Over the past few months I have been helping three sole owners of law practices develop succession plans. They have presented some unique challenges as I help them. I have found that when I help attorneys develop their succession plans, each situation has its unique issues that must be considered. Timing for implementing a plan and retiring varies with each attorney. One of these attorneys contacted me last October and told me, “Don, I want to retire at the end of 2018.” Another attorney was in his late 50s and didn’t want to slow down until he turned 65, but he wanted to get a plan in place by mid-2019. The third attorney was 77 and wanted to develop a plan so he could retire in a few years.
The timing issue also influenced the shaping of the succession plans and what role the succeeding attorneys would play. The attorney who wanted to retire soon wanted to sell his practice as quickly as possible to one of his associates he had worked with for more than 10 years. I’ll share more later in this article about the challenge in selling a practice by a sole owner. The attorney who didn’t want to slow down for several years wanted to make a key associate a partner in mid-2019. The other attorney wanted to bring in a middle-aged attorney as an associate, make her a partner in a year or two, with the sole owner moving to an of counsel role for a year or so and then retiring.
While each of these attorneys had unique issues to take into account, there were also similarities. Each attorney had identified his or her successor. Most senior attorneys that I work with have not identified a successor. My role is usually as a “matchmaker” or “broker” by bringing opportunities and attorneys together.Another similarity of these three attorneys is that they needed and wanted my help in developing and implementing a succession plan. They had questions about how to do this and just needed some guidance. I met with each attorney and asked them a series of questions to better understand what they wanted to do and their timetable. Each of them wants to continue their legal legacy and protect the jobs of their loyal staff. They know that a lot is on the line, and they need to be guided through a process to accomplish what they want.
These three attorneys also needed the assistance of competent attorneys who could draft appropriate legal documents that would implement their succession plans. When I was thinking about offering my services to help attorneys develop succession plans, I had to figure out what my role would be. As attorneys, we know that we can’t represent both parties. But, if I was going to be a “matchmaker” or “broker” by bringing opportunities and attorneys together, would I be violating a key principle in our Rules of Professional Conduct? Rule 5.7 provided my answer as to how to position myself and represent my services as “law-related services.” I make it clear in my engagement agreements that I am an attorney and the services I will provide are not legal services, but law-related services, and that the Rules of Professional Conduct that relate to the client-lawyer relationship do not apply. But I agree to keep the details of their law practice and succession plan confidential unless the attorney agrees to their disclosure. This is one of the reasons I became a partner in Harrison & Moberly. I have access to excellent attorneys who regularly help businesses develop succession plans. While my niche is law practice succession plans, there are similar legal documents in business succession planning that are needed to implement law practice succession plans – e.g., operating and partnership agreements, forming an LLC, LLP or PC, unit purchase agreements, buy-sell agreements, of counsel agreements and merger agreements.
If appropriate, I encourage attorneys to obtain an appraisal of their law practice, consult with their CPA regarding potential tax issues and life insurance agents who can provide life insurance options for buy-sell agreements. I also encourage them to keep their professional liability agents in the loop regarding their succession plans.
One of the unique issues that sole owners of law practices face is RPC Rule 1.17. In an outright sale of a law practice, Rule 1.17 requires the selling attorney to give written notice to each client of the proposed sale that includes an explanation of the client’s right to retain other counsel or take possession of their file. I recommended a two-step process to the attorney who wanted to retire soon. First, he should sell an interest in his LLC to his associate attorney now. Second, several months later, sell the remaining interest in his LLC. Between steps one and two, he would be able to slow down and allow his new partner to manage the practice and transition clients so he could fully retire when step two happens. I believe that this two-step process comports with the letter and spirit of Rule 1.17. This senior attorney gave notice to his clients about what changes would be taking place. Since these clients had been working with this associate, they continued to be clients of the law firm.
While these three attorneys’ succession plans are currently being implemented, I follow the adage attributed to the late Yogi Berra, “It ain’t over ’till it’s over.” I will stay engaged with these attorneys and help them fully implement their plans and deal with new issues as they arise.•
• Don Hopper is founder of Hopper Legal Consulting Services and a partner at Harrison & Moberly LLP. His focus is serving solo and small law firms in developing law practice succession plans that will continue their legal legacies in their Indiana communities. The opinions expressed are those of the author.