DISCLAIMER: THIS POEM IS PROVIDED MERELY FOR AMUSEMENT.  THE EVENTS AND CHARACTERS DEPICTED HEREIN ARE FICTIONAL AND ANY RESEMBLANCE TO PERSONS LIVING, DEAD, OR FICTIONAL IS COMPLETELY COINCIDENTAL…

Graidy White

He’s tall and dark with piercing eyes and a smile pearly white.
His slicked back hair ends in flare and his navy suit fits right.
His letterhead and business cards state he’s: “Graidy White,
Litigator | Barrister.  Always ready for a fight”.

Hungry for Work

Recently called, Graidy White wants to make his mark.
He passed the bar without a scar and like a hungry shark
Craves the large and complex fish (unassuming in the dark)
To sink his teeth in legal briefs with outcomes not so stark.

The Office

To show his credibility, he’ll need a space to please
The gaze and earn the praise of clients paying out his fees.
He’ll get a desk and chairs that match, and hang up his degrees
And add a family frame to claim he’s more than expertise.

The Bills

Before he starts though, Graidy White feels an eerie chill,
As letters pile with a smile asking for the bill.
There’s dues and rent, E&O, and salaries to fill,
And so inclined he’ll put his mind to tackling that hill.

The Marketing

His clients swim in depths, both traditional and new.
So he’ll lurk and work the fancy waters calm and crystal blue
And add an online presence – so he’ll blog and twitter too.
And glide through murky tide ’til a client comes in view.

…

written by admin \\ tags: law poem

Ever wonder about the difference between a “barrister” and a “solicitor”?  Lawyers often refer to themselves as John Smith, Barrister and Solicitor – but what exactly does that mean?  Also, where did the term “called to the bar” come from?  I came across the following historical explanation in Daniel Pool, What Jane Austen Ate and Charles Dickens Knew: From Fox Hunting to Whist – the Facts of Daily Life in 19th-Centure England, (New York, U.S.A.: Simon & Schuster, 1993), pp. 130-134:

English lawyers were of two kinds – those who argued in court, and those who prepared the cases for these courtroom lawyers and hired them after themselves being retained by clients.  The barristers pled in the equity court (Chancery), the serjeants in the common-law courts (King’s Bench, Common Pleas, and the Exchequer), and the advocates pled in the admiralty and church courts (Consistory Court, Court of Arches, Perogative Court, Faculty Court, and Admiralty Court).  The lawyers, respectively, who hired them and backstopped them, were the attorneys, the solicitors, and the proctors.

The courtroom lawyers had the prestige and, among them, the barrister – in social standing (and often in fees) – headed the list.  The barrister was often well born, and if not, becoming a barrister could make one an important figure, possibly putting one in line for a government post…

The inns – the Inner Temple, the Middle Temple, Lincoln’s Inn, and Gray’s Inn – were ancient lodging houses, which by the 1800s housed attorneys, the offices of senior lawyers, and, in the case of Lincoln’s Inn, at times the Court of Chancery as well, in a collegial fashion not unlike that which prevailed at Oxford and Cambridge.  Each inn was run by senior barristers called benchers, who were generally King’s Counsel (K.C.) or Queen’s Counsel (Q.C.).  Together with the law students and younger practicing barristers, they regularly ate “in Hall”.   Until the latter part of the century, no exams were required of those who wished to become barristers.  The sole requirement was to “eat your terms”, that is, to show up for dinner a certain number of times for at least three years so the older lawyers could meet you informally and see if they approved of you.  If, after the requisite period of time, they found your work and character satisfactory, you were “called to the bar”, i.e., a small barrier, presumably at the Hall, that separated the area where the senior lawyers, or benchers, sat from where those who had not yet been called were.   You were thereafter entitled to appear before the courts as a barrister.

…

One could not engage the services of a barrister…directly; one had to hire a solicitor or attorney to do this…Indeed, legally the fee paid to the barrister was considered a gift rather than wages, so that he could not even sue for his money if he were not paid.

This peculiar setup enabled the barristers…to pretend they were not “in trade”, since it removed from them the necessity of taking money directly in payment for their services.  On the other hand, it made the barristers dependent on the goodwill of solicitors for their livelihood.  Consequently, the barristers often hung around courtrooms looking busy and in demand in an effort to impress solicitors from whom they hoped to get business…Solicitors were not, however, of the same status as barristers.  They had no collegial institutions equivalent to the Inns of Court, and they were not self-regulating as the barristers were.  Indeed, they were subject to the control of Parliament and the courts, who decreed that no one should become a solicitor without “articling” or apprenticing himself for five years to a practicing lawyer, which is how the “articled clerk” came into being.

written by admin \\ tags: barrister, barristers, called to the bar, solicitior, solicitors

In the Spring volume of Ontario Lawyers Gazette, there is an interesting article about the vital role of sole practitioners and small firms in promoting access to justice.   The article starts off with the statistic that 63% of Ontario lawyers in private practice are either sole practitioners or in firms of between 2-10 lawyers.

These are the lawyers catering to common person who need a will drafted, needs to buy or sell a home, or has a business issue they need answered.

The article goes on to say that the graying of the bar is an important issue and that succession planning is something that cannot be ignored.  To this end, the Law Society has taken active steps to help solo and small firm practitioners – for example, by providing a Resource Centre on their website, by working with the County & District Law Presidents’ Association and the Ontario Bar Association to provide support for these practitioners in a collaborative way, and by holding the 4th annual Solo and Small Firm Conference and Expo.

On the latter note, I will be attending this Thursday.  I was (and still am) hoping to showcase Dynamic Lawyers at the Expo but I haven’t heard back from the Law Society of Upper Canada organizers.  In fact, I’ve reached out on a number of occasions to the Law Society and am still waiting to hear what they think about my website…

written by admin \\ tags: law society of upper canada, ontario bar association, ontario lawyers, small firm practitioners, sole practitioners, succession planning

In my humble opinion, it’s always better to start a business in poorer economic times than better ones.  In fact, that’s exactly what Enterprise Toronto boasts: businesses that start during these times are more likely to survive (and thrive) after a number of years vis-a-vis business that start up in more promising times.

The thinking here is simple: start lean and mean (most likely because you have little choice) and, when business picks up, you’ll be in a perfect position to make a killing.  An abundance of companies in need of quick cash will need to liquidate their assets, which means bargain discounts for your business.  There’s lots of commercial space to lease; it’s a tenant’s market and landlords are suffering because of it.  The only thing that’s not so good during poor economic times is the drying up of credit and capital; investors are holding onto their ravaged savings, while banks are fearful of defaulting loans.  Raising money in an IPO or through a small private business is also hard when established businesses are all failing around you.

From my own background, I didn’t know that, by the time I went off on my own, the economy would be in the gutter.  The good things about legal services is that they are always in demand in some form or another.  The reason being that things are planned well in advance (e.g. going to trial, negotiating a contract, etc.) where lawyers’ services are required.  So again, the fact that a recession hits the economy hard doesn’t change the fact that things were planned from before.

written by admin \\ tags: abundance, assets, banks, bargain, best time, capital investors, economic times, economy, fly, gutter, ipo, lawyers services, loans, private business, raising money, recession, toronto

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only.  If you believe you require assistance in deciding which business structure is best for you, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).

In this blog, I’ll be discussing professional corporations.

Some of the biggest advantages to operating a law firm through a professional corporation include:

• Tax benefits and tax deferral through the small business credit and the lifetime capital gains exemption to qualifying small businesses;
• The ability to raise capital through a security issuance (e.g. equity or debt);
• The prestige factor that goes along with having a “Professional Corporation”; and
• A lawyer can choose his or her salary and dividend mix in order to minimize tax exposure.

The disadvantages to operating a law firm through a professional corporation include:

• Unlimited liability for the corporate shareholders;
• Inability to engage in income splitting via share ownership;
• Relatively high start-up costs and ongoing maintenance costs (e.g. accounting, meetings and minutes, payroll, and taxes); and
• Creating and maintaining a separate bank account, letterhead, business and tax numbers, etc.

Definition
Ontario’s Business Corporations Act “["BCA"]and the Law Society of Upper Canada’s By-Law #7 govern professional corporations. In the legal context, a professional corporation is a corporation whose shareholders (s. 3.2(1)(1) of the BCA), officers and directors (s. 3.2(2)(2) of the BCA), and managers (s. 32 of By-Law #7) are licensed members of the Law Society of Upper Canada.

Ease of Creation
By and far, a professional corporation is the most onerous – in terms of cost, time, and effort – to create. Ontario’s Business Names Act provides that “[n]o corporation shall carry on business or identify itself to the public under a name other than its corporate name unless the name is registered by that corporation”(s. 2(1) of the Business Names Act).

A professional corporation must first be incorporated in Ontario. Furthermore, lawyers may not practice law through a professional corporation until they have received their Certificate of Authorization from the Law Society – which entails completing an application form and paying an additional fee.

Continuity
Among other things, so long as the directors/officers of the corporation file the company’s annual return and the company is not cancelled for failing to comply with tax requirements, the company will survive the death or bankruptcy of its shareholders and managers and its shares may be perpetually transferred.

Liability
Section 3.4(1) of the Business Corporations Act provides that the professional liability of a shareholder of a professional corporation is unlimited under an Act governing the profession for acts of the shareholders or acts of employees or agents of the corporation. Importantly, this means that, unlike with typical corporations, shareholders of professional corporations are not immune from unlimited personal liability.

Security Interests

Only individuals who are licensed by the Law Society of Upper Canada to provide legal services to the public pursuant to a Certificate of Authorization can be shareholders of a professional corporation (Business Names Act, s. 3.2(2)1). As a separate legal entity, a professional corporation is capable of owning security interests in other business entities and properties.

Taxation
A professional corporation may have the best or worst tax treatment of all the business organizations examined (depending on whether net income is reduced down to zero via labour/employment expenses). On the one hand, if the shareholder lawyers are making more money than they need to be comfortable, then they might consider incorporating and paying themselves a salary less than what the corporation earns so as to defer taxes. On the other hand, the corporation is the only form of business organization whose income is double taxed: the professional corporation’s income is taxed and then whatever retained earnings are distributed to the shareholders are taxed again. As discussing the taxation of corporations is long and complicated, I won’t be getting into it here.

If you have comments, questions or concerns about taxation or other issues involving professional corporations,you’re encouraged to go to Dynamic Lawyers and make a post to get free information and quotes from local lawyers.

written by admin \\ tags: bca officers, business corporations act, business names act, business structure, capital gains exemption, corporate shareholders, dividend, income splitting, law society of upper canada, legal context, letterhead, maintenance costs, ontario professional corporations, professional corporation, professional corporations, professional corporations ontario, share ownership, small business credit, tax deferral, tax exposure, tax numbers, unlimited liability

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only.  If you believe you require assistance in deciding which business structure is best for you, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).

In this blog, I’ll be discussing limited liability partnerships, which can be distinguished from general partnerships (discussed in another blog).

Defined
Ontario’s Partnership Act governs limited liability partnerships. A limited liability partnership is a partnership designated as such (s. 44.1). As of July 1998, amendments to the Partnerships Act permitted professions (such as lawyers) to practice in the form of limited liability partnerships.

Ease of Creation
Ontario’s Business Names Act provides that “[n]o persons associated in partnership shall carry on business or identify themselves to the public unless the firm name of the partnership is registered by all of the partners” (s. 2(3)).

In addition to registering the general partnership’s name in the same manner as a sole proprietorship’s, the partners will generally enter into a partnership agreement to modify the default rules prescribed by the Partnership Act. This partnership agreement will usually outline the relationship of the partners to each other and to third parties.

The partnership agreement will also deal with issues such as “term of the agreement, names of the partners, who owns which of the assets, name of the partnership and who owns the name, capital contributions if any, how profits are to be shared, how the partnership is to be managed, how holidays and illnesses are to be handled, liabilities and disability insurance, admission and withdrawal of partners, how the partnership is to be run and conditions and mechanics for dissolution of the partnership” (source: Wendy E. Oughtred, Going It Alone: A Start Up Guide for the Sole Practitioner, (Aurora, Canada: Canada Law Book Inc., 1995), p. 51).

The partners must also establish standards for fee distribution within the firm, including the means of rewarding lawyers for bringing business to the firm, as well as the lawyers who actually work on cases.

Continuity
Unless the partnership agreement provides otherwise, a limited liability partnership can be dissolved in a number of ways, including:

• At the expiration of the partnership’s term, adventure, or undertaking (if specified) (s. 32(a) and (b) under the Partnership Act);
• By the death or insolvency of any of the partners (s. 33(1) of the Partnership Act);
• By the happening of an event which makes it illegal for the partnership to continue (s. 34 of the Partnership Act); and
• On application by a partner in respect of prescribed circumstances (s. 35 of the Partnership Act).

Liability
Unlike a general partnership – where the partners are liable for debts and liabilities arising from the negligent acts of all partners – the partners in a limited liability partnership are not personally liable for the negligent acts of another partner or an employee who is directly supervised by another partner (s. 10(2) of the Partnership Act). However, the partnership assets continue to be at risk for the negligence of the partners and employees (s. 10(3.1) of the Partnership Act). A limited liability partnership is required to carry insurance coverage for each of its member.

Taxation
Like a general partnership, a limited partnership is a flow-through entity, which means that income earned by the partnership is passed on to the partners without being taxed at the partnership level. “If a partnership earns dividend income, taxable capital gains, or realizes a business loss, these sources would be received as dividend income, taxable capital gains, or business losses in the hands of the partners” (source: Clarence Byrd and Ida Chen, Byrd & Chen’s Canadian Tax Principles, 2006-2007 ed. (Toronto, Canada: Pearson Prentice Hall, 2007), p. 863.). The income, losses, and tax credits of the firm is first determined and then allotted to the individual partners in accordance with their equity interest in the partnership (as per the partnership agreement). The income earned by the individual partners will be fully taxed at their personal income tax rate (source: Clarence Byrd and Ida Chen, Byrd & Chen’s Canadian Tax Principles, 2006-2007 ed. (Toronto, Canada: Pearson Prentice Hall, 2007), p. 862). The fiscal year end of the partnership will be same as the individual partners – namely, December 31st of each year (sources Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 96(1) and 249.1(1). See also Clarence Byrd and Ida Chen, Byrd & Chen’s Canadian Tax Principles, 2006-2007 ed. (Toronto, Canada: Pearson Prentice Hall, 2007), p. 862.

written by admin \\ tags: association, associations, best legal structure, blog, business names act, business structure, capital contributions, continuings, dissolution, general legal structure, general partnerships, insolvency, judges, lawyer, lawyers, liabilities, limited liability partnership, limited liability partnerships, losses, money, partnership, partnership act, partnership actadvantages of business structure, partnership agreement, practitioner, Sole Practitioner, sole proprietorship

Legalline.ca is a great access to justice resource for those wanting to know more about Canadian law in general.  Legalline ® was founded as a federal not-for-profit corporation in 1993 by lawyer Antree Demarkos and her husband and telecom whiz, Ian Levine.  The two established a phone service, whereby everyday people could call in and, through a series of automated prompts, listen to a pre-recorded voice talking about the legal information they sought.  To get to that point, Demarkos and Levine had to enlist the service of 300 top Ontario lawyers to work for free, writing about topics in each’s area of expertise (e.g. criminal law, landlord and tenant law, business law, etc.). Over 1000 legal issues are covered in a simple question/answer and problem/solution format, which allows listeners and readers to get the information they need without the legal jargon. Next, they found people with nice voices to freely record the information.  They also began printing and distributing millions of guides (2 feet by 3 feet) to law offices, police stations, recreations centres, and (with the help of Canada Post) eventually to every home in Ontario. The guide is a directory of all legal topics that is to be used by individuals when calling the Legalline telephone service. Finally, they recruited sponsors to offset the cost of the service and maintain credibility.  Speaking of credibility, there is a very long list of people, corporations, and other organizations that endorse Legalline, and some testimonials can be found here.  In 1997, Demarkos and Levine established Legalline.ca to compliment their phone and fax services.  Most recently, with the help of lawyers and legal writers James Middlemiss (National Post – Legal Post) and Michael Crawford, Demarkos and Levine published Your Guide to Canadian Law: Answers to the Most Frequently Asked Questions in 2006.  That invaluable book (which is a Canadian best seller) was updated this year.

written by admin \\ tags: Access to Justice, antree demarkos, free legal advice, ian levine, legal advice, legal line, legalline, legalline guides, legalline.ca

In this week’s National magazine, Cynthia Kirkby discusses pioneering sole practitioners who “stake their claim on the web”.  As I recently mentioned to Rob Todd of the Law Times, the excuses lawyers have for not blogging are not that convincing anymore.

Some might say they don’t have the time.  Well, it doesn’t take more than a few minutes of the day to express some of your thoughts in a blog.  In her article, for example, one of the lawyers interviewed by Cynthia Kirkby notes how blogging once a week doesn’t require much of a time commitment.

Some lawyers might say it’s costly.  Well, in face, it’s really inexpensive and, if you have a family or friend who is somewhat tech savy, it can be pretty much done at no cost (just install word press on your website, pick a theme, and start blogging!).  The lawyers interviewed by Cynthia Kirkby noted that the cost of a blog could range from a few dollars per month at the minimal end to a few hundred for more bells and whistles.

Some lawyers might say that they’ve got nothing to blog about.  Well, they’re simply not thinking that hard.  You can blog about whatever you want.  And “No”, lawyers don’t typically offer legal advice to the masses through their blog.

Finally, some lawyers might not see the benefits of voicing their opinion through the world wide web.  Well the fact is that sharing a sampling of your knowledge to the masses is a great way to build goodwill, create new opportunities, and develop a reputation as an expert in your particular legal area.

So go on and get blogging, already!

written by admin \\ tags: bells and whistles, blog, Canada Bar Association, Cynthia Kirby, few minutes, goodwill, kirkby, lawyers, legal advice, National magazine, new opportunities, reputation, sampling, sole practitioners, solo, Solos who lawyer, time commitment, word press, world wide web

Before opening up my own practice, Carabash Law, I relied on Michael Porter’s 5 Forces Model (Competitive Strategy: Techniques for Analyzing Industries and Competitors) – which is used to assess the attractiveness of any given industry using five separate perspectives – to analyze the solo/small law firm industry in and around where I live.  Each of these 5 factors will be examined in turn.  This analysis also helped me to identify the key success factors for that industry (which I will discuss in the next blog).

1. Threats of New Entrants: Moderate
“The threat of entry into an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect. If barriers are high and/or the newcomer can expect sharp retaliation from entrenched competitors, the threat of entry is low” (source:  Competitive Strategy: Techniques for Analyzing Industries and Competitors, p. 27). Factors affecting the threat of new entrants in the targeted law firm industry primarily include the fear of “hanging out one’s shingle” and “going it alone”, the lack of legal and business management skills, knowledge, and experience, necessary operating costs and capital expenditures on office equipment/layout and information technology systems (e.g. research, documentation, billing, etc.), and accessibility to new clients.

The threat of new entrants into the targeted law firm industry seems relatively low. To establish a law firm, lawyers need to be licensed member in good standing of the Law Society of Upper Canada (which required getting into and completing law school, passing the Bar Admissions tests, and articling for 10-months), which acts as a significant first barrier to entering the industry. Throughout their minimum 7 years of university studies, law students accumulate large student loans and debts, which may take years to repay. Furthermore, many articling students and lawyers do not have the sufficient legal research, writing, presentation, and inter-personal skills to effectively market their services to the public in a meaningful way.

Establishing and managing a business also involves risk, time, expenses, and patience – something many people may not be fortunate to have in their lives (e.g. they may have a mortgage, be married with kids, have car payments to make, etc.).

Indeed, establishing a new business – but perhaps even more so a legal business which involves regulatory oversight from the Law Society of Upper Canada – involves a lot of additional management considerations which lawyers may be unfamiliar with and scared of. Lawyers may not, for example, understand or properly execute organizational theory, supply chain management, information technology systems, human resources managing, advertising and promotion, accounting and finance – in other words, areas of business management which affect their clients’ and their own practice.

Start-up costs are relatively low. Such costs typically include rent, a computer with internet access, a telephone/fax and related services, business cards, and other stationary (e.g. letterhead, paper, pens, stapler, etc.).

A successful firm will also require a steady stream of clients – something which is not guaranteed. Accessibility to clients may depend on word of mouth advertising, a convenient location, being situated near target markets, etc. A new firm would also have to coerce clients of existing law firms to switch over – something they may be reluctant to do because of their affiliation and sense of loyalty to one particular lawyer/firm.

Another factor affecting the threat of new entrants is the accessibility that potential entrants would have to the necessary labour pool. This, however, is not likely to create a high barrier to entry because the availability of administrative staff seems to be in abundance.

Finally, given the fragmentation and diversity of the targeted legal industry, newcomers need not expect swift or sweeping retaliation from established competitors in the form of price wars and special promotions and programs.

2. Bargaining Power of Suppliers: Moderately low
“Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services. Powerful suppliers can thereby squeeze profitability out of an industry unable to recover cost increases in its own prices” (source: Porter, Michael E., “How Competitive Forces Shape Strategy” (Jul-Aug 1997), Harvard Business Review, p. 5). A supplier group is generally powerful if it is dominated by a few companies and is more concentrated than the industry it sells to.

The bargaining power of suppliers in the targeted law firm industry is moderately low. While some suppliers (e.g. of stationary) can be easily replaced with little transaction costs, other suppliers (e.g. application software, information management systems, research databases, etc.) can be difficult not to rely on. That being said, there are my alternative and sometimes free sources which can be used as a substitute to those suppliers. Moreover, suppliers of utilities (e.g. hydro, electricity, telephone, gas, internet, etc.), labour, and various services (e.g. cleaning, repair, vending, etc.) are generally either too small, widespread, or do not differentiate between this and other industries.

3. Bargaining Power of Buyers: Moderately low
“Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other – all at the expense of industry profitability” (source: Competitive Strategy: Techniques for Analyzing Industries and Competitors, p. 24) .

The bargaining power of buyers in the targeted law firm industry seems to be moderately low. Granted, lawyers do offer some services for which only they can deliver (e.g. representation before a court, public notary/commissioner for taking affidavits, etc.). Yet competitors such as other law firms, consulting companies, and paralegal firms can perform legal services but at a cheaper rate. Moreover, access to information through the internet may allow potential clients to engage in self-help (e.g. drafting a commercial agreement, registering a corporation, filing a divorce, etc.) or conduct their own legal research (e.g. www.canlii.org). These things being said, the firms in the targeted legal industry do not advertise their prices and individuals may not be able to distinguish one firm from another – ultimately hiring the first lawyer they find or are referred to. When it comes to promoting and protecting one’s legal rights and obligations, people may not be as open to shopping around because legal services may be seen as more than a commodity and more of a value-added service. Also, law firms impose relatively high switching costs (e.g. lawyers may demand payment for switching before handing the client’s file over to them) for clients who decide to take an active matter elsewhere before it is finally resolved.

Ultimately, buyers may not do as much shopping around for legal services as they might for retail products because of the lack of meaningful information available to them. Typically, clients hire a lawyer through word-of-mouth referrals, which means that they have little purchasing power.

4. Threat of Substitute Services: High
“Substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge. The more attractive the price-performance alternative offered by substitutes, the firmer the lid on industry profits” (source: Competitive Strategy: Techniques for Analyzing Industries and Competitors,p. 23).

The threat of substitute services is somewhat high: primary competitors can be found in thousands, while secondary competitors (such as consulting companies and paralegal firms) promote themselves for low-cost alternative legal services.

5. Intensity of Rivalry among Competitors: Low
“Rivalry among existing competitors takes the familiar form of jockeying for position – using tactics like price competition, advertising battles, product introductions, and increased customer service or warranties” (source: , p. 17).

The primary and secondary competitors generally have not distinguished themselves from one another and, as such, do not have an effective strategy. They do not seem, in their advertisements or other marketing communications materials, to understand or appreciate what the competition is doing to win clients over. And because they do not openly advertise their fees or offer warranties to compete, the intensity is relatively low. Given that most of the competitors can offer the same fitness classes and programs, they can only distinguish from one another based on price and non-price factors (e.g. quality of services, environment, brand image, etc.).

Michael Porter’s 5 Forces Model Conclusion
This 5 Forces analysis indicates that, overall, the attractiveness of the targeted law firm industry is considered moderately high. Despite the relatively low start up costs, low supplier and purchaser power, and low intensity among rivals, developing and managing a successful law firm has significantly high start-up costs which cannot be easily learned or accumulated.

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Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only.  If you believe you require assistance in deciding which business structure is best for you, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).

In this blog, I’ll be discussing general partnerships, which can be distinguished from limited liability partnerships (discussed in another blog)

Defined
Ontario’s Partnership Act governs general partnerships. A general partnership is “the relation that subsists between persons carrying on a business in common with a view to profit”. Here, the word “business” includes “every trade, occupation and profession”.  You may need to consult with a lawyer to determine if you’re already involved in a partnership (without even realizing it!).  In these situations, you may be subject to the Ontario’s Partnership Act and other legislation.

Advantages
The partnership structure offers the advantage of having someone to brainstorm your cases with, share the expenses, and expand your database of clients. Partnerships typically generate a great deal more money than sole practices. The larger the law firm, the more likely it is that a practitioner will be handling large cases for large clients who generate large legal fees (see Judge William Huss, Start Your Own Law Firm: A guide to all the things they don’t teach in law school about starting your own firm, (Illinois, U.S.A.: Sphinx Publishing, An Imprint of Sourcebooks, Inc., 2005), p. 14)

Felicia S. Folk points out the advantages of the general partnership in Getting Started: Opening Your Law Office (updated September 2004), Law Society of British Columbia, p. 6: online: Law Society of British Columbia:

• shared financial risk;
• continuity of cash flow when you are on vacation or ill;
• additional sources of capital and clients;
• broader management base;
• division of labour;
• ability to discuss all files with your partner;
• ability to provide clients with different areas of expertise; and
• sharing cost of associates and support staff.

Disadvantages
Felicia S. Folk points out the disadvantages of the general partnership in Getting Started: Opening Your Law Office (updated September 2004), Law Society of British Columbia, p. 6: online: Law Society of British Columbia:

• divided authority;
• hard to find suitable partners;
• conflicts among partners;
• liability for partners’ actions; and
• less freedom to choose clients.

Ease of Creation
Ontario’s Business Names Act provides that “[n]o persons associated in partnership shall carry on business or identify themselves to the public unless the firm name of the partnership is registered by all of the partners”. In addition to registering the general partnership’s name in the same manner as a sole proprietorship’s, the partners will generally enter into a partnership agreement to modify the default rules prescribed by the Partnership Act. This partnership agreement will usually outline the relationship of the partners to each other and to third parties.  The partnership agreement will also deal with issues such as “term of the agreement, names of the partners, who owns which of the assets, name of the partnership and who owns the name, capital contributions if any, how profits are to be shared, how the partnership is to be managed, how holidays and illnesses are to be handled, liabilities and disability insurance, admission and withdrawal of partners, how the partnership is to be run and conditions and mechanics for dissolution of the partnership” (Wendy E. Oughtred, Going It Alone: A Start Up Guide for the Sole Practitioner, (Aurora, Canada: Canada Law Book Inc., 1995), p. 51.)

The partners must also establish standards for fee distribution within the firm, including the means of rewarding lawyers for bringing business ot the firm, as well as the lawyers who actually work on cases (Judge William Huss, Start Your Own Law Firm: A guide to all the things they don’t teach in law school about starting your own firm, (Illinois, U.S.A.: Sphinx Publishing, An Imprint of Sourcebooks, Inc., 2005), p. 18).

Continuity
Unless the partnership agreement provides otherwise, a general  partnership can be dissolved in a number of ways, including:

• At the expiration of the partnership’s term, adventure, or undertaking (if specified);
• By the death or insolvency of any of the partners;
• By the happening of an event which makes it illegal for the partnership to continue; and
• On application by a partner in respect of prescribed circumstances.

Liability
In a general partnership, all partners are jointly and severally responsible for the liabilities of the partnership up to the total value of their personal assets.

Taxation
A general partnership is a flow-through entity, which means that income earned by the partnership is passed onto the partners without being taxed at the partnership level. If a partnership earns dividend income, taxable capital gains, or realizes a business loss, these sources would be received as dividend income, taxable capital gains, or business losses in the hands of the partners. The income, losses, and tax credits of the firm is first  determined and then allotted to the individual partners in accordance with their equity interest in the partnership (as per the partnership agreement). The income earned by the individual partners will be fully taxed at their personal income tax rate. The fiscal year end of the partnership will be same as the individual partners – namely, December 31st of each year.

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