When It's Time to Say "So Long..."
Published on November 4, 2009
From time to time I get calls from lawyers who are looking for information on shuttering their practices. Sometimes it’s for happy reasons, like appointment or election to a judgeship or a long-awaited retirement. Other times it involves a family relocation and, sometimes, small firms just don’t gain the traction they need to keep on keeping on, so the principals decide it’s time to move on to something else. Here are some thing to think about should you decide to close your practice.
- Consult with your tax advisor to discuss your plans and develop a strategy which will minimize your taxes in the event that you transfer assets to another lawyer or firm.
- If you are a solo practitioner, call the Office of General Counsel for an informal opinion on any plans you may have to transfer files or assets to another lawyer or firm. Although the ABA Model Rules of Professional Conduct and the ethics rules of several states now allow the sale of a law practice, the Alabama Rules of Professional Conduct do not. Make sure that any plans you have for referrals of ongoing cases meet the requirements of the rules.
- Once you have formed your plan and know your timeline, discuss your plans with your staff so that they will know what to expect. The more you can tell them about how much longer you will need their services and whether you can offer them a severance package and otherwise assist them in finding other jobs, the more likely they will be to stick with you to the end if you need them.
- Review your malpractice policy and contact your malpractice carrier to determine whether you need “tail” coverage. Purchase any necessary coverage.
- Review all open files and separate them into three categories: (a) Cases in which the client would be prejudiced if you were to withdraw; (b) Cases with short statutes of limitation; (c) Everything else. Then, either work through the matter, assist the client to find another attorney, or return the file to the client with appropriate instructions to ensure that the client doesn’t miss the statute of limitations or other deadlines, as is appropriate.
- Review all of your closed files and segregate any retained original documents or physical property such as wills, deeds, contracts, or evidence. Send a letter to all former clients telling them that you are closing your practice, informing them how they can contact you in the future, and offering their files to them. Give them a specific method to obtain the file and a time by which to do so, and notify them that if they fail to obtain their file that it will be destroyed in accordance with your file destruction procedure. Let them know how much longer you will retain the file if they fail to pick it up, and tell them that it will be destroyed after that date. Be sure to document all returns and destructions. See Formal Opinion RO-93-10 for more information.
- Perform a complete audit of your trust account and return all client or third party funds to the appropriate person or entity. This includes resolving any outstanding, uncleared checks.
- Diary your calendar to file all end of the year reports such as 1099 filings, tax returns, etc.
- Review your lease and take the steps necessary to terminate it early, if allowed.
- If you have leased any office equipment, review these leases and take the steps necessary to terminate them early, if allowed.
- Check the status of all quarterly, withholding, or other tax payments due, and make any unpaid payments.
- Send a letter to the judges and clerks in the counties in which you practice, notifying them that you are closing your practice. If you are on any appointment lists, ask that your name be removed or, if you will continue to accept occasional pro bono cases, let them know that.
- Send letters to all vendors with whom you have done business, canceling all subscriptions. Pay your account in full at this time, if possible, and specifically notify them not to send you any further updates, books, or supplies.
- File the appropriate forwarding instructions with the Post Office to make sure that mail sent to your office address is forwarded to your post office box or, if you don’t have one, to your home address. Forwarding orders are good for six months, so diary the expiration date and make sure that you renew the forwarding order for an additional six months. If you have an office post office box, plan to keep it for at least one year after you close your practice.
- If the service is available in your area, when you cancel your phone service reserve your telephone number and have it directed to a voice mail box. This is much cheaper than the monthly rate for a business line, and will allow you to retrieve your messages and return phone calls. Plan to keep this service for at least a year after your close your practice. If this service is not available, try to have your calls directed to another number or consider retaining one line with voice mail for six months to one year after you close the practice.
- Make up cards with your name, forwarding address and phone number, and leave them with your office neighbors and, if possible, the new tenants of your space so that they can help former clients find you if necessary.
- Consider giving any office furnishings or equipment which you cannot sell to charity and take a deduction. Remember that confidentiality must be maintained at all times, so consider removing hard drives from computers if you are not confident that all client information has been deleted and cannot be recovered.
- At the end of the fiscal year when you receive your municipal business license renewal form notify the licensing authority of the date on which you closed your practice.
- Notify all professional organizations and associations of which you are a member of the closing of your office and your contact information.
- Notify the Alabama State Bar and the Administrative Office of Courts of the closing of your practice and of your new address, and diary your calendar to file your CLE report for your final year of practice. This report must be filed by January 31 of each year if you held a regular license to practice at any time between October 1st and December 31st of the previous year and were not a new admittee.
- When time comes for your license renewal, if you do not wish to renew as a Special Member, notify the State Bar in writing that you wish to be voluntarily inactive so that you will not be classed as “not in good standing” due to non-payment of dues. Maintaining a special membership is a good idea if you think you might ever wish to practice law in Alabama again. At the present time there are no remedial CLE or testing requirements to re-activate your license, but that could change at any time.