Alternative Business Structure

An Alternative Business Structure or “ABS” is a type of law firm ownership structure that includes both practicing attorneys, as well as non-lawyers. In 2021, the Arizona Supreme Court modified Arizona’s Rules of Professional Conduct to license such ABS law firms. Rosing Pott & Strohbehn attorneys advise ABS law firm applicants on both the application process and the compliance requirements once licensed.

An Arizona ABS structure provides a fairly unique opportunity. While ABS firms have operated in some form in England, Wales, and Australia for years, they are relatively new to the United States. In fact, most U.S. jurisdictions have some form of ABA Model Rule of Professional Conduct 5.4, which prohibits lawyers from sharing legal fees with nonlawyers or giving a law firm ownership interest to a nonlawyer. The District of Columbia has a modified version of Rule 5.4, which permits a DC law firm to partner with individual professionals who provide professional services that assist the law firm in providing legal services to clients. Passive investment by companies or individuals is not permitted in DC law firms. In 2020, Utah was the first state to launch a pilot program for ABS firms, while Arizona approved the permanent changes to Arizona rules establishing the ABS law firm licensing program in 2021.

Rosing Pott & Strohbehn attorneys take pride in demystifying this process. They advise applicants on how to comply with the regulatory application disclosures, as well as assisting with drafting policies, procedures, and training modules. Our experience with the Arizona ABS law firm program also can help train all authorized persons, employees, agents, and service providers in such firms on how to comply with the legal ethical obligations of confidentiality, conflict checking, trust accounting, competent representation of clients, avoiding the unauthorized practice of law by nonlawyers, representation of clients consistent with the lawyers’ obligations to use their independent professional judgment on behalf of the clients, and adherence to the Arizona Supreme Court’s ABS law firm Code of Conduct. Lynda Shely and David Majchrzak also counsel ABS law firms in reviewing advertising campaigns and marketing efforts for compliance with the Arizona Rules of Professional Conduct, as well as co-counsel relationships with law firms in other jurisdictions.

RPS attorneys also consult on the mandatory semi-annual ABS law firm compliance audits and creating firm programs to assure conformity with the ABS Code of Conduct as set forth in ACJA §7-209. Our team also advises lawyers admitted in other jurisdictions, even if those jurisdictions do not permit non-lawyer law firm investment, about how they might invest in or co-counsel with Arizona ABS law firms.