CI-954

August 9, 1983

SYLLABUS

    A lawyer and a nonlawyer may ethically combine in business to form a corporation for financial planning which would include planning to reduce taxes through asset repositioning, estate planning, insurance evaluation and investment analysis so long as the proposed activities and advice do not involve the practice of law.

    The determination of what activity does or does not constitute the practice of law is a legal question.

    References: MCPR DR 3-101(A), DR 3-102(A) and DR 3-103(A); CI-25, CI-208.

TEXT

A lawyer and a nonlawyer desire to form a financial planning corporation. The corporation would be registered with the Securities and Exchange Commission as an investment advisor, and would include planning to reduce taxes through asset repositioning, estate planning, insurance evaluation and investment analysis. The lawyer and nonlawyer would own all of the corporation's stock and would fill the officer and director positions. They also would receive commissions for insurance and investments sold, and would be compensated by fees for financial planning. The lawyer would not actively seek to practice law or act as a legal representative for the firm's financial planning clients.

The lawyer asks whether the proposed business arrangement is proper.

It is not clear whether any or all of the activities and advice offered to the corporation's clients would involve the offering of legal advice, and therefore, constitute the practice of law. What is or is not the practice of law involves a determination of law which is beyond the scope of jurisdiction of the Committee. Should any of the corporate business activities embrace the practice of law, MCPR DR 3-101(A), DR 3-102(A) and DR 3-103(A) would prohibit the relationship proposed.

MCPR DR 3-101(A) states that a lawyer shall not aid a nonlawyer in the unauthorized practice of law. CI-25 held that an attorney may be employed by a lay corporation engaged in activities closely related to the practice of law provided that the corporation does not engage in activities that might constitute the practice of law or use the availability of legal services as an inducement to prospective clients. CI-208 held it improper for a lawyer to jointly own and operate with an accountant a separate business created for the purpose of preparing income tax returns.

MCPR DR 3-102(A) forbids a lawyer from sharing legal fees with a nonlawyer. If any of the activities which generate the fees to the proposed corporation or both individuals involved in its ownership consist of the practice of law, then because the lawyer would be sharing fees with a nonlawyer, the activities would be prohibited by DR 3-102(A).

MCPR DR 3-103(A) states that a lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist for the practice of law. "Partnership" is defined as "an association of two or more partners in a business enterprise." The proposed relationship would involve the "partnership" of an lawyer and a layman. If any of the activities generating fees to the corporation or individuals involved consist of the practice of law, the relationship would be prohibited by MCPR DR 3-103(A).

If none of the proposed activities to be performed by its principles in advancing the corporate business involves the practice of law or offering of legal advice to the corporate clients, nothing in the Canons prohibits the proposed activities.