Lawyers tend to form partnerships with the best intentions: they have found someone with common professional interests, they want to practice law their way, or they want to make a difference in their local legal community. And, presumably, they intend to practice in the firm for the foreseeable future.
But plans don’t always work out, and what was once a promising law firm can find itself headed toward dissolution.
Here’s what to do if you find yourself in the position of having to dissolve your law firm.
Have an Honest Conversation with Your Business Partner
Talk about why you, or your business partner, want to dissolve the law firm. Maybe you have different expectations about money or responsibilities, or maybe one of you wants to pursue a different career path. Regardless of the reason, ask yourselves the following questions:
- Do either of you want to keep practicing law?
- Do either of you want to take the clients?
- Is either of you interested in the business name?
Get on the same page with your business partner by having an honest conversation. Being honest and open up front will make the dissolution process go much more smoothly.
Take Stock of Your Emotions
Dissolving a law firm is not all that different from dissolving a marriage: you’re on your own again to figure out who you are and what to do. Sit with this for awhile to make sure you’re not letting your emotions rule your professional decisions.
Look to Your Operating Agreement
It’s Lawyering 101 to have drafted an operating agreement when you started your business. If you had the foresight to take this step, now is the time to revisit it.
- What does it say about who can dissolve the firm?
- Does it have to be in writing?
- Can one business partner buy out the other?
- What happens to your clients?
Review these provisions and follow them so that this step stays more business than emotion.1
Talk With Clients
Before all others, make sure to tell your clients you are dissolving your firm. Follow your local rules to wrap up, transfer, or withdraw from their cases. If you’re dissolving your law practice to open your own practice or head to another firm, and it’s within your rights under the operating agreement, ask clients if they want to come with you. Close them out of your old firm and get all their paperwork lined up under the new practice.
Notify Fellow Professionals
Let colleagues and referral partners know that you’re dissolving your business; you want to make sure people know not to send you more business. And this notification serves the dual purpose of either letting them know about a new venture, or letting them know you’re looking for work and would love some connections or leads.
Handle Your Finances
There are a lot of financial details when dissolving a law firm. This is another time to pay attention to your operating agreement or any pertinent statutes. It’s likely you will first need to pay any debts owed by the business and pay back contributions made by the partners. You will then need to tackle your bank accounts: make sure all checks have cleared; return any unearned trust funds; shred your checkbooks and bank cards. Make sure to also close all your bank accounts: checking, IOLTA, savings, lines of credit, etc.
Tackle the Administrative Details
Now is the time to take care of all the other stuff: take down your website (but keep copies), cancel business insurance, cancel malpractice insurance, decide how to split any property the business has acquired, close all business social media accounts, and close any financial accounts.
Alert the Authorities
If you’re in Minnesota, there are only two steps you have to take to officially dissolve your business.
- File your Articles of Dissolution with the Office of the Secretary of State.
- File your Certificate of Dissolution with the Office of Lawyers Professional Responsibility.
Make sure to check your state’s rules on officially dissolving a firm.
Finally, Make Your Peace
Don’t underestimate the gravity of this event. At some point, this business is what you wanted, where you saw yourself, and how you wanted to practice. Somewhere along the line, those goals could not be achieved, which makes it a loss. Maybe you parted amicably or maybe you didn’t; either way, appreciate the partnership for what it was, make your peace with it, and move on to the next part of your life.
Download the Checklist
Instead of relying on your memory, use our downloadable checklist to ensure that you properly dissolve your partnership.
Featured image: “finger art of couple” from Shutterstock.
If you were so busy celebrating your new business that you didn’t bother to draft an operating agreement, I would suggest staying friendly with your partner while trying to wrap things up; if that doesn’t work, head to mediation. ↩