Practicing as a solo can be incredibly rewarding, even in this era of mega firms. However, solo practitioners face unique risks, issues and restrictions and so need to take extra precautions to protect their clients/patients, loved ones and themselves in the event of illness, disability or death. These steps might be addressed almost automatically in a larger organization, but not for the solo. There are many optional approaches. If your client is a solo practitioner, you should work with him to select the ones that work best for him and proceed diligently to implement them.
A robust insurance plan is often a key foundation for the solo professional practitioner. Among other coverages, your client should consider:
- Disability income replacement insurance. If your client isn’t working, other than some collections on accounts receivable, income may grind to a halt. By definition your client doesn’t have partners who may be able to carry the weight for some period of time.
- Life insurance. This is critical if your client has family and others who rely on him. His death may leave the practice with little value. Unlike partners in a professional practice, your client may have no buyout agreement. However, it may be feasible (see below) to address this with an agreement with a colleague.
- Business interruption insurance.
Ethical Rules and Regulations
Professionals are subject to an array of ethical rules and requirements. These can be incredibly important to address in planning for succession:
- Who can see client/patient records in the event of your client’s absence or death? Often, only similarly licensed professionals can take this step. This restriction can greatly narrow the field of who can assist. It can also make inappropriate (or worse) traditional estate planning documents (for example, your client’s executor may not have the legal right to see practice documents).
- Your client may face an ethical obligation to create a succession plan. This could have significant adverse consequences if identified even if no “event” should ever affect your client or his practice.
- Record retention requirements for your client’s practice could be important. What records must your client retain and how? This all may affect how your client can make records accessible to your his named successor, as well as how practical and cost effective it will be for someone stepping in to pick up work in process and/or to transition files back to clients/patients.
The documentation for your client’s practice could contemplate some of the succession issues your client might face:
- Succession agreement. Your client should consider a simple agreement with a colleague to step in and manage his practice during his absence or to sell or transition it in the event of your client’s permanent disability or death. Your client can address compensation to the colleague in this capacity.
- LLC operating agreement. Many professional practices are organized as limited liability companies (LLCs). This type of structure can lend itself to succession planning for the solo with a twist on its usual application. Your client probably had a simple single member LLC formed for his practice. He should consider instead forming his practice (or modifying it if already formed) as a manager-managed LLC. Naming a manager seems a bit like a non-event because your client would be the only choice as the initial manager/member. However, that structure permits your client, using fairly standard legal drafting, to name a successor manager. That successor can step in if your client is incapacitated and operate his practice until his return or, in the event of his death, transition his practice pursuant to an existing succession agreement or sell it if both feasible and ethically permissible. Using a successor manager gives that person a position that third parties are accustomed to dealing with and so may make operating during a transition
- Succession instructions. Whatever steps your client takes, he should draft a memorandum to staff and a colleague listing steps to take in an emergency, where key data is, how to access key passwords, where a work in process or task list can be located and so forth. Instructions that might be easy for your client to summarize could save fortunes of time and prevent a range of potential problems, for someone stepping in to help.
Personal Legal Documents
Your client might consider modifying many of your legal documents to address succession of your practice:
- Power of attorney. Your client should consider a special professional practice power of attorney designating a licensed colleague to handle practice matters. Don’t assume your client’s general agent has the legal right to access practice records, especially confidential client/patient information. If your client has a formal practice agreement, this might not be necessary.
- Will. Consider adding the appointment of a special practice executor to your client’s will (or trustee to your revocable trust) who’s a licensed professional to assist with practice succession matters.