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A blog by members of the Wake County Bar Association/Tenth Judicial District Bar's Professionalism Committee members.

 

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Turning Out the Lights Part Three: Checklist for Closing Your Law Firm

Posted By Colleen Glatfelter, Thursday, October 3, 2013

By Brooke Ottesen and Deanna Brocker, The Brocker Law Firm, P.A.

Closing a law practice takes time and planning. The most important considerations, outside of ethical responsibilities, are to start early, create and utilize a timeline and checklist, and update it often. The process should ideally be implemented over a period of six months to one year.

Ensuring your clients and their files are taken care of should be a principal concern once you have made the decision to close your practice and have informed staff of your plans. Although individual circumstances will dictate how much time you have available, attempt to complete and close out as many clients as possible.

The following is a form checklist that you can modify to your particular circumstances:

For Closed Client Files:

o Determine if any inactive clients should be notified. If the file or client matter has been closed for more than six years, the file may be destroyed as long as client confidentiality is preserved. If six years or less, the files should be retained and the client notified how you will be storing the files and how the file may be retrieved.

o Create a record of all destroyed files.

For Remaining Active Clients and Files:

o Calculate any accounts receivables and try to collect the balances before making the announcement if possible.

o Prepare a letter for all active clients. Advise the clients about the termination of the representation; the status of their cases and any pending deadlines; the need to retain new representation, if necessary; and how to receive their files. Try to contact clients personally first, if possible, before sending the letter.

o Get the client’s prior consent, if you are planning to transfer any files to a new lawyer.

o Prepare and file withdrawal motions where necessary.

o It is a good idea to keep at least an electronic copy of all files.

o Determine if you may need to refund money to any of your clients, particularly in the case of flat fees designated as "earned upon receipt.”

o Resign from any fiduciary position held, such as administrator, executor, etc. that cannot be completed.

Banking and Accounting:

o Review accounts payable and contact vendors to arrange payment of bills.

o Check for fee sharing and fees owed to co-counsel.

o Reconcile and close trust and fiduciary accounts. Disburse funds held in your trust account to appropriate client or third parties with final accounting to the clients.

o Research current escheat law if you have unclaimed funds in your trust account.

o Notify the State Bar when the trust and fiduciary accounts are closed.

o Preserve the financial records for the appropriate period of time. Trust records must be maintained for six years.

o Determine if there is other non-cash client property being held that must be returned to the client.

o Determine a closure date for all other accounts.

o Terminate all bank account direct pay arrangements from the operating account.

o Determine which state and federal offices should be contacted.

o Discuss filing final tax returns with an accountant.

o Cancel any credit in the name of the business entity.

Insurance:

o Cancel all relevant insurance including office, liability, etc., but only after operations have ceased. Discuss the timing with your insurance agent.

o Determine need for professional liability tail coverage that would cover you for any malpractice claims that arise after you have stopped practicing for malpractice incurred while you were still practicing.

o Consider COBRA options for health insurance.

o Determine rollover options for retirement plan for you and staff.

o Determine if life and disability insurance may be rolled into a personal policy.

State Bar and Bar Associations:

o Call the membership department at the N.C. State Bar to update membership records with your status and any new contact information. You may submit a petition for transfer to inactive status, which must be received by December 31st to avoid dues for the following year.

o Contact all other associations and professional organizations to update membership records with your status and new contact information.

Equipment, Furniture, and Office Space:

o Scrub computers, digital copiers, and other electronic devices, including smart phones, of software and client information to ensure confidential information is not compromised.

o Consider how to dispose of equipment, furniture, and office supplies.

o Determine move date and arrange moving service.

o Coordinate with the landlord if rental space.

Misc.:

o Dissolve the business entity.

o Terminate all firm e-mails accounts and any social media sources.

o Consider setting up a static web page on your website with information on the closure of the firm and where client files are being stored.

o Cancel subscriptions and on-line accounts.

o Cancel vendor accounts including courier and express accounts.

o Cancel any advertisements by the firm and any legal directory listings.

o Determine whether a post office box is needed for post-dissolution mail.

o Disconnect utilities including phone. Determine whether the firm needs to maintain the number for a period of time with a recording that gives information regarding the dissolution and client files.

o Determine what disclosures should be made to employees concerning termination of employment.

This list is not comprehensive and does not cover every situation. Hopefully, it may serve as a starting point for building and completing your own checklist so you can be confident that when you turn off the lights, no one is left in the dark.


Tags:  Exit Planning 

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Turning Out the Lights Without Leaving Clients in the Dark

Posted By Colleen Glatfelter, Monday, July 1, 2013

By Brooke Ottesen,  Associate, The Brocker Law Firm, P.A.

Exit planning is a hot topic in North Carolina although we are certainly not the first state to tackle these issues. Keith Kapp, President of the North Carolina State Bar, called for the Bar to re-examine and improve our approach to both the beginning and the end of law practice. Despite this call to arms and recognition of a need for change in the legal profession, Warren Savage, a claims attorney with Lawyers Mutual, finds it surprising "how many lawyers avoid preparing for the inevitable end of their careers until after that end arrives at an unexpected time.” He says, "While legal careers will almost certainly end because of a career change, retirement, health, or death, a surprising number of lawyers reach that end without having considered and prepared for the recurring issues common to winding down a law practice.”[1] Therefore, exit planning appears to be both a big challenge for attorneys, as well as, an opportunity for improvement in the legal profession.

Exit strategies can encompass any one of a number of different scenarios:

(1) Winding down and closing the doors of the practice;

(2) Selling or merging the law practice; or

(3) Internally transitioning the law practice to another attorney in the firm.

Each strategy comes with its own challenges, and it takes time and commitment to successfully implement. Regardless of the road you choose, the key is to start early in developing your plan so your clients, your employees, and your family are protected.

Beginning in July and over the next few months, we will post a series of articles related to this issue. Each subsequent article will tackle a specific aspect of exit planning and succession such as practical checklists for winding down a practice, the ethics of turning out the lights, the sale or merger of a law practice, and expecting the unexpected. In the meantime, a great resource for attorneys interested in creating such a strategy is Turning out the Lights: Planning for Closing Your Law Practice, a publication of the North Carolina Bar Association. The Association published the procedural guidebook to help lawyers plan for untimely events that might necessitate the closing of a law practice. The publication is $27 and you can order online at http://www.ncbar.org/cle/bookstore/tol12.



[1] The Senior Lawyer Division of the NCBA Newsletter. "What to Expect When You’re Expecting to Retire,” Section Vol. 21, No. 2 (March 2013).

Tags:  Exit Planning 

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