Who Can Own a Law Firm in 2026? The Real State of Law Firm Ownership
Traditional Ownership Rules (Baseline)
For decades, the foundational rule in U.S. legal ethics has been simple: only lawyers can own law firms and share in legal fees because non-lawyer ownership raises concerns about conflicts with lawyers’ duty of loyalty and independent professional judgment. That principle flows directly from ABA Model Rule of Professional Conduct 5.4, which generally prohibits non-lawyers from:
Sharing in legal fees,
Having ownership interests in law firms, or
Possessing managerial control that could affect lawyers’ legal judgment.
Virtually every state’s ethics rules adopt some version of this restriction. Most jurisdictions still enforce these limits today.
To see how serious this prohibition is, look at ABA Model Rule 5.4 itself:
“A lawyer or law firm shall not share legal fees with a nonlawyer…”
“...a nonlawyer shall not own any interest in a partnership...”
This rule — and its counterparts in state codes — exist to safeguard law-client loyalty, client confidentiality, and the independent exercise of professional judgment.
What “Non-Lawyer Ownership” Actually Means
When we talk about “non-lawyer ownership,” we mean situations where someone who is not licensed to practice law either:
Has an equity stake in a firm that provides legal services,
Can share in legal fees, or
Has decision-making authority over the provision of legal services.
For decades, such arrangements were categorically barred in the U.S. — because legal ethics codes drew a bright line around law-practice ownership.
In most states today, you still cannot:
Give a non-lawyer an ownership stake in your law firm.
Share legal fees with a non-lawyer.
Allow a non-lawyer to control professional judgments.
But a handful of jurisdictions are now doing something different: they are authorizing legal services firms that permit non-lawyers to own and invest in them, within a regulated framework.
Where ABS Fits (And Where It Doesn’t)
Alternative Business Structures (ABS) are the legal innovation at the heart of today’s law firm ownership conversations.
Under a true ABS model:
Non-lawyers can own equity in entities that deliver legal services.
Investors can share in profits.
Non-lawyers may even have management authority (subject to safeguards).
Where this is actually happening today:
Arizona: Fully adopted ABS through Supreme Court rule amendments and certifications. Non-lawyers can own or invest in law firms with court approval.
Utah: Operates a regulatory sandbox that permits ABS entities under specific conditions.
Washington, D.C.: Long-standing rule permits some non-lawyer interests but in more limited ways than Arizona’s full ABS program.
Puerto Rico: Also permits non-lawyer ownership within numeric and governance limits.
Washington: Pilot program is underway, it will be interesting to see how this program shapes up in the coming years.
Tennessee: On deck, we’re in the wait and see stage!
Even in ABS jurisdictions, only lawyers may provide legal services (non-lawyers cannot practice law). But outside of these limited frameworks here in the U.S., traditional ownership prohibitions still apply. Firm owners must still comply with Model Rule 5.4 and state-level equivalents.
Why Firms Are Asking These Questions Now
There are several reasons this long-settled rule is now a live topic:
1. Market pressures and innovation
Clients are demanding legal service models that combine law, technology, process, and business advisory more tightly than traditional firms have delivered.
Private equity is taking a deeper interest in the legal field and access to justice efforts need funding.
2. Competitive examples emerging
Arizona’s ABS program has already attracted innovative entrants (for example, AI-augmented legal services firms and large professional service firms seeking law firm licenses) that operate with non-lawyer ownership. When KPMG is in the mix, you know there’s something to it.
3. Ethics guidance is evolving
The ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 499, which clarifies when lawyers can passively invest in ABS entities in permissive jurisdictions without violating Model Rule 5.4, a nuanced but important development.
In short, both market forces and ethics guidance are pushing firms to rethink what “ownership” can look like, without sacrificing core professional obligations.
Key Rules & Opinions
ABA Formal Opinion 499 – Passive Investment in Alternative Business Structures — https://www.americanbar.org/news/abanews/abanewsarchives/2021/09/aba-issues-guidance-on-investing-in-abs-approved-entities-when-a-lawyer-is-licensed-elsewhere/
NYC Bar Formal Opinion 2024-4 – Guidance on associating with Alternative Legal Business Entities —https://www.nycbar.org/reports/formal-opinion-2024-4-lawyers-associating-with-alternative-legal-business-entities/