Ethics Opinions

Opinion No 81-10

Summary: If a sole practitioner who employs others in the course of his legal business or a law firm has incorporated as a professional corporation, that status should be disclosed to clients and others with whom the practitioner or firm may come in professional contact where relevant.

Facts: A sole practitioner who has incorporated as a professional corporation pursuant to Chapter. 156A and filed the necessary certificates pursuant to S.J.C. Rule 3:06 (4) asks the following questions:
(1) whether his stationery and checks must indicate the corporate existence;
(2) how non-shareholder associates need be shown on stationery;
(3) whether clients need be advised of corporate status; and
(4) whether court or administrative agency appearances must disclose corporate status or existence.

Discussion: In Opinion No. 77-14 we advised that the partnership of A, B, and C could continue to practice under the name of A, B, and C even after it had incorporated as a professional corporation under the provisions of G.L. c.156A and what was then SJC Rule 3:18. We stated that the use of the former partnership name would imply that the group of lawyers so practicing together "would appear to the general public to be partners, or at least associated in some other way, with common personnel, files and business ties of some kind of another." We stated that in view of the lawyers' association as shareholders and employees of a professional corporation the representation involved in use of the former partnership name would therefore not be misleading.
With that view of the meaning of practice under the name, "A, B, and C," we then concluded that none of the restrictions on firm names contained in DR 2-102(B) and (C) was applicable: practice under a "trade name" was not involved; practice under a "misleading" name was not involved; and there was no holding out of a partnership, contrary to the fact. We were also assisted by the provision in DR 2-102(B) that a professional corporation "may" (not must) contain "'P.C.' or 'P.A.' or similar symbols 'indicating the nature of the organization.'" Implicit in that opinion was the notion that the statutory requirement that the corporate name of a professional corporation include "P.C." or some such similar designation did not preclude the professional corporation from using a firm name that did not contain such a designation.
Since the issuance of Opinion No. 77-14, the Supreme Judicial Court has issued its Interim Rules on Solicitation and Advertising. New DR 2-102 contains only a subparagraph (A), which reads:
A lawyer or law firm shall not knowingly use or participate in the use of a professional card, professional announcement card, office sign, letterhead, telephone directory listing, law list, legal directory listing, or a similar professional notice or device which includes a deceptive statement or claim.
Presumably, in replacing all the subparagraphs of former DR 2-102 with one new subparagraph (A), the Supreme Judicial Court intended that the former detailed regulation of firm names and all publicity with respect thereto should be governed by one test, that of deception. We therefore believe that Opinion No. 77-14, if originally correct, would not be affected by the disappearance of the language specifically referring to professional corporations' names from DR 2-102. The new "deception" test would be satisfied by our original conclusion that it is not misleading for a professional corporation to continue to practice under its former firm name.
The justification for our former Opinion No. 77-14 must have been that there is no reason for the public in general and specific clients in particular to know that they are dealing with a professional corporation. To the extent that Rule 3:06 preserves the individual attorney-client relationship intact and makes the existence of a professional corporation irrelevant to that relationship, such a conclusion would be warranted. Rule 3:06 does this to a very large extent. However, there is one respect in which Rule 3:06 does make it quite relevant for clients to know that they are dealing with a professional corporation instead of an individual or individuals. Rule 3:06(3) provides:
(a) Each shareholder of the corporation shall be personally liable for damages which arise out of the performance of legal services on behalf of the corporation and which are caused by his own negligent or wrongful acts, errors or omissions. Shareholders of the corporation whose acts, errors or omissions did not cause the damages shall not be personally liable therefor, whether or not they have agreed with any shareholders or employees or other persons to contribute to the payment of the liability, except to the extent provided in subparagraph (b).
(b) All the individuals who are shareholders of the corporation at the time of any negligent or wrongful act, error, or omission of any employee or employees of the corporation which occurs in the performance of legal services by the corporation and which results in damages to the person or persons for whom the services were being performed shall be jointly and severally liable for such damages, but only to the extent of the excess, if any, of (1) the sum of $50,000 plus the product of $15,000 multiplied by the number of employees of the corporation at the time of such acts, errors or omissions who are duly licensed by this court to practice law in the Commonwealth of Massachusetts and who are employed by the corporation as lawyers, but not in excess of $500,000 in the aggregate; less (2) the sum of the assets of the corporation which are applied to the payment of the liability and any amounts paid by the insurers in partial payment of the liability under policies of insurance issued to the corporation.

This formula for limiting a shareholder's liability for negligent or wrongful acts by employees and other shareholders is in contrast to the normal rule that would make all partners potentially personally liable for negligent or wrongful acts by employees, associates, and other partners, and a sole practitioner liable for such acts by his or her employees and associates. This limitation of liability might well be a matter of some consequence to clients and perhaps to others who have dealings with the corporation. We therefore believe that the proper application of DR 2-102 to this inquiry is that it would be deceptive to fail to disclose the fact of professional incorporation of the firm or of a sole practitioner who employs others in the course of his legal business to such persons. It may not always be clear whether persons other than clients have a sufficient interest in being given specific notice, but at the least general notice given to the public, through disclosure on stationery, office signs, professional lists, checks, and the like, is likely to make such persons aware of the firm's legal status. We therefore answer questions (1), (3), and (4) by advising that in our opinion disclosure is required. We answer question (2) by advising that the associate if listed at all on the stationery, not be listed in a manner to indicate that he or she is a shareholder in the professional corporation because Rule 3:06(3)(b) makes the number of persons in a corporation who are vicariously liable turn on their shareholder status.
The inquiring attorney has not asked about the status of a sole practitioner who does not employ others in the course of his or her legal business and we have not addressed that question.
It should be added that we have of course not addressed any questions relating to the advisability, under relevant tax laws, of adopting any particular name or of using that name or some other name in the normal course of business.


Permission to publish granted by the Board of Delegates, 1981. As stated in the Rules of the Committee on Professional Ethics, this advice is that of a committee without official governmental status.

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