Establish an Office Sharing Arrangement

Step-by-Step Guidance

Step 1: Determine whether office sharing is right for you.

• Do you enjoy working alongside (but not necessarily with) other people? In other words, do you want independence and solitude in your work, but in a social environment?
• Are you flexible and willing to negotiate and compromise with those with whom you share an office?
• Are you willing to stand up for yourself and your business needs?

For discussion of benefits of office sharing, see Additional Practice Guidance.

Step 2: Thoroughly evaluate prospective office sharers.

• Look for attorneys with compatible personalities, working styles, tastes, and attitudes.
• Verify that all prospective office associates are financially stable. You don’t want to show up for work one day and find that you are now stuck paying the rent, utilities, telephone, equipment, supplies, payroll taxes, insurance, etc.
• Look for attorneys who have complementary and diverse practices. This fosters referrals among the lawyers in the shared office. On the other hand, office associates with overflow work might be interested in other attorneys with similar expertise.
• Avoid attorneys with either competing or conflicting practices. For example, if you are a plaintiff-side medical malpractice attorney, you may not want to share an office with an insurance defense lawyer. Or, if you are a divorce lawyer, you may not want to share an office with another divorce lawyer.
• Find attorneys who share your vision on how business should be conducted and who, like you, are willing to compromise for the greater good.
• Find attorneys who agree with your vision of office culture: type and quality of office furnishings, office atmosphere, mix of clientele in the reception area, importance of office technology.
• Make sure that all attorneys are members of the State Bar in good standing and ensure that each lawyer has a good professional reputation and impeccable ethics. Your reputation will be affected by those with whom you associate in practice.
• Look for attorneys who are ready and willing to share business and legal expertise.
• Avoid arrangements where there could be a wide disparity of income or use of common staff, equipment, supplies, or facilities that will eventually lead only to resentment, frustration, and jealousy.

See Additional Practice Guidance for a discussion of the ethical considerations.

Step 3: Choose officemates and begin negotiating an agreement.

After you’ve done the thorough vetting of potential office associates outlined above, begin the process of negotiating an office-sharing agreement, using the steps below.

Consider implementing an initial trial period, minimizing duration and financial investment until confirmation of actual compatibility.

See the sample office-sharing agreement.

Step 4: Decide which office expenses are joint or separate.

These categories are suggested based on actual past experience:

• Joint expenses are for items that usually are shared equally by the office associates. Individual shares can be adjusted where there is significant disparity in use. A typical (but not exhaustive) list of joint expenses includes rent; signage; receptionist; telephone equipment; copier; typewriter for preprinted forms; reception and conference room furniture and furnishings; liability, contents, fire, and flood insurance; and utilities.
• Separate expenses are for items used exclusively by individual attorneys and their staff rather than shared with other members of the group. A typical (but not exhaustive) list of separate expenses includes computers and peripherals; Internet and research charges; telephone lines and service; fax lines and equipment; stationery and business cards; cell phones and service; dictators; copiers; furniture and furnishings for individual offices; insurance (malpractice, business interruption, overhead expense, disability, health, life, vehicle, and umbrella); file costs; professional dues; seminar fees; personal property taxes on equipment that is individually owned or proportionately owned; income and business taxes; bank charges on individual accounts; parking; vehicle; travel and entertainment; advertising; trust account; and checking account. Also consider requiring each office sharer to provide a small life insurance policy with the trade name (see step 5) as the beneficiary to help pay the costs on the death of the individual office sharer.
• Other expenses may be totally or partially shared: dictation transcribers and other equipment; law books; audio and visual materials; work stations, worker’s compensation insurance, salaries, and unemployment and payroll taxes for shared staff; miscellaneous office supplies; bank charges on joint accounts; repairs and maintenance on shared equipment; marketing; postage and shipping; and file and storage space.

Step 5: Establish joint office management.

• Register a basic trade name such as ABC Office Management (name derived from first initials of each office-sharing associate) with the county clerk’s office. Using a basic trade name will simplify bookkeeping and payment of joint expenses. (Note: Remember that use of a trade name should be strictly limited to joint financial obligations and not applied to the practice of law, which is prohibited by applicable ethical rules as discussed in Additional Practice Guidance on ethical considerations.)
• Open an office operating account and a payroll account for shared staff under the assumed name at a nearby bank or other financial institution. (Note: Trust accounts should be maintained separately by each attorney.)
• Open credit or billing accounts with suppliers under the assumed name.
• Other joint financial obligations, such as office leases, equipment leases, law publications, insurance, and so forth, should be incurred under the assumed name if possible.
• Schedule a designated day and time each month (or more often if desired) for regular meetings regarding office management.
• Delegate on an equal basis responsibility for different routine office management duties, taking into account individual preferences, areas of expertise, and special skills.
• Comply with all applicable governmental registration, deposit, tax, and filing requirements.
• Establish a simple but reliable accounting system to track disbursements made for joint expenses.
• Make routine management decisions by majority vote except for significant expenditures, over which each associate retains veto power.
• Preferably, all office sharers should be required to maintain their own professional liability insurance.

Step 6: Decide on office location.

When considering location, keep in mind the following nonexhaustive list of considerations:

• expected clientele and their sophistication
• city or suburbs
• convenience to clients, walk-in business, and other business sources
• convenience to courthouses, law libraries, restaurants, banks, and other businesses
• high-rise or low-rise building
• parking availability and cost
• class-A building or less
• building security

Step 7: Decide on office atmosphere.

Factors when deciding on the “feel” of office you would like include appearance, image, decor, furnishings, dress and conduct code, noise level, and any other factors that relate to enjoyment, comfort, and convenience. A typical but by no means exhaustive list of considerations includes the following:

• individual office size, windowed or not, view
• plush or spartan decor
• new or used equipment and common area furnishings
• limitations (e.g., times, frequency, purpose), if any, on the use of common facilities such as conference rooms, equipment, and staff
• interior office proofing (often neglected but critical in professions such as law when dealing with client confidences and secrets, especially in a suite shared with other nonaffiliated attorneys)
• business or casual attire

Step 8: Hire shared support staff.

The simplest way to handle the expense of shared staff is to divide it equally. On the other hand, if the usage is expected to be disproportionate, allocate the cost accordingly with periodic adjustment to reflect actual usage. You should also

• establish salary, pay raises, and benefits;
• determine how the staff sequence and prioritize demands on their time by multiple attorneys;
• decide how to schedule vacation or leave time,
• set limitations, if any, on usage, access, or overtime;
• make sure qualifications, experience, and expertise level are appropriate;
• designate attorney(s) who will be the main contact for administrative issues;
• establish the procedure for maintaining client confidences and secrets (at the very least, all support staff should sign a written confidentiality agreement);
• define job duties and whether these include personal errands for attorneys;
• conduct periodic performance reviews;
• establish regular business hours, work schedules, and holidays, as well as a policy on absenteeism and tardiness;
• systematize repetitive tasks by standardizing forms and procedures to maximize efficiency, productivity, and work product quality; and
• invite staff suggestions and feedback.

Step 9: Avoid the appearance of a partnership or other professional association.

You must ensure that the public is not misled into thinking that you share a professional association or affiliation with others in your office. Consider the following steps to prevent the public’s misunderstanding:

• Ensure that office signs and building directories clearly indicate that the lawyers are sole practitioners.
• Business cards, letterhead, pleadings, advertising, brochures, and websites should be done in the name of individual attorneys only.
• Have separate telephone numbers for each attorney and instruct the shared receptionist to answer incoming calls in the name of the attorney being contacted. (Note: If phone numbers are shared, the receptionist should answer incoming calls simply “law offices.”)
• Include a description of the shared office arrangement in engagement letters and retainer agreements and ensure that clients understand that the other attorneys are not partners of the engaged attorney.
• Organize interior space so that attorneys have separate offices.
  
  See Additional Practice Guidance discussing ethical considerations.

Step 10: Avoid client conflicts in multilawyer office.

Best practices to avoid potential client conflicts between office sharers, and to allow office sharers to take a case or a client from another office sharer who has a conflict, dictate the following:

• All office associates must use written engagement or retainer agreements signed and consented to by the client that designate the responsible attorney(s) and clearly disclaim in plain language the existence of a firm.
• All office associates must separately maintain confidential client information in a way that is inaccessible by the other attorneys. Remember to ensure server, fax, and mail confidentiality through appropriate office setup and procedures.

See Additional Practice Guidance for conflicts of interest and ethical considerations.

Step 11: Preplan for departures.

It is important to have a written policy or plan for dealing with the departure of an attorney from an office-sharing arrangement. Ideally, this policy or plan will be part of the office-sharing agreement. Factors to keep in mind in developing the policy or plan include the following:

• reasonable advance departure notice period so that the remaining group has adequate time to make other arrangements
• retention of joint telephone numbers
• procedure for rerouting incoming calls
• file and client transfer if departing member is ending law practice, subject to any applicable ethical rules
• custody of records concerning joint expenses and assets
• payment by departing lawyer of any pro-rata share of remaining joint financial obligations
• retention of shared staff
• discontinuance of assumed name(s) if departing lawyer’s name is included
• valuation of joint assets at fair market value, after depreciation for wear and tear, as established by a mutually acceptable qualified expert if the parties are unable to agree on their own
• payment to departing lawyer for pro-rata share of joint assets
• agreement by all office associates that they will act in good faith to take whatever steps are reasonably necessary to facilitate a smooth departure, including the execution of appropriate documents
• agreement to mediate and arbitrate any unresolved departure issues

See Additional Practice Guidance on handling departures.

Step 12: Reduce the office-sharing arrangement to a written agreement.

In order to avoid later confusion or controversy, all terms should be memorialized in a written memorandum or agreement. In the practice of law as in life, it’s best to keep the arrangement as simple and uncomplicated as possible. Just be sure to cover all the essentials. See the sample office-sharing agreement.

When to Use

Use this kit to consider all the factors that go into an office-sharing arrangement. The descriptive title for this How-to Kit, Establish an Office-Sharing Arrangement, might instead be Establish an Expense-Sharing Arrangement. The references to the concepts of office sharing, expense sharing, or lawyer associations simply mean an arrangement whereby each attorney, “associate,” or “office member” maintains their own separate law practice in a group setting. Although office overhead is split, typically no income is shared except on a case-by-case basis. There would be no true partnership or other formal legal entity.

Using these materials is not a substitute for the attorney’s independent judgment, drafting, and research.

Other Resources

Books

• Michigan Basic Practice Handbook (see chapter 1)

Other How-To Kits

• Open a Law Practice
• Close Your Own Law Practice

Additional Practice Guidance

Benefits of Office Sharing

There is a growing trend, especially during difficult economic conditions, toward attorneys associating in group practices. Besides the obvious economies of scale resulting from sharing fixed costs among several people and also affording the option of better physical facilities and equipment than attainable individually, there are other professional and personal advantages as well.

From a professional perspective, associating with others provides a sounding board for various practice matters such as client or file issues, experts, consultants, fees, ethics, applicable law, etc. Beyond sharing just physical assets of an office is the more valuable sharing of ideas and information. Also available in some arrangements is the sharing of workload on designated projects or coverage in the event of schedule conflicts. Sharing of standard forms time-tested by experience is another benefit.

On a personal level, working in an environment with other attorneys avoids the isolation and burdens of a solo practice while preserving one’s freedom and independence. Shared responsibility and delegation of duties for office management relieves some of the stress of practicing law. Sharing experiences, problems, successes, failures, or just a good laugh with someone who understands and identifies with you is invaluable.

Ethical Considerations

Ethical rules require that office-sharing arrangements segregate individual practices. Parameters that should be followed include (1) preservation of client confidences and secrets, (2) accuracy of communication about the relationship, (3) avoidance of improper solicitation of client referrals, (4) exercise of independent judgment regarding legal representation, (5) avoiding improper division of fees, and (6) avoiding conflicts of interest. RI-249 (Mar 1, 1996), RI-135 (May 28, 1992), RI-118 (Feb 2, 1992).

Client Confidentiality. MRPC 1.6(b)(1) provides that an attorney shall not knowingly reveal a confidence or secret of a client to others. This means that any office-sharing arrangement must establish systems for maintaining the confidentiality of client files and communications.

Protection of client confidences and secrets when sharing telephone numbers and a receptionist can be assured by using private voice mail for client messages when the attorneys are unavailable. Additionally, sharing a computer server may present issues; be sure to have an IT professional assist in partitioning the server so that attorneys do not have access to each other’s files. Sharing a fax line also raises concerns regarding protection of client confidences and secrets. According to RI-249 (Mar 1, 1996), unless it is clear to all users that a facsimile transmission within an office is a public communication device and not segregated to a particular attorney’s business, sharing the fax line would be improper among office sharers. In the end, probably the safest way to protect client confidences and secrets is for the client and attorney to communicate via e-mail instead of voice mail and faxes, but ensure that any common servers are adequately partitioned. Incoming mail should be delivered directly to the designated attorneys or their dedicated support staff and not opened by shared support staff.

You should also consider interior office soundproofing to insure client confidentiality between individual offices and between offices and conference/meeting rooms.

Marketing Considerations. A lawyer may, on the lawyer’s own behalf, on behalf of a partner or associate, or on behalf of any other lawyer affiliated with the lawyer or the lawyer’s law firm, use or participate in the use of any form of public communication that is not false, fraudulent, misleading, or deceptive. MRPC 7.1.

A lawyer shall not use a firm name, letterhead, or other professional designation that violates MRPC 7.1. A trade name may be used by a lawyer in private practice if it is not otherwise in violation of MRPC 7.1. (Note that effective January 1, 2019, MPRC 7.1 limits use of a title when a lawyer is a retired or former justice, judge, referee, or magistrate.) MRPC 7.5(a). This means that lawyers cannot state or imply that they practice in a partnership or other organization unless that is the fact. In this regard, “lawyers sharing office facilities, but who are not in fact partners, may not denominate themselves as, for example, “Smith and Jones,” for that title suggests partnership in the practice of law.” MRPC 7.5(d) and comment.

A number of informal ethics opinions have concluded that attorneys who are not partners may not use joint letterhead even if the letterhead contains a disclaimer that the attorneys are not a professional corporation or a partnership. See, e.g., RI-200 (Mar 29, 1994) (lawyers who are not in fact in same law firm may not use joint letterhead but may use joint advertising as long as advertising clearly delineates relationship between firms and does not imply independent lawyers act as one); CI-1179 (Sept 4, 1987) (sole practitioner who shares office space and overhead expenses with several other lawyers may not list their names on joint letterhead and common signs even with disclaimer language); CI-1044 (Nov 14, 1984) (it is improper for two professional corporations that occupy same building and share expenses to use joint letterhead where two separate and distinct law practices are maintained).

According to an ABA formal opinion, lawyers may not be called “of counsel” if they merely collaborate on occasional cases, serve as a consultant, or share office space. ABA Comm’n on Ethical and Prof’l Responsibility, Form Op 90-357 (May 10, 1990).

Fee Agreements. Best practices dictate that office associates each use written engagement or retainer agreements that clarify the exact nature of the relationship among the office members and also refrain from stringing their respective names collectively on stationery. The written attorney-client agreements not only should explain in plain language the nature of the arrangement among the attorneys, but also should delineate to what extent the client will and will not receive the services and assistance of other attorneys in the office. Unless the relationship is clearly explained, attorneys who share office space, stationery, telephone numbers, fax lines, advertising, signage, staff, or other features run the risk of not only owing professional obligations to misled clients but also being held jointly liable for malpractice under the doctrines of de facto partnership, partnership by estoppel, or ostensible agency if clients reasonably were led to believe that they practiced together in a partnership.

See also Additional Practice Guidance on conflicts of interest.

Conflicts of Interest

MRPC 1.10 provides in a pertinent part that while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by MRPC 1.7. MRPC 1.7 provides in a pertinent part that a lawyer shall not represent a client if the representation of that client will be directly adverse to another client unless (1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client and (2) each client consents.

However, the comment to MRPC 1.10 provides that whether two or more lawyers constitute a firm can depend on the specific facts. For example, two practitioners who share office space and occasionally consult or assist each other ordinarily would not be regarded as constituting a firm. However, if they present themselves to the public in a way suggesting that they are a firm or conduct themselves as a firm, they should be regarded as a firm for purposes of the rules. The terms of any formal agreement between associated lawyers are relevant in determining whether they are a firm, as is the fact that they have mutual access to confidential information concerning the clients they serve.

According to RI-249 (Mar 1, 1996), when an office sharer has a conflict of interest prohibiting representation of a private client, the conflict is not per se imputed to other office sharers. Thus, using a formal office-sharing written agreement, avoiding holding out to the public as a firm, and maintaining separate client files and records should prevent conflicts of interest and allow referrals between office sharers.

Handling Departures

Eventually office-sharing associates may want to withdraw and other attorneys may want to join an office-sharing arrangement. Other reasons for personnel changes may include death; disability; retirement; insolvency; finances; disbarment; suspension; personality conflicts; differences in types or styles of practice or both; the appearance of ethical or legal impropriety; incompatibility; overuse of shared facilities, staff or equipment; and noncompliance with other terms.

In order to facilitate as smooth a transition as possible, a methodology or formula should be established to handle the disposition of all joint assets such as furniture, furnishings, equipment, supplies, books, and so forth with rights of first refusal held by the remaining office associates. Ideally it is best to reach such an agreement before any financial obligations are incurred and while the excitement of a new prospective venture is still fresh. And remember, it is always easier to tie a knot than to untie it.

See the How-to Kit Close Your Own Law Practice for helpful information relevant to handling a departure.