It is important to create a transition plan with a timeline for closing your practice when you do not intend to sell your practice or transfer it to a successor attorney or firm. The following checklist outlines some of the issues to address when creating your plan and to protect the interests of your clients. A series of rules that may be implicated when you close your practice, of which you should be aware. are listed below.

If you formed an entity through the Secretary of State, such as a professional corporation or a limited liability company, you must also dissolve the entity. See Section B, Dissolving the Professional Entity of a Sole Practitioner, for information on how to do so.

1. Checklist for Closing Your Own Practice Without a Successor

 

1. Choose an Exit Date

It is best to choose a target date for when you want to stop practicing law and create a plan of action. Some attorneys prefer to slowly transition by wrapping up cases and not accepting any new matters with the intention that there will be few, if any, client matters in need of closure or transition to a new attorney by the planned retirement date. Others intend to practice up to the date notice must be given to clients and interested parties of their intent to retire that reasonably allows enough time for their clients and themselves to get their affairs in order.

2. Review Rules and Ethics Opinions:

 

1. Texas Disciplinary Rules of Professional Conduct:

1. Rule 1.03 Communication: A lawyer must keep a client reasonably informed of issues affecting the client’s matter, including the closure of your practice.

1. Rule 1.05 Confidential Information: Provides rules for avoiding conflicts and protecting former clients after an attorney-client relationship has ended and prohibits disclosure of confidential information of current or former clients except in certain circumstances set forth in the rule. File disposition must be handled in a way that prevents disclosure of confidential information.

 

• Rules 1.09 and 1.10: Prohibit a lawyer from taking adverse action against a former client related to the matter in which the lawyer represented the client.

 

1. Rule 1.14 Safekeeping Property: Rule 1.14 relates to how a lawyer should handle funds or other property that belongs to a client or third party and how long financial records must be maintained.

1. Rule 1.15 (d): A lawyer must take reasonable steps to protect a client’s interest when representation ends, including giving reasonable notice to the client, allowing time for the client to hire another attorney, returning documents or property to the client, and refunding any unearned fees. An attorney should encourage the client to pick up their file or instruct the attorney transfer it to another attorney. A lawyer may retain documents related to the client if permitted by law provided it does not prejudice the client in the subject matter of the representation.

 

13. Texas Rule of Disciplinary Procedure 13.01, Notice of attorney’s Cessation of Practice: When an attorney becomes inactive or resigns from the practice of law and leaves an active client matter that no other attorney has agreed to handle with the consent of the client, written notice of the cessation of practice must be mailed to those clients, opposing counsel, courts, agencies with which the attorney has matters pending, malpractice insurers, and any other person or entity that has a reason to be informed of the cessation of practice. If the client has secured other counsel or consented to the assumption of responsibility by another attorney, the above notices are not required and no further action is needed. Under TRDP 13.04, the formal procedure for court supervised custodianship under Rules 13.01-13.03 can be by-passed by an attorney’s self-appointment of a custodian who can conduct a custodianship with the same notices to clients, the court and other counsel without court action.

 

1. Ethics Opinion 570: The client is entitled to obtain the contents of the file, including attorney notes and other work product related to the lawyer’s representation of the client, unless the lawyer is permitted or required to retain documents and can do so without prejudicing the interests of the former client in the subject matter of the representation.

 

1. Ethics Opinion 627: While Texas Disciplinary Rules of Professional Conduct do not provide specific guidance regarding the disposition of client files, they do provide basic principles and values, such as not disclosing confidential information of current and former clients, not destroying a client’s file if there’s a reasonable likelihood that the client’s interest would be harmed. The opinion also clarifies that the attorney is responsible for the cost of storing the file except that charging the client for storage if the client wants the file to be stored longer than required is allowed.

1. Ethics Opinion 657: Generally, a lawyer can provide the file to the former client as it’s maintained or, at the lawyer’s expense, convert some or all of it to paper or to an electronic format. The file contents must be reasonably accessible to the ordinary client. If any information is kept in a special format that is not reasonably accessible to the ordinary client, the lawyer must bear the cost of converting the information to a reasonably accessible format or print the information in a format that can be read by the client. If the file contains anything with unique or significant value in its original form, it should be returned to the client in its original form.

 

3. Notification to Clients and Other Interested Parties

 

1. Clients: Clients must be notified that you will be closing your practice. The notice should include:

 

1. The date you intend to close your practice.

 

1. The client’s need to retain other counsel if needed.

 

• The client’s right to obtain their client file and a request of whether the client would like to retrieve it, have it transferred to new counsel, or have it destroyed in accordance with the Texas Rules of Professional Responsibility. It is prudent to include a statement that if they do not respond within a reasonable time period of X days, you will assume they wish for you to destroy it in accordance with the rules.

• The general rule is that the file belongs to the client, although there may be contents in the file that do not belong to the client. It is best if the file is returned to the client. You are allowed to make a copy. A digital copy is best in terms of low-cost storage.

 

• All client property, including original wills, signed contracts, property deeds, birth and marriage certificates, trust instruments, and the like must be safeguarded and returned to the client. For guidance on what contents belong to the client and which should not be given to the client, see the above ethics opinions and 6. Destruction and Storage of Client files below.

 

• If the client wants to retrieve their file, promptly arrange how it will be made available to them, and have the client sign an acknowledgment of receipt.

• If the client asks you to transfer the file to new counsel, have the client sign an authorization to transfer the file, and promptly do so. See Forms and Resources below for a sample client authorization to transfer the file.

• If the client asks you to destroy the file, have the client sign an authorization to destroy the file, and do so in accordance with the rules and any file maintenance policy you have. In case of future dispute, keep the client’s authorization separate from the client’s file or it may inadvertently get destroyed along with the file.

1. How final invoices, accounts receivable, and the return of any unearned fees will be handled.

 

1. Any other information that is relevant to how the closing of your practice affects the client and the client’s matter.

 

1. Courts or Agencies: Courts and agencies where you have any pending matters should be notified of the date that you will cease to practice.

 

13. Current cases: Make sure to withdraw as counsel from any case in which there will not be a substitution of counsel. If there will be a substitution of counsel, it is always prudent to do a joint motion for withdrawal of counsel and substitution of counsel releasing you from any future obligations and liability related to the case. See Texas Rule of Disciplinary Procedure 13.01 listed above and Forms and Resources for Transition Planning below for a sample Motion for Substitution and Withdrawal of Counsel.

 

1. Court Appointments: Make sure to notify the court with ample time for the court to appoint new counsel.

 

13. Opposing counsel: See Texas Rule of Disciplinary Procedure 13.01 listed above.

4. Staff

Inform any staff of your intention to close your practice, the date you plan to close, and any severance package you plan to provide. If you are winding down your practice, staff may be happy to stay and assist until the client load is one that you can handle closing on your own.

5. Final Invoices and Return of Funds

Prepare and send clients a final billing statement showing any outstanding fees due or any refund of unearned fees being held in an IOLTA, escrow, or other trust account.

 

6. Destruction and Storage of Client Files

1. Review the File: Review all files to determine if they can be destroyed or, if not, how long they must be stored before destruction.

 

1. Secure Certain Content with Intrinsic Value or That May Give Rise to Significant Property Rights: Secure contents with intrinsic value or that may give rise to significant property rights. Files may contain original wills, signed contracts, stock certificates, promissory notes, property deeds, trust instruments, or other original documents like birth and marriage certificates and passports. Such items must be safeguarded, returned to the client, or disposed of, if at all, by court order. Special attention should be paid to open files and closed files in which it appears the client’s or the attorney’s interest may be ongoing, including files that contain corporate books and records, intellectual property files, documents pertaining to minors (such as custody and support judgments and adoption records), or other matters of ongoing interest.

 

1. Be Alert to Lawful Restrictions on the Client’s Access to Contents in the File: Specific content in the file may be reviewable by the attorney but restricted from disclosure to the client. Be watchful for protective orders and markings that limit disclosure to “Attorney’s Eyes Only.” Other restrictions may apply by statute, rule, or standing orders. Examples of restricted access include:

• Criminal case discovery obtained from the prosecution may be restricted from the client. Tex. Code Crim. Proc. art. 39.14(f), (g) and ethics opinion 657.

• Trade secret and proprietary information discovery may be restricted from the client. Misc. Order 62, ¶22 and Ex. A (N.D. Tex. Nov. 17, 2009) (standing protective order applicable to patent cases in the Northern District of Texas); Local Rules for the United States Court for the Eastern District of Texas, app. B, P. R. 2-2 (local rule applicable to patent cases in the Eastern District of Texas).

• National security information discovery may be restricted from the client. Classified Information Procedures Act (“CIPA”), 18 U.S.C. app. 3; see U.S. v. Bin Laden, 2001 WL 66393 *2 (S.D. New York 2001) (“defense counsel have been cleared to review a category of classified documents that they may not share with their clients”).

 

7. Accounts

 

1. IOTLA, trust, and escrow accounts: Return any unearned attorney’s fees from your IOLTA account or any client funds held in trust or escrow accounts.  Remember to notify the Texas Access to Justice Foundation within 30 days of any IOLTA account closure. The Texas Access to Justice Foundation’s website has an IOLTA Bank Account Closure Form that you can print and return to them.

1. Bank accounts: Close out any business accounts as needed. If a professional entity is involved, see information on closing the entity’s accounts under Section E, Dissolving the Professional Entity of a Sole Practitioner below.

8. Vendors and Other Contractual Matters

Notify vendors and others that you will be closing your practice and the date of cessation. It’s important to notify your landlord, phone carriers, the post office, insurance carriers, and vendors for case management software, billing software, copiers, other office equipment, etc.

9. Websites and Social Media

It is important to shut down any websites and social media presence and indicate the law practice has closed.

10. Office Furniture

Arrange to sell or donate any office furniture, filing cabinets, or equipment.

 

1. Dissolving the Professional Entity of a Sole Practitioner

 

If a solo practitioner formed a professional corporation or limited liability company to practice law, review this checklist of considerations and statutory procedures for the entity’s dissolution, referred to as “termination” in the Texas Business Organizations Code (TBOC), and practice tips:

1. Information Gathering

 

1. When preparing for the winding up and termination of a professional entity, you should identify the status of the following about the entity and consider how to reconcile or comply with relevant rules:

 

1. Recent financial statements, balance sheets, and other accounting records.
2. Federal, state, and local tax returns.

• A list of all actual and potential creditors and run a credit report on the entity to identify possible undisclosed creditors.

1. A list of all litigation to which the corporation is party.
2. An inventory, with appraised or estimated values, of all entity assets.

1. Practice Tip: Review any provisions in the entity’s organizational documents that address termination (corporate bylaws, an LLC’s company agreement, buy-sell agreement). For example, the organizational documents sometimes have provisions that:

1. Name the person responsible for winding up the entity; or
2. Set out termination distributions (after the entity has discharged its liabilities).

 

2. Professional Limited Liability Company

For a professional LLC, the legal representative or successor of the sole member is charged with the entity’s winding up, if the LLC’s company agreement does not otherwise specify.  See TBOC § 101.551(2)

3. Professional Corporation

A professional corporation continues after the death, incompetency, bankruptcy, resignation, withdrawal, or retirement of its sole shareholder until the corporation’s winding up and termination.  See TBOC § 303.005(1)

4. Sole Practitioner’s Ownership Interest

If the sole practitioner of a professional entity dies or otherwise ceases to be authorized to practice law, see TBOC §§ 301.008(b)–(e), 301.009:

301. The sole practitioner’s ownership interest (e.g., shares of a corporation or membership interest of an LLC) must be promptly relinquished. See TBOC § 301.008(b)

301. The legal successor can continue the practice only if the successor is also licensed to practice law. If not, the legal successor must also relinquish the interest. See TBOC § 301.008(c)

301. The ownership interest in a professional entity may only be transferred to an owner, the entity, or another licensed attorney. See TBOC § 301.009

301. If relinquished, the professional entity must purchase the ownership interest (or cause it to be purchased), which may be provided for by the entity’s governing documents or other agreement (such as buy-sell agreement). See TBOC § 301.008(d)

301. The successor can act as a managerial official or owner of the entity only for the purpose of winding up the entity’s affairs, including selling the entity’s assets. See TBOC § 301.008(e)

5. Court Orders During Termination

11. Under TBOC § 11.054, the sole owner’s legal representative or successor for a professional entity that is terminating its affairs can apply to a court to:

1. Supervise the winding up;
2. Appoint a person to carry out the winding up; and

• Make any other order, direction, or inquiry that the circumstances may require.

1. Practice Tip: Depending on the circumstances, the successor (or other liquidator charged with winding up the entity) could seek orders under this TBOC provision to:

1. Seek to appoint the custodian attorney or another person to wind up the entity.
2. Coordinate with the custodian attorney or the sole practitioner’s executor.

• Seek to combine an action for court-supervised custodianship under Texas Rule of Disciplinary Procedure 13.03.

1. Obtain a court order granting or facilitating access to the entity’s files, assets, accounts, digital resources, etc.

 

6. Winding Up Procedures under TBOC, Chapter 11

 

11. Per TBOC § 11.052, when winding up a professional entity, the entity (by and through its liquidator):

1. May no longer carry on any business, except to the extent necessary to wind up its business.
2. Must send a written notice of the winding up to each of its known claimants.

• Must collect and sell its property to the extent any assets-in-kind will not to be distributed to the successor of the ownership interest.

1. May perform any other act required to wind up its business and affairs.
2. May prosecute or defend a civil, criminal, or administrative action.

11. TBOC § 11.053(a), (b) says that the entity must apply and distribute its property to discharge (or make adequate provision for the discharge of) all its liabilities and obligations. If there is insufficient property to do so, it must either:

1. Apply the property, to the extent possible, to the just and equitable discharge of the liabilities and obligations (including any owed to owners or members, other than for distributions).
2. Make adequate provision for the application of the property to the liabilities and obligations.

The entity may delay paying a debt if it would result in an unreasonable loss of value to the assets to be liquidated. See TBOC § 11.053(d)

The entity may set aside or reserve funds to cover any debt or liability owed to members or creditors that cannot be located or are unknown by depositing the amounts owed in a special account with the Texas Comptroller, which will protect the liquidator from any further liability if the statutory procedures are followed. See TBOC §§ 11.352(c), 11.353

7. Optional Claims Procedures

 

11. A terminating entity can use the TBOC’s optional claims procedures to shorten the period for asserting a claim against the entity by sending notice to claimants by certified mail. See TBOC § 11.358

11. Practice Tip: To take advantage of these optional procedures, the entity is not required to send notice to all potential claimants. It can deliver the notice to only a few selected creditors. See TBOC § 11.359(b).

Under these procedures, a claim is extinguished by operation of law if the claimant fails to either:

1. Timely present a written claim.
2. Timely bring an action if, after the claimant presents a claim in response to the notice, the entity subsequently delivers a notice of rejection.

If the entity does not use this procedure, a claim otherwise expires if the claimant does not begin a proceeding within three years of the entity’s termination.  See TBOC § 11.359(a)

8. After Discharging Liabilities

 

11. Any remaining property, whether in cash or in kind, is distributed to the owners of the ownership interests (TBOC § 11.054(c)).

1. Consult with the entity’s accountant or another tax professional to complete and federal tax and recordkeeping responsibilities such as:

1. Filing final tax returns.
2. Fulfilling any employee obligations.

• Reporting payments to contract workers.

See IRS, Closing a Business (Feb. 2, 2023), https://www.irs.gov/businesses/small-businesses-self-employed/closing-a-business.

1. After completing winding up, the entity must:

1. Request a certificate of account status from the Texas Comptroller (https://comptroller.texas.gov/taxes/franchise/certificate-letter-request.php).
2. File a certificate of termination with the Texas Secretary of State that attaches the certificate from the Texas Comptroller (see https://www.sos.state.tx.us/corp/termreinfaqs.shtml).

 

1. Resources
2. Closing a Practice on the State Bar of Texas Law Practice Management website.
3. Succession Planning on the State Bar of Texas Law Practice Management website.