

Advisory Opinion: 1828
Year Issued: 1998
RPC(s):
Subject: Division of fees; Lawyer owning stock in law firm personal services corporation when neither employee or shareholder of firm

The Committee researched and reviewed your inquiry concerning a lawyer owning stock in a law firm organized as a professional service corporation when that lawyer is not an employee of the corporation and does not practice law as a shareholder of it and determined the following:

The rules of the RPC Committee do not permit the Committee to respond to inquires that ask legal questions. We cannot respond to your question regarding the purchase of shares because we believe that it asks a legal question. We can state that, in our opinion, there do not appear to be any RPCs which prohibit a duly licensed lawyer from owning shares in a professional service corporation with which he is neither practicing law nor an employee. This response is premised on the information contained in your May 7, 1998 letter.