Arizona Is Modernizing Law with Alternative Business Structures

Across the country, regulatory reforms are aligning with global trends, allowing nonlawyers to participate in the delivery of legal services, and challenging long-standing rules about who can own and operate a law firm. While private equity involvement has drawn a disproportionate share of the criticism, it’s just one part of a broader shift.

Business and technology professionals are also increasingly partnering in law firm operations, driving structural changes across the legal industry. In other sectors, similar changes have led to the consolidation of independent professional practices into corporate chains, sometimes with troubling consequences. Now, the legal field is in the spotlight as the so-called final frontier, and Arizona is leading the way with its alternative business structures program.

Critics are sounding alarms about a future in which law firms are overrun by outside investors chasing returns, with dire warnings about eroded service quality, diminished professional autonomy, and fewer options for future lawyers and their clients. But the Arizona Supreme Court didn’t open the door to nonlawyer participation without careful consideration.

After an in-depth review and adoption of recommendations from the Task Force on the Delivery of Legal Services, the court established a regulatory framework that deserves a closer look to appreciate the safeguards and the opportunities it creates for ethical innovation.

First, Arizona’s ABS program is designed to preserve the professional independence of lawyers. Every applicant must demonstrate their proposed business model doesn’t compromise a lawyer’s ability to exercise independent judgment in clients’ best interests.

Ownership may be expanded, but lawyer independence isn’t up for negotiation. ABS applicants must submit detailed governance plans for review by regulators to ensure compliance with this core principle.

Second, supervision of nonlawyers isn’t being ignored; it’s being strengthened. Every state has ethical rules imposing obligations on lawyers to supervise nonlawyer assistants, and Arizona’s ABS program builds on that foundation.

If a nonlawyer has managerial or financial control over firm operations, there must be systems in place to ensure their conduct aligns with professional responsibilities. Lawyers remain on the hook for any ethical violations, and ABS applicants must demonstrate precisely how they will comply with an ABS code of conduct and prevent any violations of the Rules of Professional Conduct.

Most importantly, clients’ best interests remain at the center of Arizona’s program. Innovation is encouraged, but not at the expense of client trust. ABS licensees must show how their model maintains confidentiality, avoids conflicts, and meets expectations of competence and accountability.

These aren’t theoretical commitments. Every licensee is required to appoint a compliance lawyer. And every license is issued with ongoing conditions, including regular audits, renewal, and the potential for disciplinary action up to and including license revocation if ethical obligations aren’t met.

The entrepreneurs, technologists, and business professionals entering the ABS program aren’t trying to cut corners. They are coming forward, disclosing their business models (and personal backgrounds) in detail, submitting to regulation, and committing to operate under the same ethical scrutiny as licensed lawyers. Instead of trying to circumvent the rules, they are working within them to build something better.

This isn’t deregulation. It is careful reregulation, focused on modernizing legal services while keeping the profession’s values intact. If successful, it could pave the way for broader access, smarter delivery and sustainable innovation in legal practice.

The rules are in place, the oversight is real, and the mission is unchanged. Protect the public, support ethical practice, and preserve client trust. Let’s give Arizona’s program a chance to do exactly that.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Suzanne Porter is founder & managing attorney of NewMarket Law LLC, a Scottsdale-based firm specializing in alternative business structure strategy and compliance.

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