Court Denies Entireties Ownership Of Law Practice

An attorney formed a corporation to own his law practice. He formed the corporation under Florida’s general corporation statute instead of the professional corporation statute. He issued all the stock to himself and his wife jointly. The lawyer then filed Chapter 7 bankruptcy. He sought to exempt the jointly owned stock in his law business as tenants by entireties stock. The Chapter 7 Trustee argued that the stock could not be exempt as joint property because only individuals who are licensed attorneys can own in a law firm. The debtor responded that since he owned the stock with his wife jointly there was no "individual" stock owner and therefore his ownership was exempt from regulations that all "individual" owners be licensed attorneys.

The bankruptcy court rejected the attorney/debtor’s argument. The court denied the claimed exemption of the stock as a tenants by entireties asset. The judge cited the Florida statute that states only licensed attorneys can have any ownership interest in a law firm or law firm corporation. Unless both spouses are licensed Florida attorneys, a law business cannot be owned as tenants by the entireties in Florida. The same rule would apply to other licensed professionals. Case No. 05-29501 (Adams)

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida