Law Firm Structures 2

Question 1

In a general partnership law firm, how is each partner typically liable for the firm's debts and obligations?

Accepted Answer

Jointly and severally liable for all firm obligations

Answer

In a general partnership, partners share joint and several personal liability for the firm's debts and malpractice.

Question 2

What is the primary reason many modern law firms organize as a Limited Liability Partnership (LLP) rather than a general partnership?

Accepted Answer

To shield partners from personal liability for other partners' malpractice

Answer

The LLP form protects each partner from personal liability arising from the negligence or misconduct of other partners.

Question 3

In a typical law firm partnership, what distinguishes an 'equity partner' from a 'non-equity partner'?

Accepted Answer

Equity partners hold an ownership stake and share in profits

Answer

Equity partners own a share of the firm and share in its profits and losses, while non-equity partners are usually salaried.

Question 4

Which firm structure issues stock and is owned by lawyer-shareholders while still limiting personal liability?

Accepted Answer

Professional Corporation (PC)

Answer

A professional corporation is owned by lawyer-shareholders and provides liability protection similar to a regular corporation.

Question 5

What is the simplest law firm structure, typically used by a single attorney practicing alone?

Accepted Answer

Sole proprietorship

Answer

A sole proprietorship is a single attorney practicing alone with no separate legal entity.

Law Firm Practice Test