A potential client asks, “Can my accountant draft legal documents for me?” The answer is quite simple, no. Let me be perfectly clear here, I said NO! I’m picking on accountants a bit here, because of recent events. However, this article applies to bankers, realtors, and any other advisor that is giving legal advice or doing legal work.
As a small business attorney, I see this situation all too frequently. It comes up in a variety of ways. The typical situation goes something like this… (1) My accountant formed my business and provided legal documents to me. (2) My accountant told me “this legal entity is best for you” and then drafted the legal documents. (3) Or, in truly egregious cases, the accountant becomes the client’s one-stop shop for all legal needs.
The advisor’s response when questioned? “Oh, I’m not giving legal advice, I’m just a ‘scribner’”. To which I respond, “tell that to the judge, your malpractice insurance provider, or the prosecutor.” Let’s see why non-lawyers doing legal work is not only unacceptable, but unlawful.
Missouri Law – Penalty
Missouri Annotated Statutes §484.010 and §484.020, define the unlawful practice of law or carrying on of a law business. §484.010 states in relevant part, “The “practice of law” is hereby defined to be and is the appearance as an advocate in a representative capacity or the drawing of papers…”. Additionally, “The “law business” is hereby defined to be and is the advising or counseling for a valuable consideration of any person… as to any secular law or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document or instrument affecting or relating to secular rights…”.
Section 484.020 goes on to say, “No person shall engage in the practice of law or do law business…unless he shall have been duly licensed therefor…”. It continues with the penalty provisions. First, a person violating this provision “shall be guilty of a misdemeanor”. Second, they shall be punished by a fine, costs of prosecution, and subject to be sued for treble the amount paid to him/her.
Now ask, can your accountant draft legal documents?
(Side Note: In a quick web search, I found several law firms dedicated to helping consumers who have paid a non-lawyer for legal services. There are plenty of legal cases on the unlawful practice of law in Missouri as well. Many of these cases deal with companies charging fees to fill out legal documents on behalf of consumers. In other words, scribner’s. So, no, I don’t buy the ‘scribner’s’ exception defense.)
Why This Matters
My first thought is less legal in nature and more practical. If your advisor is willing to skirt the law on something as simple as preparing a business entity, what else are they willing to do? Integrity matters… at least to me. My job is to protect and advise my clients. I take this role seriously and cannot jeopardize their future by not calling out their other advisors that step over the line.
Second, I give this one simple piece of advice to anyone faced with this situation. Ask your advisor if their malpractice insurance will cover them or the legal documents they created. Most professionals carry malpractice insurance, also known as errors and omissions coverage. These malpractice policies cover the insured for the professional classification they work in. If your accountant is preparing legal documents for you, will you be able to recover damages from their insurance provider? Probably not. (Here’s a more detailed analysis on this point from another law firm.)
The bottom line is simple. Attorney’s give legal advice and draft legal documents. When forming a business, drafting a contract, or discussing legal implications, there are a wide array of complicated legal theories and issues that come into play. Other advisors are smart, if they have been around they know a lot, but if they are not licensed attorneys, they cannot do it for you. So, can your accountant draft legal documents? Sure, but not lawfully.
What Can You Do?
When confronted with these scenarios, I, as an advisor have a couple of decisions to make. Here is the general framework I work through.
First, before assuming the worst in your advisor, I like to learn more about them to see if perhaps they are just “unaware” of the implications of their actions. Believe it or not, I’ve heard on multiple occasions that various “professional seminars” instruct accountants and others to “go ahead and form businesses.” After all, they are just ‘scribner’s,’ right? In these cases, I ask for permission to speak with the other advisor to share my knowledge. If they are willing to learn and stop, we can build a great team and relationship. If not, we move on to step two.
Second, if the other advisor is convinced they are doing nothing wrong and will not adapt, then I tell my clients to make a decision. I refuse to work with, or alongside, other advisors who are willing to jeopardize my client’s reputation and good will for a few bucks. As previously stated, this is a major lapse in integrity to me and I don’t want to comingle my advice with someone who is willing to step over that line. As such, my clients need to decide which advisor they want to continue forward with. This may seem harsh. However, at the end of the day, my obligation to my clients is to them and them alone.
Third, as a licensed attorney and officer of the court, I have to consider whether or not to report the other advisor. This is a very tricky scenario and not one that I take lightly. Of course, my potential client would have to be on board and willing to make a formal complaint. Some clients are happy to do so, given the breach of confidence and the potential to recover treble damages for fees paid.
I work with a handful of excellent accountants, bookkeepers, bankers, and other business advisors that understand these rules. They, for good reason, refuse to give legal advice or even do “simple” legal tasks. Why? They know their job/profession and do not want to stray outside of their lanes. These advisors also understand the potential implications of doing legal work without a law license. They are not willing to put their clients at risk, nor ruin their professional reputations.
Please feel free to share this short article with others you know that might benefit from its information. I’m always happy to field calls on this topic and help others understand the issues involved. At the end of the day, my main objective is to help my clients build a team of trusted advisors that have one goal in mind…
To see our client, achieve their mission.
**Disclaimer: No accountants or other advisors were harmed in the creation of this article. I work with many fantastic people from a wide array of professional services. If anything I have said is offensive to you, give me a call. I’m happy to discuss. If you feel anything I’ve said is in err, again, please give me a call so we can discuss.