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For many law firms, switching over to a limited liability partnership didn’t come without its share of uncertainty, internal haggling, even predictions of a client backlash. But five years after Connecticut’s LLP law took effect, all the fuss seems to have been for nothing. Clients, according to Greenwich, Conn., solo Mark Pruner, have paid little if any attention to the combination of letters — LLP, LLC, PC — that have cropped up at the end of firms’ names over the years as they have reorganized under laws intended to prevent their partners from being personally liable for their fellow partners’ negligence or misconduct. That wasn’t the view shared by many attorneys when the LLP statute was enacted, said Pruner, who authored a book on Connecticut limited-liability corporations published by The Connecticut Law Tribune. “There was a fair amount of concern that [switching to a limited-liability form of ownership] would be seen as being disloyal to your clients,” Pruner recalled. TAKING THEIR OWN ADVICE David A. Swerdloff, a corporate lawyer at Day, Berry & Howard’s Stamford, Conn., office, said some of his partners expressed similar worries about creating an impression that the firm didn’t stand behind its lawyers’ work. “That proved to be a non-issue,” maintained Swerdloff, whose firm has since made the switch without regret. Indeed, after prodding corporate clients to take advantage of the protections offered to LLPs or LLCs, Shipman & Goodwin tax partner Louis B. Schatz said, “clients would think we were remiss if we did not give ourselves the benefits of the same advice.” Equally unproven, Swerdloff said, was the concern that partners in an LLP would shy away from handling litigation or transactions where huge amounts of money were at stake. Though the LLP law protects partners’ personal assets from malpractice claims stemming from another partner’s acts, it does not shield partners from their own negligence or that committed by anyone under their direct supervision. But the prediction that partners would shrug off high-stakes assignments for fear of being left to fend for themselves if something went wrong “never came to pass” at DBH, according to Swerdloff. Far more repellent was what many firms considered to be a serious defect in the LLP law as initially drafted. The statute’s original language protected partners from their colleagues “negligence, wrongful acts or misconduct,” but did not mention claims arising from contracts, thus affording plaintiff’s lawyers with the opportunity to potentially recast a malpractice claim as a breach of contract. In such a case, LLP protections would not apply. Once state lawmakers rewrote the provision, Shipman & Goodwin became the first major firm in Connecticut to convert to an LLP, according to Schatz, whose specialty is setting up companies under limited-liability forms of ownership. LLP OR LLC Many firms followed Shipman’s lead. The 2000 edition of Martindale-Hubbell lists 83 legal outfits in Connecticut as being LLPs. A slightly larger number are LLCs, but most of the state’s largest firms, including Hartford-based Shipman, DBH, Murtha Cullina, Pepe & Hazard and Halloran & Sage, Waterbury’s Carmody & Torrance and New Haven-based Tyler Cooper & Alcorn, fall into the LLP camp. Connecticut businesses have been able to organize as LLCs since 1993. But both designations were intended by lawmakers to offer identical liability protections, according to Schatz. LLPs and LLCs also are treated identically for tax purposes, he said. For brand new firms, it’s a pretty even split between those that choose to become LLCs rather than LLPs, according to Schatz. But for established ones, converting into an LLP is a far more common route “because it will cause the least amount of disruption,” he maintained. By switching to an LLP, Schatz noted, firms do not have to renegotiate their partnership agreements, whereas, in converting to an LLC, firms must draft new operating agreements, thus putting touchy subjects, such as partners’ compensation and mandatory retirement ages, to renewed debate. Pruner said the decision also is partly psychological. In an LLP, partners are still referred to as “partners.” In an LLC, they’re technically “members” of the firm. “You still hear people talk about making partner. You never hear about people making member,” said Pruner. For Stamford-based Cummings & Lockwood, however, the LLP statute only came about after it had transformed itself into a general partnership of professional corporations. Under that form C&L partners have liability protection similar to partners in an LLP, Giuliani said. What the firm doesn’t have, he conceded, is the ability to flow revenues from one calendar year to the next without suffering tax penalties.

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