I am assuming you would carry the bag in crowded areas and not just keep it stashed in the trunk of your car. I think it could draw unwanted attention, possibly even by those who would want to steal it. Hopefully not in an attempt to use it against you, but you never know. I would not want to carry a knife like that except maybe in the wilderness. In the city I would want to have it very close to my body so I could keep control over it at all times.
Regarding legality, it is my understanding that you have more legal problems if the knife is concealed, so carrying it openly like that seems better in general from a legal standpoint. I don't think you would get into legal trouble for that unless you live in one of the most restrictive places. However, if you conceal it inside the bag or elsewhere "about your person," I think you are in danger of violating the concealed weapon laws of most US states.
The safest options would be to wear it on your belt or carry a folder.