Kara Sears
Law firms are independent businesses that hire their own lawyers, choose their own clients, and handle their own cases. In the United States, there is a rule that only lawyers may own or manage a law firm, although this is slowly changing, with states like Arizona and Utah allowing non-lawyer ownership. Law firms can grow by merging with or acquiring other firms, recruiting experienced attorneys, or gaining new clients and practice areas. Partners in a law firm share profits and have a great deal of autonomy in their work, although they can be forced out for reasons such as criminal activity or malpractice.
| Characteristics | Values |
|---|---|
| Ownership | In most countries, only lawyers can own law firms. However, this is slowly changing, with states like Arizona, Utah, and Washington D.C. allowing non-lawyers to own firms or hold minority stakes. |
| Management | Only lawyers can be managers of law firms. |
| Financing | Law firms raise capital through capital contributions from partners or debt. They cannot raise capital through IPOs on the stock market. |
| Mergers and Acquisitions | Law firms undergo mergers and acquisitions to gain new clients and practice areas, with results varying between firms. |
| Competition | There is a high level of competition for talent and clients among law firms. |
| Independence | Law firms are expected to maintain professional independence and autonomy in their operations, including hiring their own lawyers, choosing clients, and handling cases. |
| Prestige | Becoming a partner at a large or mid-sized firm is prestigious due to the competition. |
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What You'll Learn
Law firm ownership
In the United States, there is a rule that only lawyers may own or be managers of a law firm. This rule is in place in all U.S. jurisdictions except for the District of Columbia, which allows non-lawyer ownership under specific circumstances. For example, a non-lawyer can hold a financial interest in a firm if they provide services that assist the firm in providing legal services to clients. This is usually the case with government lobbyists.
The rule against non-lawyer ownership aims to prevent conflicts of interest and ensure ethical duties and client confidentiality are upheld. However, critics argue that it limits innovation and access to affordable legal services.
While most states maintain the rule against non-lawyer ownership, some states, like Arizona, Utah, and California, have made changes to allow non-lawyers to hold ownership interests in law firms under certain conditions. Arizona, for instance, permits non-lawyer ownership in entities known as Alternative Business Structures (ABSs), which must include at least one licensed attorney to act as a compliance lawyer.
The trend towards allowing non-lawyer ownership in some states has sparked debate. Some argue that it will drastically change the market, while others believe it will improve firm management and provide comprehensive services at lower rates. Despite the concerns and support, the shift towards non-lawyer ownership in law firms is gaining momentum in the U.S.
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Law firm mergers and acquisitions
Mergers and acquisitions (M&A) are a common practice in the legal industry, with many law firms offering dedicated M&A teams to facilitate these transactions for their clients. These teams are composed of experienced lawyers who provide legal services and strategic advice to companies involved in mergers or acquisitions. The services provided by M&A teams cover a wide range, from initial evaluation and negotiation to deal protection measures and integration support.
Law firms play a crucial role in navigating the complex legal landscape of M&A transactions. They offer guidance on regulatory approvals, antitrust issues, and compliance with relevant laws. For instance, Shulman Rogers, a full-service law firm, successfully advised Broadway Licensing, LLC on its landmark acquisition, navigating complex issues related to government contracting regulations, tax law, and PPP loan repayment rules. Similarly, Gibson Dunn has a long history of partnering with clients to achieve their business objectives through acquisitions and dispositions. Their M&A team includes dedicated lawyers in the US and international financial centers, ensuring seamless global service.
M&A teams also assist in identifying potential opportunities and challenges for their clients. For example, Perkins Coie's lawyers offer exceptional support by tailoring their advice to each client's goals and risk tolerance. They have experience in various types of transactions, including acquisition programs, roll-up strategies, and private equity-backed M&A. Holland & Knight, another prominent law firm, excels in the middle market, offering creative and innovative approaches to their clients while fostering long-term partnerships.
Law firms also play a vital role in facilitating cross-border M&A transactions. Perkins Coie, for instance, regularly serves as lead M&A counsel on transactions involving target companies with operations and assets outside the United States. They leverage their international practice and vetted network of firms to provide efficient legal solutions for multijurisdictional engagements. Additionally, law firms assist in structuring financing arrangements, negotiating terms, and providing tax-efficient deal structures. Jeffer Mangels Butler & Mitchell LLP (JMBM), a California-based law firm, has extensive ties to financial and investment firms, enabling them to facilitate mergers, acquisitions, and divestitures for their clients.
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Types of lawyers
Lawyers are an integral part of the legal system, providing advice and assistance to clients on legal proceedings and issues. There are various types of lawyers, each with their own area of expertise and specialization. Here are some of the most common types of lawyers:
Criminal Defense Lawyer
Criminal defense lawyers advocate for those accused of criminal activities, ensuring their rights and liberties are upheld within the justice system. They may work as public defenders or private attorneys, leveraging the law to benefit the accused while protecting their clients' interests within legal boundaries. Criminal defense lawyers may appear in court frequently, especially if a case goes to trial. They may also act as trial lawyers, representing clients in criminal cases and arguing the facts before a judge or jury.
Employment and Labor Lawyer
Employment and labor lawyers handle relationships between employers, employees, and unions. They deal with workplace-related issues such as discrimination, harassment, wage and hour regulations, benefits, and pension security. Employment lawyers can represent either the company or the employee when conflicts arise.
Corporate Lawyer
Corporate lawyers, also known as business lawyers, work for companies, providing advice on legal matters. They assist with mergers and acquisitions, draft and review contracts, and ensure compliance with laws and regulations. Corporate lawyers help create and edit corporate contracts, advise on board duties and shareholder rights, and handle employee relations and contract-related issues. They protect companies from legal risks and represent them in court if legal action is taken.
Intellectual Property Lawyer
Intellectual property lawyers advise clients on issues related to intellectual property rights, trademarks, and copyrights. They help determine if someone has used their client's intellectual property without obtaining the necessary permissions. Intellectual property lawyers can also assist individuals or companies in outlining the legal use of their intellectual property by others.
Estate Planning Lawyer
Estate planning lawyers help individuals manage their assets and create plans for distributing them after their death. They assist in drafting wills, creating trusts, and establishing healthcare proxies to specify medical care wishes. Estate planning lawyers help beneficiaries avoid probate court and potential legal disputes, ensuring a smooth transition of assets according to the individual's wishes.
Real Estate Lawyer
Real estate lawyers specialize in property transactions, including buying, selling, or leasing. They assist with contracts, title searches, zoning issues, property taxes, and financing options. Real estate lawyers can also help resolve disputes, conduct thorough title searches to identify potential legal issues, and oversee the closing process for property transactions.
Personal Injury Lawyer
Personal injury lawyers represent individuals who have been injured due to someone else's negligence, such as car accidents, slip and fall incidents, or dog attacks. They help their clients seek compensation for medical bills, lost wages, and other damages. Personal injury lawyers may also specialize in niche areas like medical malpractice or claims against pharmaceutical companies.
These are just a few examples of the many types of lawyers within the legal profession. Each specialization allows lawyers to develop expertise in a particular area of law, providing specialized services to their clients.
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Law firm rankings
- Am Law 200: This ranking is published by The American Lawyer and is considered a prestigious recognition of law firms' financial performance. It ranks firms based on their gross revenue, with the latest edition being the 2024 rankings. In these rankings, Kirkland & Ellis secured the first position, followed by Latham & Watkins and DLA Piper.
- Global 200: This survey ranks law firms worldwide based on their gross revenue. In the 2024 rankings, Latham & Watkins took the second spot, while DLA Piper and Baker McKenzie ranked third and fourth, respectively. Kirkland & Ellis topped the list as the highest-grossing law firm in the world.
- NLJ 500: Published by the National Law Journal, this ranking focuses on the size of law firms. The 2024 rankings placed Kirkland & Ellis in third place with 3514 attorneys, while Latham & Watkins ranked fourth with 3450 attorneys. DLA Piper topped the list with 4561 attorneys, and Baker McKenzie came in second with 4558 attorneys.
- Best Law Firms: Best Lawyers produces these rankings, which recognize top law firms across various regions, including the United States, Canada, Germany, and Australia. Their methodology combines client and peer evaluations with comprehensive data about the firms, offering a transparent assessment of leading practices.
These rankings provide valuable insights into the legal industry, highlighting the financial performance, size, and reputation of law firms. They serve as a resource for businesses and individuals seeking legal services, helping them make informed decisions when selecting a law firm.
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Law firm independence
The concept of law firm independence relates to the traditional rule that only lawyers may own and manage law firms. This rule is in place to prevent conflicts of interest and ensure that lawyers' duties to their clients and the courts are upheld. However, this rule has been criticised for limiting innovation and competition in the legal industry. In recent years, there has been a growing trend towards allowing non-lawyer ownership of law firms, with several states in the US relaxing their rules.
Law Firm Ownership Rules
In the US, the rule that only lawyers can own and manage law firms has been codified by the American Bar Association as Rule 5.4 of the Model Rules of Professional Conduct. This rule has been adopted in all US jurisdictions except the District of Columbia, which allows non-lawyer ownership under certain conditions. For example, in Washington, D.C., non-lawyers can hold minority stakes in law firms if they actively assist the firm in providing legal services.
Protecting Clients' Interests
The rule against non-lawyer ownership of law firms is intended to protect clients' interests. It aims to prevent non-lawyer owners, who are not bound by professional conduct rules, from prioritising profits over ethical duties and providing good legal services. It also helps to maintain attorney-client confidentiality by limiting access to client information.
Impact on Firm Structure and Operations
The rule on law firm ownership has implications for the structure and operations of firms. Law firms are typically organised as partnerships, with partners sharing directly in the profits of the firm after paying salaried employees and other costs. Partners generally have a high degree of autonomy in cultivating new business and servicing existing clients. However, they may be subject to forced retirement at a certain age, as specified in the partnership agreement.
Changes and Relaxation of Rules
While the traditional rule has been in place for decades, there is a growing recognition that non-lawyer ownership of firms may not be harmful. In fact, it could benefit the public by fostering innovation and competition, potentially leading to less costly and higher-quality legal services. As a result, several states in the US, including Arizona, Utah, and Washington, D.C., have relaxed their rules to allow some form of non-lawyer ownership or influence in law firms.
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Frequently asked questions
In most countries, including the United States, only lawyers may own or manage a law firm. However, this is slowly changing, with many states relaxing this rule. In Washington, D.C., non-lawyers can hold minority stakes, and Arizona became the first state to authorize "alternative business structures" with non-lawyer owners in 2025.
The oldest law firm in continuous practice in the United States is Rawle & Henderson, founded in 1783 in Philadelphia. The oldest continuing partnership is Cadwalader, Wickersham & Taft, founded in 1792 in New York City.
A law firm hires its own lawyers, chooses its own clients, and handles its own cases according to its own professional judgment.
