What is an alternative business structure?
An alternative business structure is a law firm or legal services entity in which non-lawyers are permitted to hold ownership interests, sit in management or share in the profits of providing legal services. The non-lawyer can be a partner, director, shareholder or external investor. Common examples that are discussed internationally include:
- lawyer establishing a law firm with a non-lawyer co-owner or investor.
- non-lawyer manager in an established firm becoming an equity participant
- traditional lawyer-owned firm bringing on non-lawyer partners or selling shares to outside investors.
In Canada, however, almost none of these examples are currently permitted in for-profit firms.
What structures are typically allowed in Canada?
Canadian legal regulation remains provincial. For example:
- Traditional sole proprietorships and partnerships: These are typically the default and restricted to licensed lawyers (or paralegals where they are regulated).
- Professional corporations: Often called professional law corporations rather than ILPs, these are widely permitted across all provinces, but 100% of voting shares and ownership are held by licensed lawyers or paralegals, with very limited room for non-voting shares in a few jurisdictions.
- Multi-disciplinary partnerships (MDPs): These are firms that combine lawyers with accountants, notaries, financial planners or other professionals. They’re expressly allowed in British Columbia, Ontario and Québec.
Full ABS with non-lawyer ownership and management of for-profit legal services is permitted in no Canadian province or territory.
Furthermore, a limited civil society organization (CSO) / not-for-profit ABS-style regime exists in Ontario exclusively for charities and certain not-for-profit entities, adopted by the Law Society of Ontario in 2017, and only a modest number of organizations have made use of it.
Potential issues with alternative business structures in Canada
Historically, Canadian law societies prohibited fee-splitting with non-lawyers and any form of non-lawyer ownership. These prohibitions can protect lawyer independence, client confidentiality and the administration of justice. The concern is usually that a non-lawyer with a direct financial stake might pressure lawyers to put revenue ahead of professional duty.
Benefits of other limited models
Even without full ABS, the structures that are permitted in British Columbia, Ontario and Québec may deliver the following advantages:
Potential benefits for consumers
- greater convenience when legal and related services (accounting, financial planning, notary services) are offered under one roof
- modest price competition in high-volume, routine matters
- slightly improved access in rural or underserved areas through interdisciplinary clinics and not-for-profit or charitable providers using CSO-style models
Potential benefits for legal service providers
- tax advantages and limited liability through professional corporations
- ability to reward high-calibre non-lawyer executives (chief financial officers (CFOs), chief operating officers (COOs), marketing directors) with partnership-like status inside permitted MDPs, subject to regulatory limits
- easier retention of business talent who want equity-like incentives within the bounds of current rules
Challenges that block full ABS in Canada
Canadian law societies and large segments of the profession may be opposed to non-lawyer ownership of for-profit law firms. Example challenges of full ABS adoption are:
Core values of the profession
Allowing non-lawyers to own or control law firms might undermine lawyer independence, breach new client confidentiality and create unavoidable conflicts between duty to the client or court and duty to investors.
Conflict of duty
A lawyer’s primary duty is typically to the court and the client. A director or shareholder in a publicly listed firm typically owes fiduciary duties to the corporation and its investors. These obligations can directly clash in real cases.
Quality of service
Pressure to maximize returns might push firms toward commoditization of legal services, shorter client consultations and a “volume over quality” approach that ultimately harms consumers.
In Canada, full non-lawyer ownership of for-profit law firms remains prohibited. Employers can still leverage professional corporations, limited MDPs (BC, ON, QC) and Ontario’s not-for-profit ABS option for tax, talent and succession benefits while preserving the ethical safeguards that typically define Canadian legal practice.
This article is based on information available at the time of writing, which may change at any time. Indeed does not guarantee that this information is always up-to-date. Please seek out a local resource for the latest on this topic.
