Thursday, December 7, 2023

Can the Chairman of a Law Firm Be a Non Attorney?

The ethical rules of law firms prevent a non-lawyer from holding equity partners, and even less so, a position of chairman. But non-lawyers can serve in a non-equity role in a law firm, by accepting a salary or taking on other administrative duties. It’s a great opportunity to bring in new ideas and improve the quality of legal services for low-income Americans.

Most law firms are entirely lawyer-owned. Nonlawyers cannot own a majority of the company, and they are prohibited from sharing legal fees with lawyers. But there are a few exceptions to this general rule. In California, lawyers can own equity shares in a law firm, and their ownership interest can’t exceed ten percent of the firm. That way, nonlawyers cannot hold a majority share in a law firm.

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While many lawyers would prefer outside investment, they aren’t necessarily motivated by profit. For them, the ultimate goal is to sell the firm for as much as possible and walk away with a tidy profit. But outside investors would likely have a different mindset. Moreover, they would not understand a lawyer’s obligations in the firm. Then again, lawyers who want to run a firm as an entrepreneur aren’t necessarily interested in shareholders.

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