Few solicitors yet describe themselves as a managing director of a 'recognised body'.

This somewhat strange title stems from the Law Society's Incorporated Practice Rules 1988, which permit solicitors to practise through the medium of limited companies - or recognised bodies as the rules quaintly describe them.In the 1970s incorporation was a fairly hot topic.

With income tax at 83%, and 98% on unearned income such as client account interest, the then lower rates of tax on companies seemed very attractive as a way of building up post-tax working capital.

The Law Society agreed that legislation to permit solicitors to incorporate should be sought.

The change of government in 1979 brought much lower nominal rates of tax.

Continuing high inflation coupled with the preceding year basis of assessment for partnerships meant that pressure for incorporation evaporated.During the 1980s solicitors' practices grew much larger and 'corporate management' became fashionable, but the received wisdom was that partnership offered the best tax structure.My own view was that tax was not the governing issue - after all we, together with many other lawyers, were advising large numbers of clients on the merits of incorporation on the basis that the benefits of limited liability outweighed any tax disadvantages.

The practice of law could hardly be described as a low risk occupation any more and the tax issues were the same for everybody.Perhaps more importantly, the corporate structure seemed better suited to a more long term view of business - partnership accounting attributing all profits directly to partners without a formal consideration of the amount to be retained in the business and that available for distribution.

Investment in a partnership is unattractive: there is no prospect of capital growth.

Thus £100,000 left in a partnership for 20 years yields a capital sum of £100,000 however much the business has grown - hardly an exciting investment, although the income may be exciting along the way.A friend in a top ten partnership had explained to me with pride some time ago that, in his firm, one went in with nothing and came out with nothing.

But one hundred times nothing is still nothing, so a multi-million pound business had a capital value of nothing.

He did say that the young partners tended to vote for capital expenditure because in all probability they would get the benefit after the older partners had paid for it - and by the same reasoning the older partners opposed expenditure, only the pyramid structure driving the practice forward.Nevertheless, the exclusive concentration on annual income may have disadvantages - both for clients of the firm who may face excessive fees and in terms of instability, where partners or teams move rapidly from firm to firm seeking the highest short term yield.For several years we had been looking for suitable premises in Sheffield to open an office.

When a suitable freehold property was identified it was an opportunity to set up a new incorporated practice.

The Law Society provides a useful information pack including specimen articles of association and a copy of the incorporated practice rul es.

The two main requirements are that shareholders must be solicitors or foreign lawyers, and professional negligence cover of £1 million in addition to indemnity fund cover must be maintained.One of the main benefits of limited companies is the ease of raising funds.

A business plan was prepared, and those solicitors within the existing firm who wished to invest did so.

Since we had achieved accreditation to the BS5750 standard it was simple to describe the proposed methods of operation.

The aim is to run a profitable business, with a fair return to those who provide capital and those who work in the business.

The intention is to achieve capital growth in the value of the shares and to provide share options in due course to new employees.Partnership is said to be like marriage, but 40% of marriages end in that painful procedure divorce.

Buying and selling shares is much simpler and relatively risk free.

The task now is to ensure that the business succeeds and grows.There seems little reason why a mechanism which has been successful for many other businesses should not work for solicitors, although a number of solicitors have told me that solicitors are different.

I am not convinced that this is true today.

When I joined the profession the conveyancing monopoly ensured a good living for almost all solicitors.

Advertising and 'touting' were banned and the worst offence solicitors committed was charging less than the scale fee for a conveyance.

The cost of professional negligence insurance was insignificant.

Perhaps we were different then.Only last week I heard of a firm with £5 million indemnity cover receiving a claim for three times that amount.

The accountants cannot obtain cover for anything like the size of claim they now tend to face, and KPMG are consulting clients on their proposal to incorporate their audit practice.

In the USA lawyers and accountants are opting for PLL status - a hybrid with partnership tax status but some limitation of liability.

Who can say what standard of care the courts will require ten years from now when claims in tort may still lead to review of legal work done today by the standards of tomorrow?For incorporation to offer protection for retired professionals a long lead time is necessary; perhaps now is a good time to start.Incorporation may offer a clearer management structure, easier finance raising and a more equitable reward structure at a tax cost that is acceptable.

National insurance is not payable on dividends, and the preceding year basis of assessment is soon to go anyway.

If accountants follow KPMG, incorporation may soon become the norm, and buying, selling and merging legal firms may become a much simpler exercise.