![]()
Vol. 70, No. 5, May
1997
Question and Answer:
Limited Liability Practice
By Melvin McCartney
Q: Why would a sole practitioner
or small firm want to use a limited liability organization?
A: Limited liability organizations
are used primarily for business or tax reasons, wholly apart from professional
liability reasons. Some lawyers will use the LLP, LLC or S.C. for pension,
tax or health insurance purposes.
The LLP, LLC or S.C. does insulate the law firm owner, even a sole practitioner,
from general creditors of the firm provided only that the limited liability
organization form is used in all contracting. A creditor of the limited
liability organization firm usually can attach only the assets of the firm
and not the personal assets of the firm owner.
Limited Liability Partnership Teleseminar set
for June 3
State Bar CLE Seminars will offer the Limited Liability Partnership
teleseminar on June 3 from noon to 1 p.m. Attorneys Joe Boucher and Len
Sosnowski will bring participants up-to-date on the new Wisconsin Supreme
Court rule allowing attorneys to practice in limited liability entities.
If you haven't received a brochure on this teleseminar and want more information,
or to register, please call the State Bar at (800) 362-8096.
Wisconsin Limited Liability Company Handbook
is your source of complete information
This popular handbook, with forms on disk, will
teach you what you need to know to advise clients on when and how to use
LLCs. The handbook explains how you can take full advantage of the flexibility
permitted under the Wisconsin LLC statute - without losing the advantages
of pass-through tax treatment. The 1996 supplement adds a new chapter on
limited liability partnerships (LLPs). This 450-plus page book is $165.
For more information or to order, please call the State Bar.
Or Order Online Now! |
Q: How does the LLP, LLC or S.C.
limit the liability of the law firm owner for acts, errors or omissions
in providing professional legal services?
A: The limited liability organization
does not change the personal liability of an attorney from the attorney's
professional legal services negligence. Even with the use of an LLC, LLP
or S.C., a lawyer's personal assets are still exposed for his or her negligence
in providing professional services.
The entire assets of the firm (including malpractice insurance) are the
first assets at risk in the event of a professional liability claim. Next
are the personal assets of the negligent attorney if the firm's assets are
insufficient to cover the claim. Use of a limited liability organization
only protects the personal assets of nonnegligent attorneys in the firm.
Q: Will law firms that want to
use an LLP, LLC or S.C. change their insurance coverage limit because of
the new rule?
A: We expect that law firms reviewing
this subject will analyze their insurance limit needs. Most firms evaluate
the following criteria to determine appropriate levels of professional liability
insurance coverage:
1) What would the clients' damage or potential loss be if I messed up
their work? How large are the matters I and members of the firm handle?
2) What would the firm lose if its insurance limits were insufficient
to cover a claim?
3) What could the attorney(s) who worked on the matter lose from personal
assets if the malpractice insurance and firm assets were insufficient to
cover the loss?
Q: Do the new rules create any
risks for lawyers who supervise the work of other attorneys, or who act
in management capacities or on review committees (that is, a legal opinion
review committee) within the firm?
A: Lawyers have a continuing duty
to teach and supervise and to implement responsible programs to allow their
firms to serve clients; consequently, lawyers who are fulfilling these roles
within a firm may want to have some rights to indemnification or a sharing
of these risks with other owners of the firm. We expect many firms will
review their shareholder or partnership agreements in this light.
Law firms need to consider the emotional trauma and effects on the firm
should a successful malpractice claim be made against one member where the
insurance is insufficient to cover the amount of the loss.
|
Melvin McCartney, U.W. 1964, is president and chief executive officer
of WILMIC.
|
Q:
Under the new rule, will a multiple-member law firm designate
an attorney to be responsible for supervising the work product of employees?
Will there be a new duty to supervise the activities of firm employees or
the other firm owners because of the elimination of the general partner
liability concept?
A: We do not have answers to these
questions. But if a firm has adequate professional liability limits, questions
like this never may have to be answered. | 