So You Want to Start an Arizona Alternative Business Structure?

Since 2021, Arizona, nonlawyers have been permitted to hold ownership in law firms, provided that these law firms meet specific criteria. With certification from the Arizona Supreme Court under the state's "alternate business structure" (ABS) statute,¹ a nonlawyer can possess an economic interest and even exercise decision-making authority in a law firm.²

Traditionally, only lawyers could own law firms. However, the Arizona Supreme Court revised its rules in an effort to encourage business innovation, improve access to justice and enhance the delivery of legal services.³ In addition to allowing nonlawyers to own or manage law firms, the court also adopted changes allowing fee sharing and referral fees for client referrals.⁴

Although this new paradigm invites significant change to the legal profession, some traditional restrictions persist. A nonlawyer owner may not give legal advice or practice law – only an Arizona lawyer can do that. That said, nonlawyer owners are nevertheless expected to comply with the Arizona Rules of Professional Conduct and the Arizona Code of Judicial Administration (ACJA), even though they are not lawyers.

Even as ABS owners are bound by a series of regulations in their business practice, establishing an ABS requires only a few straightforward steps.

Steps for Starting an ABS in Arizona:

1. Find a Compliance Lawyer. Even though an ABS does not need to be owned by a lawyer, it must employ a lawyer admitted to practice in the State Bar of Arizona. This individual is responsible for establishing policies and procedures within the firm to ensure nonlawyer compliance with the Arizona Rules of Professional Conduct.⁵
2. Have a Plan. Like any corporation, an ABS must have adequate governance structures and policies in place. In the context of its law practice, these governance structures and policies are necessary to ensure that lawyers employed by the ABS have independence and the ability to make decisions in the best interests of clients.⁶
3. Designate a Principal. A principal ensures that division staff have a point of contact to communicate any administrative, procedural or operational issues.⁷
4. Register your ABS. Like any Arizona business, an ABS needs to be registered to do business in Arizona and identify its statutory agent. To the extent that the ABS is not registered yet, it needs to prepare draft registration documents.
5. Apply for Licensure. Licensing for an ABS requires the completion of approval forms by the law firm, compliance lawyer, designated principal and "authorized persons" – people or entities who have at least a 10 percent economic interest in the ABS or decision-making authority.⁸
6. Pay Fees. This includes an application fee, the initial licensure fee and other registration fees that arise from opening a new business in Arizona. The fee schedule is below.⁹
7. Wait for Approval. The Committee on Alternative Business Structures will review applications for licensure under Arizona Supreme Court Rule 33.1 and ACJA Section 7-209 and make licensure recommendations to the Arizona Supreme Court.¹⁰
8. Obtain License and Keep Current. Once a license is approved by the Arizona Supreme Court, the qualified ABS will receive its license and must renew it annually.
9. Stay Aware of Multijurisdictional Regulations. Not every state permits partnerships with non-attorneys. Attorneys barred or participating in an ABS in Arizona must stay up to date on regulatory changes happening across the country. As of now, at least one state ethics committee has opined on the subject. In Texas, for example, an attorney may not join a law firm that allows non-attorney ownership – even where the home jurisdiction of the law firm allows for this arrangement.¹¹ That said, Texas does allow joint ownership with a non-attorney where the entity does not engage in the practice of law.¹² Likewise, California recently passed a law (AB 931) that restricts California attorneys' ability to associate without-of-state ABSs – like Arizona's.¹³ This law limits fee sharing with out-of-state ABS-associated attorneys unless they meet the following narrow criteria: 1) They must be licensed in the state where the ABS is located, 2) they must perform legal services in the state where the ABS-associated fees are shared and 3) the fee-sharing agreement cannot be contingency-based but rather must outline "a specific dollar amount for services rendered."¹⁴ Maryland, too, through a state bar ethics opinion, has adopted a narrow view of ABS arrangements where legal services are offered.¹⁵

To ensure that they are properly navigating this changing field with professionals who understand the complexities of the ABS structure, investors and lawyers interested in establishing an ABS are encouraged to contact Holland & Knight for guidance on the process or any questions related to the creation and licensing of an ABS.

Initial Licensure Fees

Renewal of Licensure Fees

Miscellaneous Fees

Merger or Acquisition Fees

Reinstatement Application Fees (After Suspension or Revocation)

Notes

¹ ACJA § 7-209, https://www.law.nyu.edu/sites/default/files/7-209%20Alternative%20Business%20Structures%20Amended%208_29_24.pdf.

² Task Force on Alternative Business Structures, https://tinyurl.com/m57mnaud.

³ Id.

⁴ https://www.azbar.org/media/iqedfzl4/faqs-re-2021-ers-lp-abs.pdf.

⁵ ACJA § 7-209(G)(3).

⁶ ACJA § 7-209(K)(1)(e).

⁷ ACJA § 7-209(G)(1)(f).

⁸ ACJA § 7-209(E)(1).

⁹ ACJA § 7-209(J).

¹⁰ ACJA § 7-209(E)(2)(a).

¹¹ https://www.legalethicstexas.com/resources/opinions/opinion-704/.

¹² https://www.legalethicstexas.com/resources/opinions/opinion-706/.

¹³ CA AB931, https://legiscan.com/CA/text/AB931/id/3191034.

¹⁴  https://www.hklaw.com/en/insights/publications/2025/09/regulatory-retrenchment-in-california-what-ab-931-means.

¹⁵ MD Ethics Docket NO. 2025-01, https://www.msba.org/site/content/Resources-and-Tools-Content/Ethics-Opinions/2025/ETHICS-DOCKET-NO-2025-01.aspx.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.