I chose our business structure because…

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Lawyers have a variety of options when it comes to organizing their practices.
What follows are some of the reasons lawyers gave for organizing their practices as LLCs, LLPs, and S.C.s.

“I chose an LLC format because I wanted the pass-through of the financials to my personal level of taxation. I also consulted with a corporate lawyer and was advised to use the LLC, rather than the S.C. status. I don’t view there as being a significant difference on the liability of my organization. Also, it’s just me at this point, and it suits me fine for my needs.”
— John E. Thiel,
Thiel Law Office LLC, Appleton

“My law partner and I previously practiced in a three-person firm where a partner left. Although there were a number of circumstances that influenced our decision, it was just easier from an accounting and tax standpoint to continue with the same business entity as the firm was originally formed, namely, a C corp. It made for an administratively less disruptive and a smoother transition.
“Many established law firms were formed prior to the existence of the limited liability company. I suspect that rather than change their accounting set-up, letterhead, ownership documents and other administrative items, these established firms have decided to keep the status quo.
“However, if we were starting a new firm now, we’d probably elect to form an LLC, in which there are the benefits of an entity with fewer formalities, and a number of tax-status elections from which to choose.”
— Jeffrey Alan Santaga,
Hanson & Santaga S.C., Wauwatosa, and
chair of the Law Office Management Section of the State Bar of Wisconsin

“We’ve been a general partnership since my father started the firm in 1940. It’s been our tradition, although we’re considering other entities, the LLC or the LLP. On the tax issue, both are treated as a partnership, and there might be an advantage if you had a generalized retirement program. We don’t. My dad practiced five and a half days a week until he passed away at age 94, and I guess I plan on doing the same. So a retirement-deductible program is not a consideration. Also, my law partner is my son, so there’s less of a concern about liability, and that’s what our malpractice insurance is for.”
— Terry Rose,
Rose & Rose, Kenosha

“There are several reasons why I elected sole proprietor status for my law practice.
“By default, it was the easiest way to set up my practice when I first began. I wasn’t sure how long I would be practicing as a solo, so I took the path of least resistance.
“As time went on, I began looking at other forms of organizing my business. Keep in mind that I have no employees, no staff and no other attorneys with whom I practice. There were two overriding questions that needed to be answered. First, could I, as a sole practitioner, get any liability protection by using a business entity? If so, what would be the ‘cost?’ Secondly, could a business entity provide tax savings to a sole practitioner?
“Although I could, on paper, form an entity of some sort to limit my liability, the Supreme Court rules, namely SCR 20:5.7, provide little, if any, relief from personal liability, and no relief for errors and omissions. Furthermore, the rules require attorneys to notify their clients of the limited liability under which they are organized. Such a letter to clients may do more harm than good by scaring off potential clients who think their lawyer is trying to absolve himself of any bad legal advice. Is this being overcautious? Perhaps. But it comes into play, at least for a true solo practitioner.

“As far as tax relief, I have found little advantage to forming a business entity. Some solo attorneys create entities that allow them to pay themselves a lower salary, subject to FICA taxes, and to take the rest of their income as a distribution or dividend issued by the entity. But the question arises whether their salary is ‘reasonable compensation’ as viewed by the IRS. Since I have no paid staff, and I am the sole source of revenue for the practice, what I pay myself out of the practice is most likely what the IRS would deem to be ‘reasonable compensation.’ Again, I am being cautious.”
— Thomas A. Heyn,
Thomas A. Heyn Attorney at Law,
Cottage Grove,
and member of the Law Office Management Section Board of
Directors of the State Bar of Wisconsin

“We chose the LLP for a number of reasons. Mostly, it’s conducive to growth, and there’s the flexibility of a partnership. Also, there is some liability protection for lawyers, vis a vis their partners. When you get into management issues, however, there isn’t a tremendous difference between the corporate forms anymore.”
— Jerry Gonzalez, Gonzalez, Saggio & Harlan LLP, Milwaukee

“I went with the sole proprietorship for complete simplicity. It’s by far the easiest. I do criminal defense, a lot of public defender cases, so I’m not too worried about liability, although I do carry malpractice insurance. Eventually, I’ll probably form an LLC. But for now, I work out of my home, and for tax and paperwork reasons, it just makes sense to keep it simple. I can use my own checkbook.”
— Michael E. Covey,
Covey Law Office, Madison