Arizona Alternative Business Structure Program Reaches Major Milestone with 100th Participating Entity
To expand access to legal services, the state of Arizona has implemented alternative business structures (ABS), business entities that include individuals other than lawyers who have an economic interest or decision-making authority in a firm that provides legal services. The ABS program recognizes that entrepreneurial lawyers and nonlawyers alike should be empowered to pilot a range of differing business forms that would otherwise be prohibited, but could ultimately improve access to justice and legal services for the public. As of September 24, 2024, Arizona has approved 100 participating entities—a huge milestone for both Arizona and the greater regulatory innovation community.
While ABS systems have long existed in the United Kingdom and Australia, Arizona is the first state in the U.S. to implement rule changes to allow for ABS models. When surveyed, Arizonans agreed that the costs of legal services are too high, and as a result of implementing ABS programs, they are better able to receive the lower-cost legal assistance they need.
The Arizona ABS Program
On January 1, 2021, through an administrative order, the Arizona Supreme Court created the ABS program permitting “nonlawyers,” or those not licensed to practice law, to partner with lawyers in business. These individuals may “own, have an economic interest in, manage, or make decisions in” an ABS that provides legal services and may split fees with attorneys.
The ABS program has two regulatory objectives: 1) innovating the delivery of legal services, and 2) increasing and improving access to justice. The ABS program requires licensure and regulation of ABS law firms.
Among existing alternative business structures in Arizona, there are consumer-facing and business-facing models. Both models demonstrate innovative approaches to delivering legal services to businesses and individuals alike by offering streamlined processes and multidisciplinary practices that bring professionals other than lawyers into the fold. Consumer-facing ABS models include, but are not limited to, services for assistance with small claims and estate planning issues. Also included within the realm of consumer-facing ABS law firms are those focused on serving specialized groups such as dentists, medical professionals, and pilots. Examples of innovation on the consumer side include models that leverage technology to create convenient and transparent estate planning services and accessible and affordable record expungement services.
Business-facing models are also ripe for alternative business structures in Arizona. Entities exist to increase fair pricing and accessibility with respect to legal services, assist with business filings, offer one-stop-shop business consulting services, and leverage technology to increase efficiency and scale. Examples of business-facing innovations include combining the disciplines of law, business, engineering, and technology to serve clients in a holistic manner and streamlining the small claims preparation process for small businesses.
The Future of Legal Innovation in Arizona and Beyond
The continued use and expansion of the Arizona ABS model will allow for greater technological innovations in the delivery of legal services to businesses and the public, thereby increasing access to justice. It will also provide additional capital for law companies and firms and will create “one-stop shops” to provide legal and related services to clients. With time and continued participation in the ABS program, the gap in legal services for Arizonans should decrease, innovation of the delivery of legal services to all should increase, and states across the U.S. will have an excellent example to look to as they also try to solve their legal service and innovation gaps.
