CALIFORNIAN attorneys have joined the growing ranks of US practitioners shielding their personal assets from seizure, following the passing of a new Bill on limited liability partnerships (LLPs).
The Senate Bill 513, which passed through both houses with virtually no opposition, enables lawyers and accountants to register as LLPs provided they can show they are financially sound.
Supported by 10 of the largest firms in the state, the Bill brings California into line with at least 30 other US states which already permit LLPs for lawyers. The step is becoming increasingly popular as the number of law suits against US attorneys grows annually by 19 per cent.
Heller, Ehrman, White & McAuliffe's Los Angeles-based head of finance Steven Weise said the new legislation would mean that lawyers entering into partnerships would no longer risk losing their private assets as well as their equity.
“Most businesses can operate that way, but it was hard for law firms and accountancy firms,” said Weise. “Before this Bill was passed there was an undue risk that didn't seem fair in the context of how other businesses operate.”
Weise, who worked with O'Melveny & Myers lawyer Edward McAniff to lead the coalition supporting the Bill through parliament, said lawyers simply wanted a “level playing field” which would allow them to operate on a par with other professionals.
Firms opting to become LLPs must now assure clients they are protected. Practices can either buy insurance to an amount equivalent to $100,000 per lawyer up to a limit of $7.5 million, provide a personal guarantee from partners of protection up to $7.5 million, or present a letter of credit providing protection.
“Every other business can normally operate with that kind of protection,” said Weise. “Most businesses don't have any personal liability and there's no particular reason why lawyers and accountants shouldn't have this sort of protection.”