Law Firm Dbas: California's Unique Rules And Regulations

In California, a law firm cannot be opened as an LLC; instead, it must be registered as a Professional Corporation. This means that a law firm in California can have a DBA or fictitious name, but it must first obtain a permit from the State Bar of California and pay a fee. The use of trade names by attorneys was permitted following the repeal of former rule 2-103(B) of the Rules of Professional Conduct by the Supreme Court of the State of California, effective April 1, 1979.

Law firms in California can use a DBA or trade name

Law firms in California can use a DBA (Doing Business As) or trade name. The use of trade names by attorneys was permitted following the repeal of former rule 2-103(B) of the Rules of Professional Conduct by the Supreme Court of the State of California, effective April 1, 1979. This rule previously stated that:

> "A member of the State Bar in private practice shall not practice under a trade name, a name that is misleading as to the identity of the lawyer or lawyers practicing under such name, or any name other than a firm or corporate name containing the name of one or more of the lawyers in the firm, except that the name of a professional corporation shall contain the words or wording or abbreviations denoting corporate existence, and if otherwise lawful a firm may use as, or continue to include in, its name, the name or names of the firm or of a predecessor firm in a continuing line of Succession."

Now, it is permissible for attorneys to use a single "trade name" for a law office, as long as it complies with rule 2-101 of the Rules of Professional Conduct and Business and Professions Code section 6164. This rule states that trade names cannot be false, deceptive, or misleading. For example, a trade name should not imply that the firm is publicly supported, be deceptive about the identities of the members of the bar performing professional services, or be misleading about the types of services offered.

California Professional Law Corporations that wish to use a DBA or fictitious name must obtain a permit from the State Bar of California and pay a fee. They should also file a fictitious name statement in every county in which they operate. To start a California Professional Law Corporation, the following steps must be taken:

• File the Articles of Incorporation with the Secretary of State and pay the filing fee.
• Notify your profession's state agency that manages your profession.
• Hold a Board of Directors' meeting and appoint directors.
• Get your Professional Corporation Bylaws drafted.
• Apply for your EIN.
• File your Statement of Information.
• File Form 2553 for S-Corporation tax election.
• Pay California corporate taxes to the California Franchise Tax Board.
• Register with the EDD if you will be hiring employees.
• Apply for local business registration and licenses.

It is important to note that lawyers in California are prohibited from forming an LLC or a traditional corporation for their law practice and must instead register as a Professional Corporation.

A law firm cannot be opened as an LLC in California

In California, most licensed professionals are prohibited from forming a Limited Liability Company (LLC). This is because professionals are held to a higher standard and are responsible for upholding the public's safety. Therefore, the California Legislature doesn't allow professionals to limit their personal liability for their mistakes.

Practicing law or being a lawyer is considered a "professional service" under California law because it requires a state license and meeting various eligibility requirements to obtain that license. As such, lawyers in California cannot form an LLC for their practice and must instead form a professional corporation or a limited liability partnership.

There are, however, a few exceptions to the rule. For example, a contractor who is required to have a license by the California Contractor State License Board (CSLB) can, under Section 7065 of the Business and Professions Code, operate their business using an LLC. Another exception is mentioned in Section 17701.04(d) of the California Corporations Code, which outlines the limited instances where an LLC can be used to run a "health care service plan".

It's important to note that the inability to form an LLC as a law firm in California does not restrict the use of trade names by attorneys. The former rule 2-103(B) of the Rules of Professional Conduct, repealed by the Supreme Court of California in 1979, previously prohibited attorneys from practicing under a trade name. However, the repeal of this rule now permits attorneys to use trade names or fictitious business names, as long as they comply with the general false, deceptive, and misleading standards set forth in Rule 2-101.

California law firms must be registered as Professional Corporations

To form a professional corporation in California, you must file articles of incorporation with the Secretary of State and pay the necessary fees. The name of the professional corporation must comply with the rules governing the profession and any name requirements issued by the licensing agency. It must also be distinguishable from the names of other business entities on file with the Secretary of State. Law firms can use trade names, but these must comply with the Rules of Professional Conduct and cannot be false, deceptive, or misleading.

Professional law corporations in California must ensure that all officers, directors, and shareholders (owners) are licensed to practice law in the state. The bylaws of the corporation must also contain specific language mandated by the State Bar of California, which includes requirements such as shareholders being licensed and entitled to practice law, and shares being owned only by the corporation or a shareholder.

There are also tax and other regulatory requirements that apply to professional corporations in California. For example, a Statement of Information must be filed annually, along with applicable fees. A Certificate of Registration renewal should also be filed annually, and a Limited Offering Exemption Notice should be filed with the CA Department of Financial Protection and Innovation within 15 days of share issuance.

The State Bar of California oversees law firms structured as corporations

The State Bar of California's primary role is to license and discipline attorneys. In recent years, the State Bar has been criticised for its efforts to deregulate the practice of law. Specifically, it has been accused of attempting to authorise non-lawyers to practice law and allow corporations to own law firms. This has raised concerns about potential conflicts of interest and the undermining of consumer protection.

In response, the Legislature has taken steps to prevent the State Bar from pursuing corporately-owned law firms. Assembly Judiciary Chair Mark Stone and Senate Judiciary Chair Tom Umberg submitted a joint letter urging the State Bar to reconsider its efforts. Despite this, the State Bar continued its push, leading to the amendment of Assembly Bill 2958. The amendments require the State Bar to provide detailed information on funding spent on these efforts, prohibit the pursuit of corporate ownership of law firms, prioritise increased access to legal services for low-income individuals and small businesses, and explicitly prohibit any changes to restrictions on the unauthorised practice of law.

The State Bar of California does oversee law firms structured as corporations through its Law Corporations Program. This program certifies professional corporations that wish to practice law in accordance with applicable statutes and court rules. However, it is important to note that the State Bar's efforts to further deregulate the practice of law and authorise corporately-owned law firms have faced significant opposition and legislative action.

While the State Bar has the authority to oversee law firms structured as corporations, there are strict rules and ethical considerations in place. The use of trade names by attorneys is permitted, but it must comply with the Rules of Professional Conduct and Business and Professions Code. These rules aim to prevent false, deceptive, or misleading practices and ensure that the name does not imply public support or deceive clients regarding the identities of the members of the bar or the services offered.

Rules exist to prevent false, deceptive, or misleading law firm names

In California, the repeal of former rule 2-103(B) of the Rules of Professional Conduct permits attorneys to use trade names. However, the use of such names is governed by Rule 2-101, which prohibits false, deceptive, or misleading statements. The rule also applies to the names of firms, offices, and organisations under which a member of the bar practices law.

A law firm name or designation is considered misleading if it implies a connection with a government agency, a non-affiliated lawyer, a non-lawyer, or a public or charitable legal services organisation. For instance, terms like "legal aid", "legal service office", and "legal assistance office" are reserved for bona fide legal assistance organisations. A law firm name may be deemed misleading if it implies public support or is deceptive about the identities of the lawyers providing the services or the types of services offered.

Similarly, the New York Rules of Professional Conduct prohibit lawyers from practicing under false, deceptive, or misleading trade names, domain names, or names that mislead about the identities of the lawyers practicing under such names. The purpose of Rule 7.5(b) is to protect the public from being deceived or misled about the identities of lawyers using a firm name. Lawyers are also prohibited from implying partnerships or affiliations with other lawyers or law firms that do not exist.

To avoid misleading the public, law firms may need to include appropriate disclaimers or qualifying language in their communications. This is especially important when using a trade name with a geographical name, such as "Springfield Legal Clinic", to clarify that it is not a public legal aid organisation.

Frequently asked questions