Law Firm Structure & Regulation Heatmap Law Firm Structure & Regulation

Law Firm Structure & Regulation

Holland & Knight helps protect and advance the interests of lawyers, law firms, legal departments, legal tech companies, investors, stakeholders and management services organizations (MSOs). We do this by balancing our deep understanding of the business of law, with an emphasis on the regulations and ethics that govern them. The legal services industry is undergoing significant regulatory change as more jurisdictions explore, and in some cases adopt, models that permit nonlawyer ownership. Simultaneously, law firm/MSO partnerships are increasingly attractive for both firms and nonlegal organizations that want to invest in law firm operations. This area of "New Law" includes not only the developed field of litigation financing but also alternative business structure (ABS) models and partnerships between law firms and MSOs. These developments are reshaping how lawyers, law firms and other alternative legal providers operate across the United States. The map below highlights state-by-state developments governing nonlawyer ownership and related MSO structures. Each jurisdiction is categorized based on its current regulatory approach, ranging from states that permit these structures to those that are evaluating or limiting them. Click on any state to view a summary of its position, governing authority and key developments. For more information on law firm/MSO developments, visit our Legal Services Transactions Page or contact our team of Holland & Knight attorneys.

ABS/Nonlawyer Ownership Tracker

Management Services Organization (MSO) and Professional Employer Organization (PEO) Tracker

Permissive

Conditional

Under Consideration

Restrictions in Place

Inactive

Arizona

Regulatory Status: Permissive Nonlawyer Ownership/ABS Status: Allowed Summary: Arizona became the first U.S. state to eliminate Rule 5.4, effective January 1, 2021, allowing nonlawyer ownership, investment and management of law firms through its ABS licensing framework. All ABS entities must be licensed by the Arizona Supreme Court and are subject to rigorous compliance, governance and ethical standards. Proposed amendments are currently being considered that, if adopted, would implement additional oversight and restrictions to the ABS program. Key Requirements: Licensing/Registration: An ABS must be licensed by the Arizona Supreme Court. Ethical/Reporting Obligations: An ABS must comply with ethical standards and reporting requirements set by the Arizona Supreme Court. Fee Sharing/Control Restrictions: An ABS must adhere to fee-sharing and control restrictions as defined by the Arizona Supreme Court. Governing Authority: Arizona Supreme Court References: Arizona Supreme Court Final Order Eliminating Rule 5.4 and Establishing ABS Licensing Framework (R-20-0034) Arizona Supreme Court, Access to Legal Services (ABS Information and FAQs)

Regulatory Status: Permissive Summary: Washington, D.C., permits nonlawyer equity ownership in law firms under Rule 5.4(b), as long as non-lawyer partners agree to follow professional conduct rules and the firm’s sole purpose is legal services. The D.C. Bar continues to review and discuss possible expansions to these rules. Nonlawyer Ownership/ABS Status: Allowed Key Requirements: Nonlawyer ownership: Nonlawyer ownership is permitted under Rule 5.4(b), provided non-lawyer partners agree to abide by all professional conduct rules and the firm’s sole purpose is the practice of law. Disclosure: Firms with nonlawyer owners must disclose this status on firm stationery, business cards and professional listings. Fee sharing: Fee sharing with nonlawyers is restricted under Rule 5.4; compensation to non-lawyer owners or PEOs cannot be based on legal fees. Governing Authority: D.C. Bar Reference: D.C. Bar, Rule 5.4(b) and Nonlawyer Ownership

Washington, D.C.

Regulatory Status: Permissive Summary: Recently adopted nonlawyer ownership regulations. Nonlawyer Ownership/ABS Status: Allowed Summary: Puerto Rico’s Supreme Court amended Rule 5.4 of its Rules of Professional Conduct to permit nonlawyer ownership of law firms, effective January 1, 2026. Key Requirements: Licensing/Registration: Entities must comply with Puerto Rico’s legal services regulations. Ethical/Reporting Obligations: ABSs must adhere to ethical standards as outlined by Puerto Rico’s legal authorities. Additionally, they are required to submit an annual sworn statement detailing attorney headcount, investment dates and amounts, and nonlawyer owner revenues. Fee Sharing/Control Restrictions: Fee sharing and control are permissible within the framework of new regulations, provided ethical guidelines are followed. Nonlawyer owners may not interfere with legal practitioners’ independent judgment or the attorney-client relationship. Governing Authority: Puerto Rico Supreme Court Reference: Puerto Rico Supreme Court, Rules of Professional Conduct (Reglas de Conducta Profesional)

Puerto Rico

Regulatory Status: Conditional Summary: Utah launched a seven-year “regulatory sandbox” in 2020 to test nonlawyer ownership of legal entities and alternative legal service models. In 2025, the Utah Supreme Court significantly tightened participation rules: Only entities with substantial impact on underserved Utah consumers may continue practicing law. The sandbox is scheduled to run through 2027, but its scope is now much narrower and more locally focused. Nonlawyer Ownership/ABS Status: Conditional Summary: Permitted only for entities approved by the Utah Supreme Court under the sandbox program. Key Requirements: Licensing/Registration: Entities must be authorized under Utah’s regulatory sandbox program. Ethical/Reporting Obligations: Participants must comply with ethical standards and reporting requirements set by the Utah Supreme Court. Fee Sharing/Control Restrictions: Fee sharing and control are subject to the conditions of the regulatory sandbox program. Governing Authority: Utah Supreme Court Reference: Utah Office of Legal Services Innovation

Utah

Regulatory Status: Conditional Summary: The Washington Supreme Court has authorized a 10-year pilot program allowing nonlawyer entities to provide legal services under specific conditions. Nonlawyer Ownership/ABS Status: Conditional Summary: Nonlawyer ownership is permitted only for entities approved by the Washington Supreme Court under the pilot program. The program is designed to expand access to legal services while maintaining ethical standards and oversight. Key Requirements: Licensing/Registration: Entities must be approved by the Washington Supreme Court under the 10-year Entity Regulation Pilot Project. Ethical/Reporting Obligations: A designated compliance officer must oversee ethics compliance and submit periodic reports to the WSBA. Operational Oversight: Participants are subject to Washington State Bar Association (WSBA) and Practice of Law Board monitoring throughout the pilot. Governing Authority: Washington Supreme Court Reference: WSBA Entity Regulation Pilot Project

Washington

Regulatory Status: Under Consideration Nonlawyer Ownership/ABS Status: Not Allowed Summary: Nonlawyer ownership of law firms is not currently permitted, but Illinois is actively considering new restrictions through proposed legislation introduced in 2026 (SB 3812 and HB 5487). The bills would regulate how private equity and hedge funds interact with law firm structures by reinforcing existing Rule 5.4 restrictions, limiting when an MSO can be involved in firm operations, and prohibiting any fee arrangements that are based directly or indirectly on legal fees, firm revenue or profits. In addition, proposed legislation seeks to regulate private equity and hedge fund investments in ABS arrangements involving law firms. Key Requirements: N/A Governing Authority: Illinois General Assembly Reference: Illinois SB 3812 Illinois HB 5487

Illinois

Regulatory Status: Under Consideration Summary: Nonlawyer ownership of law firms is not currently permitted but in October 2024, the Indiana Supreme Court approved the creation of a regulatory sandbox to explore innovative legal-service delivery models aimed at improving access to justice. In March 2025, the Court expanded these efforts by appointing additional members to the Commission on Indiana’s Legal Future to guide the sandbox’s development and related reforms. In July 2025, the Commission released its Final Report, which emphasized modernizing the legal profession and exploring new service models but does not explicitly recommend authorizing nonlawyer ownership or alternative business structures. The state is now awaiting further action from the Indiana Supreme Court. Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Authority: Indiana Supreme Court (and its Innovation Committee for sandbox initiatives) References: Indiana Supreme Court Approves Legal Regulatory Sandbox Program in State Final Report: Commission on Indiana’s Legal Future

Indiana

Regulatory Status: Under Consideration Summary: Nonlawyer ownership of law firms is not currently permitted, but Michigan is actively exploring regulatory reforms to expand access to legal services. The Michigan Supreme Court has approved pilot programs to test expanded roles for paralegals and associated professionals, with rigorous training, oversight and ethical standards. These pilots do not authorize nonlawyer ownership or independent law practice, but represent a significant step toward evaluating new models for delivering legal services. Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Authority: Michigan Supreme Court Reference: Michigan Justice for All Commission, Regulatory and Practice Reform Committee Non-lawyer Legal Services Subcommittee

Michigan

Regulatory Status: Under Consideration Summary: Nonlawyer ownership of law firms is not currently permitted but Colorado is considering a constitutional amendment to allow nonlawyer ownership of law firms. The proposal would shift regulatory authority from the Supreme Court to the legislature. Nonlawyer Ownership/ABS Status: Not Allowed Summary: Nonlawyer ownership is currently prohibited but may be permitted pending legislative reform. Key Requirements: N/A Governing Authority: Colorado Supreme Court (currently); proposed shift to Colorado Legislature Reference: Colorado General Assembly, Law Firm Modernization Act

Colorado

Regulatory Status: Under Consideration Summary: Nonlawyer ownership of law firms is not currently permitted, but the Tennessee Supreme Court has initiated a public comment process to explore potential regulatory reforms, including reconsidering restrictions on law firm ownership and fee-sharing. These reforms are part of a broader effort to expand access to legal services. The court is currently soliciting public comments on these proposals, with a deadline of March 16, 2026. Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Authority: Tennessee Board of Professional Responsibility Reference: Supreme Court of Tennessee, Public Comments on Potential Regulatory Reforms to Increase Access to Quality Legal Representation

Tennessee

Regulatory Status: Under Consideration Summary: Nonlawyer ownership of law firms is not currently permitted, but in January 2022, the North Carolina State Bar Issues Subcommittee on Regulatory Change issued a report and recommendations advising that North Carolina establish a regulatory sandbox to test and study nonlawyer ownership and ABS for law firms. The report suggested incorporating nonlawyer ownership into the sandbox and analyzing the impact on access to justice and the quality of legal services. In July 2022, the North Carolina State Bar voted to form an Access to Justice Committee and advance the recommendations to the Access to Justice Committee for further review. North Carolina is actively considering regulatory reforms but has not yet authorized nonlawyer ownership or ABS models. Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Authority: North Carolina State Bar North Carolina Supreme Court (Access to Justice Committee) References: North Carolina Justice for All Project’s 2021 Proposal to the North Carolina State Bar and Supreme Court

North Carolina

Regulatory Status: Restrictions in Place Summary: California continues to prohibit nonlawyer ownership and restrict fee-sharing with nonlawyer-owned firms, particularly in contingency-fee cases. AB 931 (effective January 1, 2026) further restricts some types of fee-sharing with out-of-state ABSs that allow nonlawyer ownership. Co-counseling and properly structured MSO arrangements are generally allowed so long as the law firm remains 100 percent lawyer-owned and controlled, and there is no prohibited split of legal fees. Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Authority: California State Bar

California

Regulatory Status: Prohibited Summary: New York does not allow ABS entities or nonlawyer ownership for firms practicing law in New York, and Rule 5.4(b) and (d) continue to prohibit any entity with nonlawyer owners from practicing law in the state. However, Opinion 1291 clarifies that New York lawyers are now expressly permitted to: hold a financial interest in an ABS operating in a jurisdiction where ABS models are allowed contract with such an ABS and receive fee‑sharing payments from it participate in the management or legal work of an out‑of‑state ABS if the “particular conduct” clearly has its predominant effect in a jurisdiction other than New York These permissions are enabled by the newly adopted Rule 5.4(a)(4) (effective November 10, 2025), which expressly authorizes fee-sharing with law firms that have nonlawyer owners in jurisdictions where such ownership is permitted. All fee-sharing remains subject to the conditions of Rule 1.5(g). Nonlawyer Ownership/ABS Status: Not Allowed Key Requirements: N/A Governing Guidance: New York State Bar Association Committee on Professional Ethics Reference: New York State Bar Association Committee on Professional Ethics, Opinion 1291

New York

Nashville

PARTNER

+1.615.850.8751

josh.porte@hklaw.com

Joshua E. Porte

Chicago

PARTNER

+1.312.578.6514

trisha.rich@hklaw.com

Trisha M. Rich

Primary Contacts

Related Opinion

Holland & Knight protects and advance the interests of lawyers, law firms, legal departments, legal tech companies, investors, stakeholders and management services organizations (MSOs). We do this by balancing our deep understanding of the business of law, with an emphasis on the regulations and ethics that govern them. The legal services industry is undergoing significant regulatory change as more jurisdictions explore, and in some cases adopt, models that permit nonlawyer ownership. Simultaneously, law firm/MSO partnerships are increasingly attractive for both firms and nonlegal organizations that want to invest in law firm operations. This area of "New Law" includes not only the developed field of litigation financing but also alternative business structure (ABS) models and partnerships between law firms and MSOs. These developments are reshaping how lawyers, law firms and other alternative legal providers operate across the United States. The map below highlights state-by-state developments governing nonlawyer ownership and related MSO structures. Each jurisdiction is categorized based on its current regulatory approach, ranging from states that permit these structures to those that are evaluating or limiting them. Click on any state to view a summary of its position, governing authority and key developments. For more information on law firm/MSO developments, visit our Legal Services Transactions Page or contact our team of Holland & Knight attorneys.

Law Firm Structure & Regulation

ABS/Nonlawyer Ownership Tracker

Management Services Organization (MSO) and Professional Employer Organization (PEO) Tracker

Explicit Authority

Proposed Regulatory Restrictions

No Direct MSO Opinion, But Favorable Related Opinion

No Formal Opinion

Connecticut

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The Connecticut Bar Association Committee on Professional Ethics issued Informal Opinion 02-08, approving law firms’ use of a PEO that “co-employed” firm personnel. The opinion confirms that a PEO may handle HR and payroll functions and co-employ lawyers, provided the firm ensures the PEO does not interfere with legal judgment and takes reasonable steps to protect professional obligations, including client confidentiality. Key Requirements: PEO/Administrative Services: PEO may co-employ attorneys and manage HR/payroll functions. Lawyer Independence: The law firm must retain full authority over legal matters; the PEO must not influence legal judgment or supervise legal work. Professional Obligations: Firms must implement reasonable safeguards to uphold confidentiality and other ethical responsibilities. Compensation: The PEO’s fees must not be tied to legal fees or case outcomes. Governing Guidance: Connecticut Bar Association Committee on Professional Ethics Reference: Connecticut Ethics Opinion 02-08 (June 24, 2002)

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: D.C. Bar Ethics Opinion 304 clarifies that law firms may contract with PEOs or employee management companies for HR and administrative functions, provided the arrangement does not give the PEO any authority over the hiring, firing, supervision, or work assignments of lawyers or legal assistants, nor access to client confidences or legal work. The law firm must retain exclusive control over all legal services and personnel decisions related to legal work, and compensation to the PEO must not be based on legal fees. Use of a PEO is prohibited if it gives the PEO actual authority over legal staff or legal work. Administrative Service Organizations (ASOs) that do not assume employment authority are also permissible under these conditions. Because PEOs and MSOs are closely related, lawyers and investors can take guidance from Ethics Opinion 304. Key Requirements: PEO/Administrative Services: Law firms may contract with PEOs or employee management companies for HR, payroll and other administrative support, provided the arrangement does not give the PEO any authority over legal work, legal staff supervision or access to client confidences. Lawyer Independence: The law firm must retain exclusive control over all legal services and personnel decisions related to legal work. Compensation: Payments to PEOs must be strictly for administrative services and cannot be based on legal fees or outcomes. Confidentiality: PEOs may not access confidential client information. No Fee-Sharing: PEOs may not share in legal fees or exercise control over legal decisions. Governing Guidance: D.C. Bar Legal Ethics References: D.C. Bar Ethics Opinion 304 – Management of a Law Firm's Human Resources Functions by an Employee Management Company D.C. Bar – Rules of Professional Conduct

Washington, D.C.

MSO/PEO Status: Proposed Regulatory Restrictions Summary: In February 2026, the Illinois General Assembly proposed SB 3812 and HB 5487 that would apply to MSOs owned, operated, or controlled by private equity or hedge funds. The bills reinforce existing Rule 5.4 limits by restricting when an MSO can be involved in a law firm’s operations, limiting any influence over attorney judgment, staffing decisions or client records, and prohibiting fee arrangements that are based directly or indirectly on legal fees, firm revenue or profits. Key Requirements: Narrow definition and application of MSOs Applies only to MSOs backed by private equity or hedge funds. MSOs may not interfere with attorney judgment or firm management. MSOs may not control staffing decisions or client records. MSOs may not use non-compete or non-disparagement provisions. MSO fees cannot be based on firm revenue, profits or legal fees. Governing Authority: Illinois General Assembly Reference: Illinois SB 3812 Illinois HB 5487

Illinois

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: Michigan issued an informal ethics opinion RI- 310, confirming that third-party leasing or co-employment arrangements, such as those provided by PEOs, are ethically permissible. The opinion emphasizes that law firms must retain full control over legal work, supervise leased attorneys and ensure compliance with ethical duties. Additionally, Michigan’s Professional Employer Organization Regulatory Act (Act 370 of 2010) establishes a formal licensing and regulatory framework for PEOs operating in the state, signaling further support for their use by firms. Key Requirements: PEO/Administrative Services: Third-party leasing or co-employment arrangements are permitted if law firms retain supervision over legal staff and work. Lawyer Independence and Supervision: Firms must exercise effective supervision of leased or co-employed attorneys, retaining authority over legal matters and ensuring compliance with professional responsibilities. Compensation Structure: Leased attorneys’ compensation (by the PEO) must not depend on legal fees or case outcomes. Confidentiality and Ethical Compliance: Firms must ensure that PEOs do not compromise client confidentiality or interfere with processes governed by Rules 1.6, 5.3 and 5.4. Governing Guidance: State Bar of Michigan Ethics Committee References: State Bar of Michigan Ethics Opinion RI 310 (May 12, 1998) Michigan Professional Employer Organization Regulatory Act (Act 370 of 2010)

Michigan

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The Colorado Bar Association Ethics Committee issued an informal letter opinion abstract (2007 Letter #10) permitting law firms to utilize PEOs for HR, payroll and related administrative functions, provided the PEO does not supervise lawyers, control legal decisions, or tie compensation to legal fees or firm revenue. This informal guidance signals favorable acceptance, even in the absence of a formal opinion. Key Requirements: PEO/Administrative Services: Law firms may use PEOs for HR, payroll, benefits and similar functions, as long as the PEO has no supervisory role over lawyers or legal staff. Lawyer Independence: All legal work and professional judgment must remain under the exclusive control of licensed attorneys. Compensation: PEO compensation must be for administrative services only and must not be linked to legal fees or outcomes. Confidentiality: PEOs must not access confidential client data or legal work. No Fee Sharing: PEOs may not share in legal fees or participate in legal decision-making. Governing Authority: Colorado Bar Association Ethics Committee Colorado Supreme Court – Rules of Professional Conduct Reference: CBA Ethics Committee Informal Letter Opinion Abstract – 2007 Letter #10

Colorado

MSO/PEO Status: Explicit Authority Summary: North Carolina has issued three relevant ethics opinions: 2001 Formal Ethics Opinion 2 explicitly permits law firms to contract with MSOs for administrative and business support, provided the MSO does not interfere with lawyer independence, supervise legal work or access confidential client information. 2003 Formal Ethics Opinion 6 provides favorable guidance for law firms contracting with PEOs for HR, payroll and other employment-related functions. The opinion permits law firms to use PEOs, provided the arrangement does not interfere with lawyer independence or client confidentiality. N.C. State Bar Opinion RPC 104 blesses PEO arrangements where there is “no direct relationship between the payment to the leasing company and legal fees paid to the firm” and the “employee leasing company would have no control over the leased associates.” A properly structured MSO would comport with such requirements and avoid the ethical issues raised by RPC 104. Key Requirements: PEO/Administrative Services: Law firms may contract with PEOs for HR, payroll and benefits administration, as long as the PEO does not control legal work or supervise lawyers. Lawyer Independence: The law firm must retain exclusive control over all legal services and professional judgment. Compensation: Payments to PEOs must be strictly for administrative services and cannot be based on legal fees or outcomes. Confidentiality: PEOs may not access confidential client information. No Fee-Sharing: PEOs may not share in legal fees or exercise control over legal decisions. Governing Guidance: North Carolina State Bar References: N.C. State Bar 2003 Formal Ethics Opinion 6 N.C. State Bar 2001 Formal Ethics Opinion 2 N.C. State Bar Opinion RPC 104

North Carolina

MSO/PEO Status: Explicit Authority Summary: Texas has issued formal ethics guidance directly addressing MSO arrangements for law firms. Texas Professional Ethics Opinion 706 confirms that MSOs may provide administrative and operational support to law firms, as long as they do not practice law, supervise lawyers, access confidential client information or share in legal fees. Lawyers may invest in MSOs, provided the MSO does not engage in the practice of law and compensation is not tied to firm revenues. State Bar of Texas Ethics Opinion 560 blesses PEO arrangements with the following conditions: “[1] the law firm maintains exclusive control over the hiring and termination of its employees, [2] there is no sharing of employees among the various clients of the employee leasing company, [3] the leasing company has no managerial or supervisory rights over the law firm’s employees, and [4] the leasing company has no access to client information.” Assuming these pitfalls are avoided, no ethical issues would be raised by the MSO arrangement. Key Requirements: MSO Compensation Structure: Compensation must be flat fees or cost-plus arrangements; percentage-based fees tied to firm revenue are prohibited. Lawyer Independence: MSOs must not control, supervise, or direct lawyers or their professional judgment. Confidentiality: MSOs must not access confidential client information. No Fee-Sharing: MSOs must not share legal fees or outcomes. Governing Authority: Texas Professional Ethics Committee Texas Disciplinary Rules of Professional Conduct References: Texas Ethics Opinion 706 – State Bar of Texas State Bar of Texas Ethics Opinion 560

Texas

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: Missouri Informal Opinion 990019 suggests that a PEO arrangement – in which a third-party service leases a law firm’s attorneys – would violate the Rules of Professional Conduct where the law firm lacks “unilateral authority to terminate or discipline an employee for violating an obligation under the Rules of Professional Conduct.” Where a law firm does maintain such authority, it would appear that a PEO would be compliant with Missouri’s ethics rules. Key Requirements: Disciplinary Authority: The law firm must retain unilateral authority to discipline or terminate the attorney’s leaseback arrangement for any violation of professional obligations. Employment Distinction: The firm is not required to control or terminate the attorney’s employment with the PEO itself; only the assignment to the firm must be within the firm’s control. Ethical Compliance: A PEO/leaseback arrangement that does not give the firm unilateral disciplinary authority violates Missouri Rules 4‑5.4 and 4‑5.5. Governing Guidance: Office of Legal Ethics Counsel & Advisory Committee of the Supreme Court of Missouri Reference: Office of Legal Ethics Counsel & Advisory Committee of the Supreme Court of Missouri - Informal Opinion Number: 990019

Missouri

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The New Hampshire Bar Association Ethics Committee issued Formal Opinion No. 1989-90/2, permitting law firms to use a nonlawyer-owned employee-leasing company – a structure functionally similar to a modern PEO. The opinion clarified that such arrangements are ethically permissible as long as the law firm retains exclusive control over legal work and professional judgment, and the employee-leasing company does not interfere with legal decisions or access confidential client information. Key Requirements: Disclosure: The existence and material terms of the leasing (or PEO-type) arrangement must be fully disclosed to clients, insurers and creditors. Lawyer Independence: Leased attorneys must retain full and independent judgment over legal matters. Law firms cannot permit the leasing company to influence legal services. No Fee-Sharing: Law firms must not directly or indirectly share legal fees or profits with the leasing company. Compliance with RPC: Firms and leased attorneys must rigorously adhere to all relevant professional conduct rules, including confidentiality (Rule 1.6), conflict avoidance, independent judgment (Rule 2.1) and nonlawyer supervision (Rules 5.3–5.4). Governing Guidance: New Hampshire Bar Association Ethics Committee Reference: New Hampshire Bar Association Ethics Committee Formal Opinion No. 1989-90/2 (July 25, 1990)

New Hampshire

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: New Jersey Opinion 631 explicitly states that a PEO arrangement would not violate the Rules of Professional Conduct because the "employee leasing company would have no control or supervision over the leased attorney’s exercise of independent professional judgment or over how the law firm uses the attorney" and "there would be no direct relationship between particular legal fees received by the law firm and the amount the law firm pays to the employee leasing company." This fits comfortably within a broader MSO arrangement. Key Requirements: No Nonlawyer Control or Influence: The leasing company must exercise no control, supervision, or influence over the leased attorney’s legal judgment or the manner in which the law firm deploys their services. Firm-Controlled Compensation: The law firm, not the leasing company, must exclusively determine the leased attorneys' compensation. Fee Disconnection: There must be no direct connection between legal fees collected by the firm and the amounts paid to the employee leasing company. Governing Guidance: New Jersey Advisory Committee Reference: New Jersey Advisory Committee on Professional Ethics Opinion 631 (1989)

New Jersey

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The New York City Bar's Committee on Professional Ethics issued Formal Opinion 2015-1, explicitly approving law firms' use of PEOs for HR, payroll and employee benefits. The opinion states that a PEO may be ethically permissible as long as the arrangement preserves lawyer independence, confidentiality, avoids fee-sharing with nonlawyers and ensures PEO compensation is structured in compliance with fee-sharing prohibitions. Key Requirements: PEO/Administrative Services: Firms may use PEOs for HR, payroll, benefits, etc., provided the PEO does not supervise lawyers or direct legal work. Lawyer Independence: The arrangement must preserve independent legal judgment and firm oversight of legal services. Confidentiality: PEOs must not access or use confidential client information. Conflict Compliance: Any arrangement must follow conflict-of-interest rules. Compensation: PEO fees must not be tied to legal fees, firm revenue, or case outcomes. Governing Guidance: New York City Bar Committee on Professional Ethics Reference: NYC Bar Formal Opinion 2015-1

New York

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The Ohio State Bar Association Committee on Legal Ethics and Professional Conduct Ethics Opinion 2011-2 expressly approved law firms contracting with PEOs for staffing and HR functions, and also approved law firms owning and operating PEOs as ancillary businesses. These arrangements are permitted provided the firm complies with Rule 5.7 ("law-related services"), maintains professional independence and adheres to fee-splitting prohibitions. Key Requirements: Contracting: Law firms may contract with PEOs for staffing and HR functions. Ownership: Law firms may own and operate PEOs as ancillary businesses. Compliance: All arrangements must comply with Rule 5.7 ("law-related services"). Independence: Firms must maintain professional independence. Fee-Splitting: Firms must comply with fee-splitting rules. Governing Guidance: Ohio State Bar Association Reference: Ohio State Bar Association Committee on Legal Ethics and Professional Conduct ETH 2011-2

Ohio

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: South Carolina Ethics Advisory Opinion 91-09 permits law firms to use employee-leasing companies (functionally similar to PEOs) for staffing and HR functions. The opinion states that such arrangements are ethically permissible as long as the law firm retains exclusive control over legal work and professional judgment, and the leasing company does not interfere with legal decisions or access confidential client information. Key Requirements: PEO/Administrative Services: Law firms may use employee-leasing companies (PEOs) for HR and administrative support. Lawyer Independence: The firm must retain full authority over legal matters; the PEO must not influence legal judgment or supervise legal work. Confidentiality: PEOs may not access confidential client information. Compensation: The PEO's fees must not be tied to legal fees or case outcomes. Governing Guidance: South Carolina Bar Ethics Advisory Committee Reference: South Carolina Ethics Advisory Opinion 91-09

South Carolina

MSO/PEO Status: No Direct MSO Opinion, But Favorable Related Opinion Summary: The U.S. Bankruptcy Court for the Northern District of Mississippi issued a decision considering whether a law firm supported by a management service organization was engaged in illegal fee sharing or the unauthorized practice of law. The opinion concluded that there was no prohibited fee sharing or unauthorized practice of law, finding that the relationship "was no different from a law firm paying other outside vendors ..." Key Requirements: Compensation: Compensation must be for administrative services and not based on legal fees or outcomes. Lawyer Independence: All legal work and professional judgment must remain under the exclusive control of licensed attorneys. Unauthorized Practice of Law: All legal work must be done or supervised by licensed attorneys. No Fee-Sharing: Lawyers may not engage in prohibited fee splits with nonlawyers. Governing Authority: U.S. Bankruptcy Court for the Northern District of Mississippi Reference: In re Thorne, Case No. 09-11763-DWH, Chapter 13, Adv. Proc. No. 10-1172-DWH

Mississippi

Nashville

PARTNER

+1.615.850.8751

josh.porte@hklaw.com

Joshua E. Porte

Chicago

PARTNER

+1.312.578.6514

trisha.rich@hklaw.com

Trisha M. Rich

Primary Contacts

Law Firm Structure & Regulation

We protect and advance the interests of lawyers, law firms, legal departments, legal tech companies, investors, stakeholders, and management services organizations (MSOs). We do this by balancing our deep understanding of the business of law, with an emphasis on the regulations and ethics that govern them. The legal services industry is undergoing significant regulatory change as more jurisdictions explore, and in some cases adopt, models that permit non-lawyer ownership. Simultaneously, law firm/MSO partnerships are increasingly attractive for both firms and non-legal organizations that want to invest in law firm operations. This area of "New Law" includes not only the developed field of litigation financing, but Alternative Business Structures (ABSs) and partnerships between law firms and MSOs. These developments are reshaping how lawyers, law firms and other alternative legal providers operate across the United States. The map below highlights state-by-state developments governing non-lawyer ownership and relatedly, MSO structures. Each jurisdiction is categorized based on its current regulatory approach, ranging from states that permit these structures to those that are evaluating or limiting them. Click on any state to view a summary of its position, governing authority and key developments. For more information on law firm/MSO developments, visit our Legal Services Transactions Page or contact our team of Holland & Knight attorneys.

ABS/Non-Lawyer Ownership Tracker

Management Services Organization (MSO) and Professional Employer Organization (PEO) Tracker

Nashville

PARTNER

+1.615.850.8751

josh.porte@hklaw.com

Joshua E. Porte

Chicago

PARTNER

+1.312.578.6514

trisha.rich@hklaw.com

Trisha M. Rich

Primary Contacts