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Law Firm Governance
In recent
years, law firms have been organized as limited liability corporations,
professional corporations, or limited liability partnerships,
in addition to the traditional partnership arrangements. The
selection of organizational structure has a direct impact on
the liabilities and responsibilities of its workforce, particularly
at the senior-most levels. Therefore, selecting an organizational
structure requires consideration of a variety of factors, including
the relative rights of the owners during the association and
in the event of a breakup, and the effects on associated lawyers'
obligations to each other and their clients.
Alternatives notwithstanding, partnership remains the organizational
form of choice for lawyers associated in law practice. Under
the Uniform Partnership Act of 1914, which 49 states have adopted
with surprisingly little variation, a partnership is an aggregate
of their members rather than a distinct legal entity. This distinction
is important as law firms are experiencing a trend of heightened
employee mobility, even at the partner-level and with entire
practices moving to open new offices or to join already established
firms seeking additional legal expertise. Such movement between
firms has created controversies that frequently are litigated
particularly when a partnership agreement failed to address
the various scenarios involving the withdrawal of partner(s)
from the firm.
Partnership agreements must take into account the possibility
of dissolution. "Dissolution" is a term of art under the Uniform
Partnership Act and a pivotal concept governing the consequences
of a partner's withdrawal. Following dissolution, the partnership
continues until it completes the winding up of partnership affairs.
Unless the dissolution was wrongful or the partners have agreed
to the contrary, each partner has the power to compel a liquidation
of partnership assets. No partner is entitled to compensation
for winding up the partnership affairs. If the non-dissolving
partners continue the business after dissolution, they do so
through a new partnership. Entity treatment of partnerships,
however, would preserve the original partnership even in the
case of a withdrawal.
Our attorneys are experienced in assessing organizational options
and preparing the necessary incorporation or partnership agreements
that anticipate and plan for issues a firm will likely face
during its lifetime -- from creation to inclusion of new partners
to expansion into new jurisdictions to retirement or departure
of partners. We are also experienced in defending law firms
when their agreements are challenged or the firm dissolves contentiously.
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