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Under SCR 20:5.7, lawyers and law firms may avoid vicarious liability by practicing law as limited liability organizations, such as limited liability companies (LLCs), limited liability partnerships (LLPs), or service corporations (S.C.s).

According to Clay R. Williams, Milwaukee, one of the attorneys responsible for submitting the rule to the supreme court for its approval, which became effective March 18, 1997. "Compliance with the rule insulates the law firm owner or owners, even a sole practitioner, from general creditors of the firm. Thus, attorneys practicing in groups can insulate themselves from the acts or omissions of other attorneys within the firm by compliance with the rule."

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Is your firm in compliance with limited liability reporting requirements?

To be recognized as a limited liability organization under the rule, lawyers and law firms must register annually with the State Bar, which requires proof of adequate malpractice insurance.

Why would a sole practitioner or small firm want to use a limited liability organization?

Limited liability organizations are used primarily for business or tax reasons, wholly apart from professional liability reasons. Some lawyers will use the LLP, LLC or S.C. for pension, tax or health insurance purposes.

The LLP, LLC or S.C. does insulate the law firm owner, even a sole practitioner, from general creditors of the firm provided only that the limited liability organization form is used in all contracting. A creditor of the limited liability organization firm usually can attach only the assets of the firm and not the personal assets of the firm owner.

I'm a service corporation. Do I still need to file?

Yes. Service Corporations are a type of limited liability structure and are therefore included in this rule and must file an annual registration with the State Bar of Wisconsin.

Still Not Sure?

If you still have questions, contact the membership department at (800) 728-7788.