Nothing is as intense and riddled with details as opening a practice—except, perhaps, closing the doors of that practice.
When nearing retirement, many lawyers choose to sell their practice, which is a good estate-planning move. (Helpful tip: lawbizregistry.com/site/ is a site that brings together buyers and sellers.) However, there are invariably some solo or small firm lawyers who, for various reasons, do not wish to sell or otherwise transition their practices as they approach retirement time. In addition, some lawyers will not be allowed to sell because they are in one of the few remaining states that do not permit it. For these attorneys, closing the practice outright may be the only practical alternative.
Closing a practice is such a complicated process that you should, ideally, allow six months to one year to accomplish the many tasks involved. Lawyers accustomed to the rush of meeting a 5:00 p.m. filing deadline at the courthouse tend to take for granted the weeks or months of effort required to reach that point in the case. The same thing is true of the time it takes to clean things up, tie up loose ends, and perform all actions necessary to close your own law practice.
Making sure that you do everything correctly and on time requires creating a timeline that includes descriptions of and completion dates for everything you need to do in the order in which you need to do them. Your timeline must, at a minimum, include the date that you decide to close the practice, the date that your current lease runs out, and the date that you would like to have all steps in the process completed. Establishing a timeline at the beginning and keeping it up-to-date as events unfold will help you focus your efforts and track the various elements of the closing.
Just as you announced your opening, you will announce your closing.
The first thing you need to do once you have made the decision to close your practice and have discussed the situation with your family is to inform your staff. You want them to hear the news directly from you because, as the employer, you owe them an honest answer about their continued employment. In addition, you will need some or all of your staff to help you close the office and communicate with current clients about the situation.
The next step is to notify present and past clients. You need to tell your current clients that you are closing your practice, that you will refer them and their matter to three qualified attorneys plus provide contact information for the local bar lawyer referral service, and that you need to know what they want done with their files. Furthermore, you need to tell your past clients—via certified mail, return receipt requested—that you are closing your practice, that you want them to pick up their files within 30 days, and that you will destroy their files if they do not retrieve the documents.
Furthermore, you need to notify banks, trustees handling clients’ trust accounts, insurance carriers, bar associations, suppliers, opposing counsel, courts, law schools, appropriate taxing authorities, publication providers, Internet listing services, retirees and COBRA participants, utility companies, the post office, and any others with whom you deal.
Finally, if your state requires you to place a public notice of the intent to close your business, put the how and when of the procedure on your timeline.
Financial Considerations Regarding Employees
You need to consider the incentives that you will offer important staff members to stay and help you close up your practice. You can negotiate with each one individually as to how many weeks’ wages you are offering and how long you are willing to pay for their medical coverage or other benefits. A severance package is not a requirement, but it will help with the hurt feelings of those who will be leaving the firm.
As an employer, you will need to comply with the laws and related policies regarding any pension or IRA monies you have put away for your staff. In addition, you need to be familiar with the continuing-medical-benefits laws under COBRA. Be sure that you are up to speed on these issues before telling staff about the closing so that you can pass out the appropriate information and discuss these issues with them at the right time.
As a lawyer, you will have professional responsibilities with regard to your clients when closing your office.
You must protect your clients’ interests and confidences by safeguarding their property. Familiarize yourself with the rules regarding keeping track of clients’ files, returning files to the clients, or destroying the files. Keep records of notices sent to clients to have proof of contact. In addition, file pleadings to close your practice and pass clients’ matters to other lawyers.
Make arrangements to store files for the period specified in your jurisdiction. Although your client notification letter may state that clients must pick up their files within 30 days, you should keep these files for two years—unless, of course, the rules of your jurisdiction require a longer storage period.
Finally, deal with unearned fees in client trust accounts and close out all trust accounts.
In addition to your professional responsibilities as a lawyer, you also have business responsibilities as the owner of a professional services firm.
Analyze your insurance policies—including malpractice, general liability, disability, and life insurance—to find out when coverage will end. You should familiarize yourself with their various notification requirements so that you can let each carrier know when to cancel the policy or which policies to change due to your changed circumstances. To protect your retirement assets, you should consider an insurance policy called an “extended reporting period endorsement” or a “tail” policy, which covers any claims brought against you after you retire for acts that happened prior to your retirement.
In closing your practice, you are ending the traditional cycle of incurring debt in order to cover your operating costs and other expenses involved in the practice. Thus, you must either pay or negotiate an extension or settlement of all outstanding debts with creditors.
You need to consider your real estate. If you rent, you should arrange to terminate your lease and storage space. However, although you don’t want to pay your lease or storage space fees for any longer than necessary, you do want to leave yourself enough time to wind down your practice without rushing things. If you own your space, you should make a decision about whether and when to sell or rent it.
Other business assets must be considered, too. When the appropriate time comes, take control of all business assets, which includes getting equipment, keys, client directories and other client-related materials, and other business assets back from departing employees and any other third parties.
You will need to decide whether to sell, give away, or throw away office equipment, furniture, computers, books, etc.
Learn about the tax rules and requirements involved in closing your business. Talk with your accountant about the specific requirements for filing state and federal tax returns.
Last, but not least, complete all billings; you may want to hire a collection agency to collect old, overdue accounts.
The details associated with closing a practice are numerous. This article offers guidelines, but for more specifics, see my book Life After Law: What Will You Do with the Next 6,000 Days? Moreover, it is important to note that each lawyer’s situation will be unique, and lawyers are governed by differing rules of professional conduct based on their jurisdictions. Lawyers should familiarize themselves with all rules applicable to their particular situations.
Don’t forget the most important point, though: enjoy your retirement!