What is an ABS (Alternative Business Structure) and Which States Allow It?

If you have ever needed a lawyer, you probably noticed that law firms are owned and run exclusively by lawyers. That is not an accident — it has been the rule in most of the United States for over a century. But a small number of states are now changing that rule through something called an Alternative Business Structure, or ABS.

What is an Alternative Business Structure?

An Alternative Business Structure is a law firm or legal services company that allows non-lawyers to co-own, invest in, or share fees with the lawyers who provide legal services. In a traditional law firm, only licensed attorneys can be partners or owners. An ABS breaks that restriction.

This means a tech company, an accounting firm, or even a private investor could have an ownership stake in a law practice. The idea is that outside investment and expertise — especially in technology and business management — can help law firms operate more efficiently and make legal services more affordable and accessible to everyday people.

Why Does This Matter to Regular People?

The traditional model of law firm ownership has been criticized for contributing to the high cost of legal services in the United States. When only lawyers can own law firms, it limits the amount of capital and business innovation that can enter the legal market.

Supporters of ABS argue that allowing outside ownership could lead to:

Lower costs for consumers who need legal help
More innovation in how legal services are delivered, including better technology and online tools
Broader access to legal services for people who currently cannot afford a lawyer
One-stop shopping where you can get legal, accounting, and financial advice under one roof

Critics worry that non-lawyer ownership could create conflicts of interest, compromise attorney independence, or put profits ahead of client welfare. These concerns are why most states still prohibit the practice.

Which States Allow Alternative Business Structures?

As of early 2026, only a handful of U.S. jurisdictions have authorized some form of ABS. Here is where things stand:

Arizona

Arizona has gone the furthest. In 2021, the Arizona Supreme Court eliminated the ban on non-lawyer ownership of law firms entirely. Arizona created a new license category called the Alternative Business Structure, allowing non-lawyers to co-own and invest in law firms as long as the entity is licensed and regulated by the state.

As of 2025, Arizona has licensed over 150 ABS entities. These range from small firms with a non-lawyer business partner to larger operations backed by outside investment. Arizona’s approach is the most open in the country and has attracted national attention as a test case for legal market reform.

Utah

Utah launched a regulatory sandbox in 2020 that allows approved companies to offer legal services in non-traditional ways, including with non-lawyer ownership. The sandbox is an experimental program — companies apply, get approved, and operate under supervision while the state studies the impact on consumers.

Utah’s program started with dozens of participants but has since been narrowed. As of late 2025, roughly 11 active entities remain in the sandbox. Utah’s approach is more cautious than Arizona’s, treating ABS as a pilot program rather than a permanent change.

Washington, D.C.

Washington, D.C. has allowed a limited form of non-lawyer involvement in law firms since 1991. Under D.C. Bar Rule 5.4, a law firm can include non-lawyer partners or owners, but only if the firm’s sole purpose is providing legal services and the non-lawyer partners perform professional services within the firm. This is more restrictive than Arizona’s model — you cannot have a passive outside investor, but you can have a non-lawyer professional (like an economist or accountant) as a firm partner.

Puerto Rico

Puerto Rico permits non-lawyer ownership of law firms, but caps it at 49 percent. This means lawyers must always hold a majority stake, but outside investors or professionals can own a significant minority interest in a legal practice.

What About the Rest of the Country?

The vast majority of U.S. states still prohibit non-lawyer ownership of law firms. The American Bar Association’s Model Rule 5.4 restricts fee-sharing with non-lawyers and has been adopted in some form by nearly every state. Efforts to relax these rules at the ABA level have repeatedly stalled.

Several states have explored ABS proposals but have not yet adopted them:

Washington State considered a regulatory sandbox similar to Utah but has not implemented one
Indiana and Minnesota have had bar committees study the issue
California moved in the opposite direction — in 2025, Governor Newsom signed AB 931, which explicitly prohibits California lawyers from sharing fees with out-of-state ABS entities. This law took effect January 1, 2026, and is seen as a direct pushback against the ABS movement

Real-World Example: KPMG Law

One of the biggest developments in ABS came in February 2025, when KPMG Law US was approved as an Alternative Business Structure in Arizona. KPMG is one of the Big Four accounting firms, and this made KPMG Law the first major global professional services firm to obtain an ABS license in the United States.

KPMG Law US is set up so that the accounting firm has an ownership interest in the law practice. The idea is to offer clients integrated legal, tax, and business advisory services — something that is common in other countries like the United Kingdom and Australia, where ABS has been permitted for years, but was previously impossible in the U.S.

How Does ABS Work in Other Countries?

The United States is actually behind many other countries on this issue. The United Kingdom authorized ABS through the Legal Services Act of 2007, and non-lawyer-owned legal services firms have been operating there for over a decade. Australia allows non-lawyer ownership as well, and an Australian law firm (Slater and Gordon) even became the first law firm in the world to go public on a stock exchange.

In these countries, ABS has led to more competition, new types of legal service providers, and in some cases lower costs for consumers — though results have been mixed and the debate continues.

The Bottom Line

Alternative Business Structures represent a significant shift in how legal services can be delivered in the United States. Right now, only Arizona, Utah, Washington D.C., and Puerto Rico allow some form of non-lawyer ownership of law firms, while California has actively moved to block it. The rest of the country is watching these experiments closely.

For consumers, the potential upside is real: more competition, lower prices, and better access to legal help. But the changes are happening slowly, and it will take years before the full impact becomes clear. If you live in a state that allows ABS, you may already be seeing new types of legal service providers that did not exist a few years ago.

By Steve Levine | Published: February 16, 2026

Legal Disclaimer

This article is for informational purposes only and does not constitute legal advice. The regulatory landscape for Alternative Business Structures is evolving rapidly. If you have questions about legal service providers in your state, consult with a qualified attorney or your state bar association. OpenClassActions.org is a consumer news site and is not a law firm.