After years of hard work, you decide it is time to close your law practice. Perhaps you are heading into retirement. Or perhaps you are taking a job where you cannot or no longer want to practice law.
Whatever the circumstances, you will need tips and suggestions for closing your law practice. This column offers 13 suggestions.
1. Determine your timeline. Before taking any formal steps to close your practice, you will need to decide if the timing is right. Perhaps outside circumstances – that dream job or judicial appointment, your health, or a final directive from your spouse – are forcing you into particular timing. If not, you should try to calculate how much time you want to continue to practice, and how long it will take to close your practice.
Factors to consider when assessing when to close your practice include your current revenues and retirement savings or post-practice income; your mental and physical health; any large, pending payouts; and how much more income you will need from your practice before you shut its doors.
You might consider discussing aspects of this decision with your family, financial advisor, and physician. At the end of the day, you will need to make the final decision about whether and when to close your practice, but you may find clarity or comfort in discussing the decision with others who are close to you and whose advice you trust.
2. Follow your timeline. Once you have a timeline, you will need to follow and fine-tune it. The rest of this article is intended to help you decide where to address specific needs in your timeline. The greatest problem many lawyers have in leaving practice, however, arises from the failure to actually work on and execute the plan they establish. They may be too busy with client matters, or perhaps reluctant to really say farewell to their professional life. Procrastinating in shutting down a practice can create a lot of problems, including extra stress from the forces that are pushing you to close your practice, as well as unwanted work and unnecessary emergencies. You will be well-served to develop a plan and then follow it.
3. Collect your accounts receivable. Some of your clients will congratulate you when they learn you plan to close your firm, and make sure that all accounts are settled. Unfortunately, others will see you closing your practice as an opportunity to avoid paying outstanding bills. Some may even congratulate you – and then try to avoid paying you.
To reduce the bad effect of a closure announcement, one of your first actions upon deciding to close your firm should be to collect all outstanding bills – before you tell people you are closing your firm. You should be diligent with your collection efforts, but remember that the legal ethics rules still govern your relationship with clients and former clients. Therefore, be polite, professional, and ethical in collecting unpaid fees. Keep in mind that your fees must all be reasonable – ABA Model Rule of Professional Conduct 1.5(a) and its limitation on reasonable attorney fees do not provide for an "I'm retiring" bonus or fee increase.
Also, you need to keep your clients informed regarding material developments in their matters under Model Rule 1.4(a), including material changes in how you are or intend to handle those matters. So, while there may be some benefit gained from delaying the announcement you plan to close your practice, you cannot wait too long or leave your clients in the lurch. Comment 7 to Model Rule 1.4 may be instructive, warning lawyers not to withhold information to serve the lawyer's own interests.
In addition, you will want to take particular care to avoid any action that may result in an ethics complaint or civil lawsuit, whether it is litigation of a claim or a counterclaim. Such proceedings can be sources of stress and distraction for a practicing lawyer. But for a lawyer leaving practice, they can be an even bigger source of irritation.
4. Announce your intentions internally. Once you have decided to close your practice, you will likely want and need to inform your closest and most trusted employees and assistants of your decision. This is particularly true where those people are relying upon you for their livelihood – and may need to find new employment. Also, you may want to discuss your office closure with your accountants and others who may be positioned to help you through the process of closing your office.
You can instruct your employees and assistants to keep the information confidential, but do not expect such confidentiality to last too long. Anyone who hears of your intention to shut your practice will probably have a confidante they will want to tell, and the more people who know, the more likely your secret will get out. Also, as people begin making their own preparations for your practice to close (perhaps by seeking new employment, or also preparing for retirement), observers may learn of or guess your intentions. You will therefore probably only want to tell people within and close to your practice when they need to know, to help shut the practice and to find new jobs. In the best possible scenario, you may be able to assist people in finding new employment. At minimum, you should offer to serve as a reference.
5. Announce your plan externally – and stop accepting new cases. After you have informed your staff about your intention to shut down your practice (yes, you should generally tell your staff first), you should also begin telling your clients that you intend to shut your law practice.
Plan what you intend to say, and whom you will want to tell first. Important clients should hear the message directly from you.
Also, if you are planning to sell your law practice (as discussed in an accompanying article) or otherwise transfer your clients to a new lawyer, educate your clients about this plan. Realize, of course, that your clients generally get final say in who will be their lawyer going forward. Very likely, the only thing you can tell your clients is that you will not be representing them in the future.
Once you have decided to close your practice, you will also want to stop accepting new matters. New matters will distract you from the large new matter you are taking on – the work of closing your practice.
6. Address insurance issues. You should contact your professional liability insurance carrier to discuss the closure of your law practice. Depending upon your practice and your insurer, you may be able to obtain a "tail" policy, which will give you a substantial period – usually several years – to provide notice to your professional liability insurer of new claims that arise from the legal work you did when still practicing, and to obtain insurance coverage on those claims.
Many policies have provisions that provide for you to purchase a tail automatically, perhaps at a premium determined from the insurance premiums you were paying while practicing. This may be adequate and relatively affordable coverage for you after your practice closes.
7. Digital subscriptions and databases. Many lawyers subscribe to online legal research services and cloud-based client file management services. You should contact these services to find out how to close your accounts. But keep in mind ABA Model Rule of Professional Conduct 1.15(a) generally require attorneys to keep all client files for a period of five years after termination of the representation. You may need to keep some files even longer, for example if the matter involves estate planning, you know the matter is still in litigation, or you have received notice of a potential malpractice claim.
You may need to discuss whether your client files can be retained by your cloud service or other computer provider even if you cancel your subscription, and whether you will be allowed to access files in the event a client requests them. If you need to continue to subscribe to the service in order to access your files, you might ask whether there is a reduced fee subscription available that will simply allow you to access your files.
8. Review your files. You should review all your existing matters to determine status and remaining steps to resolution. You may find that some of your matters cannot be resolved in the amount of time left before your firm closes. It will be important for you to decide which cases can be likely resolved by the closure date, and which should be referred to other counsel.
When conducting this analysis, you should be mindful that the Model Rules 1.1, 1.2, and 1.3 and your fiduciary duties require you to provide competent and diligent representation to your clients, and to ensure that you handle cases consistent with what you in your professional judgment believe is in the best interest of the client. It is not uncommon for lawyers to face claims they handled matters improperly if the client feels rushed into settlement, and then learns shortly thereafter the lawyer encouraging settlement had, without warning the client, already decided to retire before the settlement was reached.
9. Withdraw from any pending matters; notify tribunals. If you intend to cease your practice, you should make sure that you provide notice of this intent to any tribunals presiding over your client's matters. If you do not, the tribunal may expect you to take appropriate action upon receiving notice some action is required in the case. And the client may bring a malpractice claim should you then fail to act appropriately.
Electronic case management and docketing systems may help you identify any active case where you are still listed as counsel. You should then at minimum file notice that you are ceasing practice, even if the matter has been dormant for some time.
10. Address open and closed client files. One major issue for law firms is how to deal with client files, particularly closed client files. The open files should be relatively simple to address. You should ask your current clients whether they want you to return the file or transfer it to a new lawyer, and then follow their instructions.
Closed files may pose a much greater problem. Your firm may have decades – or perhaps even a century or more – of client files. Recently ethics rules have developed that allow lawyers to deem closed files abandoned after a certain period, and to then destroy those records. But your jurisdiction may not have such a rule, or it may not go far enough back in time, or you may realize former clients may need some of the information in their closed files. You may then need to seek out your former clients to obtain their directions for handling the files, or seek guidance from legal ethics authorities on what should be done with files where the clients cannot be located and no authority provides for the files' destruction. Finally, if you are going to destroy client files, make sure the file destruction is done thoroughly.
11. (Re-)reconcile and shut down your trust account. You should already be following the rules of professional conduct regarding your client trust account, but it will be extremely important for you to continue ensuring you are properly reconciling your client trust account in the months leading up to the closure of your practice and paying clients and third parties any amounts they are due. In addition, as you are closing your law practice, you will likely need to refund or transfer any funds that remain from advances clients have previously paid you to cover fees and expenses, so that you remain in compliance with Rule 1.16(d) and related fiduciary obligations relating to the safekeeping of client property.
If you are holding funds for clients or third parties you cannot locate, you may need to treat such monies as unclaimed funds, which may need to be paid over to your state's IOLTA program or a government agency. You should consult with the legal ethics authorities in your jurisdiction to ensure you satisfy your obligations with regard to such funds.
Finally, you will need to comply with requirements for preserving trust account records. Model Rule 1.15(a) requires attorneys to retain their trust account records for five years after termination of representation. You should consult your jurisdiction's rules to ensure you retain the appropriate records for the appropriate amount of time.
Mismanagement of client trust account funds is one of the most common charges brought by disciplinary counsel, so you may wish to consider speaking to ethics counsel regarding proper closure of your client trust account.
You also should be sure to reconcile and eventually close-out your business bank account. Fortunately, the money in this account should all be your money, so there are likely no legal ethics obligations that govern your actions. You should leave your business account open for a substantial period after your practice is closed, particularly if you receive credit card payments, to make sure you have a place to receive payments.
12. Forward mail and calls. You will want to make sure that phone calls to your firm's phone number do not go unanswered, in case former clients call you looking for copies of their client files or if some issue arises in a case in which you attempted to withdraw from. You might consider retaining your phone number for a year after your firm closes and have it forward to your cell phone. You will also want to make sure that any emails sent to your work email address are forwarded to your new email address, or that every sender receives an away message indicating that the firm has closed, along with your new contact information.
13. Cease practicing law – unless expressly allowed (and protected). Once you close your practice, you should cease practicing law, at least for pay. You will probably no longer have any professional liability insurance, so any mistakes may place your hard-earned (retirement) assets at risk. In addition, if you allow your law license to become inactive or lapse, you may be barred from practicing law – and face civil or even criminal liability should you engage in the unauthorized practice of law.
That said, some jurisdictions do provide for well-experienced and inactive lawyers to participate in certain types of pro bono programs, and some programs maintain liability insurance for their volunteers. Consult the applicable legal ethics rules to ascertain what you may or may not be permitted to do..
Conclusion. The closure of your law firm may happen one day, but it is certainly not a one-day activity. Planning ahead is a necessary step in satisfying all your ethical obligations. And it will help you tremendously as you embark upon the next chapter of your life – hopefully worry free, and proud of the law practice you built but left behind.
We used these resources in preparing this article, and you may also wish to consult them.
Plan Ahead for Closing a Law Practice Lawyers Mutual Liability Insurance of Company of North Carolina (Jul. 2016)