X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
You’re a solo practitioner in the District with a lucrative practice. Yet you’re getting on in years and are considering retirement. What are your options? Less than 15 years ago, you had only two choices: You either brought another lawyer into your practice to eventually take it over, or you folded your tent and retired. Today, a third choice is available: You can sell your practice. Lawyers have always been permitted to place on the selling block any physical assets of their practice � for example, buildings, furniture, books, computers, and the like. Yet the practice of law is not only a business but also a profession. The notion that the so-called good will of a lawyer’s practice � its reputation, patronage, and other intangible assets � can be considered a vendible commodity is a relatively recent development. Why has the selling of a law practice � once unthinkable � come to be allowed? There’s a growing consensus among solo and small firm practitioners � who make up approximately 63 percent of the nation’s practitioners, according to American Bar Association estimates � that the shift in attitude is long overdue, that a long-standing inequity has been corrected. Lawyers in large firms “have always had mechanisms in place that provided them and their heirs with funding for the value of their interests in the larger firm,” writes Venice, Calif.-based lawyer Edward Poll in an article that first appeared in Los Angeles Lawyerand is now reprinted on his Web site, www.lawbiz.com. “Allowing small firms and sole practitioners, and their heirs, the opportunity to reap the rewards of years of effort in building a valued reputation from delivery of quality legal services levels the economic playing field in considerations for retirement and estate planning,” adds Poll, who as principal of Edward Poll & Associates Inc. now consults with lawyers who are looking to sell or buy practices. Poll, the author of The Tool Kit for Buying or Selling a Law Practice,perhaps the only book on the subject, says, “When a lawyer gets a divorce, the court assigns a value to his practice. Yet if you can’t sell, it has no value.” The California Supreme Court in 1989 approved a rule of professional conduct that, for the first time, allowed the sale of the goodwill aspect of a dead lawyer’s practice by a surviving spouse or an estate. Writing in GPSolo,the magazine of the ABA’s General Practice, Solo, and Small Firm Section, Robert Ostertag, a partner at Poughkeepsie, N.Y.’s four-lawyer Ostertag O’Leary & Barrett, writes, “California’s approval of the sale of law practices did not occur accidentally. While the impetus for such a rule existed within the state’s practicing bar, there also was a movement within the ABA . . . for such a rule.” Ostertag goes on to explain that two members of the ABA’s then-named General Practice Section helped write the California rule so that it was compatible with and could later be amended to the ABA Model Rules of Professional Conduct. Thus was born Model Rule 1.17, a 1990 amendment to the ABA’s Model Rules. While the original 1983 version of the Model Rules made no mention of the sale of a law practice, Rule 1.17 addresses the issue plainly � laying out the conditions for the sale of a practice. (See the linked article at the top of the page.) Last year, the ABA liberalized the rule to permit the sale not only of an entire law practice but also of just a practice area. According to Poll, the bar’s legitimate concerns about a buyer cherry-picking a seller’s files dictated that the entire practice area be sold. Under the amended Rule 1.17, if a lawyer wants to cut down on his work schedule, he can, for example, sell his estate planning practice, but hold on to his probate practice. The rule, however, will not allow the lawyer to accept estate planning clients again. Both Virginia and Maryland adopted variations of the ABA’s Rule 1.17. The D.C. Court of Appeals, on the other hand, has not adopted it. Ernest Lindberg, the D.C. Bar’s director of legal ethics, believes that the D.C. Bar’s Rules Revision Committee doesn’t think such a rule is necessary. “I don’t anticipate that they’ll ever consider adopting the rule.” Thus, a bar ethics opinion issued in December 1999 currently is, according to Lindberg, the “dispositive” authority. D.C. Ethics Opinion No. 294 states, “It is not unethical for a retiring lawyer (i.e., a lawyer withdrawing from the private practice of law in the locale in which the lawyer had been practicing) to sell his law practice to another lawyer, provided that he is able to terminate the representation of his clients in a manner consistent with Rule 1.16(d), that clients are suitably informed of the sale transaction and agree to the new representation, and that client confidences and secrets are preserved while negotiating the sale of the practice. Additionally, the purchasing lawyer may not charge a discriminatory fee to the retiring lawyer’s client.” So, now, free to sell your practice, how should you go about it? Poll says that before you can look for buyers, you must prepare your practice for sale. He suggests that you make sure that your practice is showing an increase in revenue, that systems are in place to allow the practice to go forward without your personal attention, and that all personal expenses have been curtailed. “The first thing you’ve got to do is evaluate the good will,” says Ostertag. He suggests that you approach a consultant, an appraiser, or an accountant to help you put a price on your practice and locate a buyer. When you approach a prospective buyer to discuss your practice, you have to be sensitive to potential confidentiality problems. Marcia Proctor, general counsel at Detroit-based Butzel Long, says you should approach discussions about your practice with a prospective buyer as if you were going to the bank to get a loan. Proctor, the former director of the American Bar Association Center for Professional Responsibility as well as the former general counsel for the State Bar of Michigan, says you should focus on financials � divulge information about, for example, receivables or, if you charge hourly fees, the number of hours you work each year. Proctor bemoans the fact that the need to sell a firm “frequently comes up by surprise.” It could be by bad news � an unexpected death � or by good news � an appointment to the bench. Yet if you’re unprepared, the tendency, she says, is to wrap up rather than transition. Says Reid Trautz, head of the D.C. Bar’s Lawyer Practice Assistance Program: “A solo lawyer ought to plan for a transition period � the longer the better.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.