Alternative Business Structures in the U.S.: What We Know and What We Still Need to Learn
As we approach the five-year mark of alternative business structures—legal service entities that allow people who are not lawyers to have an ownership or decision-making interest in the company—in the United States, over 100 entities have launched in Arizona and Utah. This article reflects on what we know, what we still need to learn, and why continued experimentation is critical to closing the access to justice gap.
The History of Alternative Business Structures in the U.S.
It is well documented that the vast majority of Americans do not have access to affordable legal help when they need it. This gap in legal services extends well beyond the income eligibility line for free legal aid and into the middle class. The breadth and depth of the problem is so extensive and dire that even if all lawyers in the United States did a substantial amount of pro bono work and legal aid was fully funded, it would not be enough. The reality is that we need an entire ecosystem of legal service models and providers to bridge the gap, including legal service delivery options that involve people who are not lawyers.
In addition to this crisis, the legal profession has traditionally been slow, if not at times resistant, to change. While other industries embrace change to improve operations and meet their customers’ evolving needs, the legal profession has lagged behind, adhering to traditional ways of operating law firms and delivering legal services.
This is where alternative business structures (ABSs) come in. Allowing alternative business structures can potentially increase access to affordable legal services and innovation in the profession in a variety of ways. ABSs permit outside investment and ownership by people other than lawyers. Law firms can use outside investment to invest in operations and technology, allowing them to increase efficiency, create new and sometimes more affordable service delivery models, and extend their reach and impact. ABSs also permit collaboration between lawyers and professionals from other fields (e.g., tech, social work, finance, tax) in a single organization, providing a more holistic approach to legal service delivery.
Two states currently permit ABSs: Utah and Arizona. In August 2020, Utah launched a regulatory sandbox that is designed to test whether changing the way it regulates the practice of law can narrow the access to justice gap without increasing consumer harm. The sandbox involves an application and monitoring process, and permits different types of innovations, including ABSs, when the “innovation requirement” is met and the ABS is not providing immigration legal services.
In January 2021, the Arizona Supreme Court created its ABS program. According to the Task Force on the Delivery of Legal Services, the purpose of the Arizona ABS program is “rooted in the idea that entrepreneurial lawyers and nonlawyers would pilot a range of different business forms” that will ultimately improve access to justice and the delivery of legal services.” The two purposes of the program are 1) to improve access to justice, and 2) to innovate the delivery of legal services more broadly. In September 2024, the Arizona Supreme Court approved the 100th ABS.
What the Data Shows So Far
Over the past four years, the regulatory innovation community has collected data related to ABSs. While not plentiful or definitive, the data does offer insights on consumer harm, innovation, and the public’s perspective.
No evidence of increased consumer harm
Since the launch of the Sandbox in Utah and the ABS Program in Arizona, state regulators and program administrators in those states have been collecting data pertaining to consumer harm. In Utah, the Office for Legal Services Innovation received a total of 14 consumer complaints as of January 2024, 9 of which were linked to one of the three defined consumer harms (inaccurate or inappropriate legal result, failure to exercise legal rights, purchase of unnecessary or inappropriate service). In relation to the total number of Sandbox services provided, these numbers translate into 1 out of every 4,011 Sandbox services resulting in a consumer complaint. Viewed slightly differently, the data shows that consumer complaints were submitted for less than 0.01% of all services provided in the Sandbox. As of April 2025, the number of complaints has increased to 20.
Data on the number of legal services lawyers provide is not collected by the Utah State Bar so we cannot directly compare the number of complaints per services offered by entities in the Utah Sandbox to the number of complaints per services offered by lawyers operating traditional law firms. We can share the following data, however, from the Utah State Bar and Office of Professional Conduct 2021, 2022, and 2023 Annual Reports: 2021: 8,998 active lawyers, 681 complaints filed; 2022: 9,221 active lawyers, 660 complaints filed; 2023: 9,432 active lawyers, 631 complaints filed.
In Arizona, 24 charges (allegations of wrongdoing) have been filed to date. Charges may be dismissed or resolved at intake or may progress to an investigation as a formal complaint. The 24 charges involved communication (7); dishonesty, fraud, deceit or misrepresentation (4); terminating representation (1); diligence (1); and in 11 instances the nature of the charge was not defined. Of those 24 charges, two have resulted in complaints against ABSs and two have resulted in complaints against ABS compliance lawyers. The ABS Annual Reports contain more information about ABS complaints and discipline in Arizona. So far, despite what critics of ABSs have predicted, the introduction of ABSs has not led to an increase in consumer harm.
As with Utah, we also cannot make a direct comparison between entity and traditional law firm lawyer complaints in Arizona. We are able to share the following data, however, from the 2021, 2022, and 2023 Arizona Attorney Regulation Advisory Committee Annual Reports: 2021: 25,344 active lawyers, 2,299 charges filed; 2022: 25,421 active lawyers, 2,421 charges filed; 2023: 25,820 active lawyers, 2,797 charges filed.
Early evidence of impact
In September 2022, the Deborah L. Rhode Center on the Legal Profession at Stanford Law School published Legal Innovation After Reform: Evidence From Regulatory Change, a comprehensive analysis of the legal service entities that are emerging in response to rule reforms in Utah and Arizona. It seeks to answer two common questions that arise in regulatory reform debates. First, if unauthorized practice of law and ethics rules are relaxed, what types of innovation in legal services are likely to result? Second, who will be served by these innovations? While the report is not solely focused on ABSs, it contains data on ABSs operating in Utah and Arizona.
One of the key insights from the report is that regulatory reforms are spurring substantial innovation in five different ways; the report offers a taxonomy of types of innovations made possible by rule reforms in Utah, Arizona, England, and Wales. The five types of innovations include traditional law firms making changes to their ownership or investment structure, law companies with nonlawyer ownership practicing law, non-law companies expanding into law, intermediary platforms connecting consumers with lawyers, and entities using nonlawyers and tech to practice law. All categories except “intermediary platforms” involve ABSs.
The report also offers the following nine findings from a qualitative study of legal services innovation in Utah and Arizona:
- Rule reform in both states is spurring significant innovation in the ownership structure of legal services providers, and lawyers are playing a central role in that innovation.
- One third of Utah authorized entities, but no Arizona entities, are using nonlawyers and/or technology to practice law within the meaning of unauthorized practice of law (UPL) rules.
- The Utah Sandbox contains the only nonprofits and the only entities that sought authorization to primarily serve low-income people.
- Most authorized entities in Arizona and Utah are serving consumers and small businesses.
- Authorized entities across both jurisdictions are offering services in a wide range of legal subject areas, but Utah’s reforms are yielding a greater diversity than Arizona’s.
- A large majority of entities across both jurisdictions sought authorization to take on nonlawyer ownership or investment, although their reasons for doing so vary.
- A majority of entities are developing some kind of technological innovation.
- A majority of entities across both jurisdictions feature other, non-tech innovations.
- There are few reported complaints against service providers in Arizona or Utah.
The Rhode Center’s report also offers key findings with respect to ABSs in England and Wales. The findings are mixed, and the authors caution that they may not fully generalize to the U.S. context for two main reasons. First, the reforms in England and Wales were implemented against a very different baseline of regulation, confounding the inferences that can be drawn about the likely effect of similar reforms in the U.S. The other complicating variable when attempting to apply evidence from the England and Wales reforms to the U.S. context is that the U.K. reforms proceeded alongside a major pullback in government funding for legal aid.
The Rhode Center is currently updating this report and expects to publish its findings in summer 2025.
Public perception and support
Before launching its ABS Program, the Arizona Supreme Court Task Force on the Delivery of Legal Services surveyed Arizona residents about nonlawyer ownership of law firms and other innovations they were considering. First, the survey assessed respondents’ existing knowledge regarding the issue. It asked: “To the best of your knowledge, are individuals who are not lawyers allowed to own or be a partner in a law firm in the State of Arizona?” About a quarter of respondents (24.8%) answered “yes” or “probably yes,” 36.3% of respondents answered “probably no” or “definitely no,” and 39.0% of respondents answered “Don’t Know” or they refused to answer the question. The survey then provided some brief background information and asked respondents whether they would support or oppose a proposal that would change current restrictions to allow people who are not lawyers to own businesses that practice law. Just over half (51.5%) of respondents indicated they would support the proposal, 39.5% of respondents indicated they would oppose the proposal, and 9.0% of respondents indicated they did not know what they would do or refused to answer the question. The survey results indicate that the majority of Arizona residents would support an ABS proposal if it were presented to them.
Outstanding Questions
While early results are encouraging, critical questions remain unanswered, including:
- What percentage of ABSs are offering services to people and small businesses that fall within the legal services gap?
- What would these people and small businesses have done had they not retained the ABS?
- What is the social return on investment—the measure of social, environmental, and economic benefits—of the ABS Program in Arizona?
- Note: IAALS is wrapping up a two-part interim evaluation of the Utah Sandbox. Part one will be a process and outcomes evaluation and part two will be a social return on investment analysis. IAALS expects to publish the first report by the end of summer 2025.
- What positive, negative, and unintended impacts have ABSs in Utah and Arizona had on the legal profession?
IAALS encourages ABS program administrators in Arizona to collect data that would help researchers answer these questions, and it encourages administrators of ABS programs under development (Washington, Minnesota, and Indiana) to consider creating a system for collecting data to answer such questions at the outset.
Experimentation and Innovation Is Still the Path Forward
Continued experimentation with ABSs in Utah, Arizona, and other states is needed to understand the full potential for positive and negative impacts on society and the legal profession. IAALS encourages regulatory innovation leaders to consider experimenting with ABSs and collecting data to help the regulatory innovation community answer the critical questions above. In jurisdictions in which experimenting with ABSs is not currently possible, IAALS recommends that leaders refrain from changing or creating rules or legislation that would stifle innovation in states that permit ABSs (e.g., AB 931 in California, which would prohibit a lawyer or other legal entity in the state from directly or indirectly sharing legal fees with an out-of-state entity that provides legal services while allowing nonlawyer ownership, management, or decision-making authority).
Conclusion
Alternative Business Structures offer a promising, though still evolving, path toward expanding access to legal services in the United States. Early data from Utah and Arizona show encouraging signs—minimal consumer harm and growing innovation—but critical questions remain. To fully understand their potential, continued experimentation and rigorous data collection are essential. As the access to justice crisis deepens, we cannot afford to stall innovation; instead, we must create space for thoughtful reform, evaluate outcomes, and remain open to new models that challenge the status quo.
