April 2, 2025 – Lawyers across the country paid attention when international accounting firm KPMG LLP established a law firm in Arizona. It wasn’t the first Alternative Business Structure (ABS) in Arizona, which isn’t the only state allowing law firms with nonlawyer owners and managers. But it may be the biggest ABS.

Do not try this in Wisconsin. Why not?

Because nonlawyer ownership of law firms in Wisconsin is clearly prohibited, said Sarah Peterson, State Bar of Wisconsin Ethics Counsel.

'Professional Independence'

Wisconsin Supreme Court Rule (SCR) 20:5.4 requires “professional independence” for lawyers to ensure they act in the best interests of their clients.

Like in most states, SCR 20:5.4 prohibits lawyers from either “entering into a partnership with a nonlawyer” in the practice of law or sharing “legal fees with nonlawyers,” nor can a lawyer work under a nonlawyer who “has the right to direct or control the professional judgment of the lawyer.”

Under American Bar Association (ABA) Formal Opinion 499, released on Sept. 8, 2021, a lawyer may passively invest in an ABS, provided it would not generate conflicts with the lawyer’s practice. The lawyer investor may not use the ABS to practice law and may not acquire confidential information about the ABS’s clients.

An ABA formal opinion is only advisory, but “often influential,” Peterson explained.

Rule Experiments

Proponents suggest that ABSs may improve access to justice, create interdisciplinary specialists, and foster better firm economics through acquiring capital from nonlawyers, who become equity owners.

Two states and the District of Columbia have changed their rules of professional responsibility to allow a wider range of forms of lawyer businesses.

In addition, Washington State has experimented with nonlawyer Limited Licensed Legal Technicians (LLLTs) to assist in divorce, child custody, and other areas of family law.

In 2020, the Washington Supreme Court decided to sunset the LLLT program, created in 2012, according to the Washington State Bar Association.

The court noted the cost to maintain the program, and the low number of applicants. Currently licensed LLTLs can still operate, but the court is not licensing new LLLTs.

The District of Columbia, in 1991, amended its Rule of Professional Conduct 5.4 to allow legal services in a firm with nonlawyer owners or managers. It was the first – and the ABA quickly issued Formal Opinion 91-360 that addressed lawyers licensed in both the District of Columbia and other states that prohibited the practice.

Utah’s Supreme Court’s Standing Order No. 15 in 2020 began an ABS pilot program scheduled to operate to August 2027. The court’s Office of Legal Services Innovation (Innovation Office) oversees the regulatory sandbox to experiment with ABSs to increase access to justice. The court tasks the Innovation Office to base its decisions on empirically driven risk assessment relative to available legal services guided by a market-based approach.

Based on experience, last September the court narrowed the scope of businesses that qualify for the sandbox to “[m]id- to high-innovation entities” that reach Utah customers, according to the letter that the court sent to the Legal Services Innovation Committee.

The experimental nature of Utah’s rules shows in the small numbers of authorized entities listed on the Innovation Office website – a total of 16. Sixteen more are out of the sandbox but allowed to operate with a partial waiver of the Utah Rule of Professional Conduct 5.4, and 36 are previously authorized entities.

Enter KPMG

Arizona’s rules took effect in 2021, and its ABS program is going full throttle. Even before KPMG Law US, LLC received Arizona Supreme Court approval to operate, the state had about 115 active ABSs.

The names of the ABSs available on the Arizona Judicial Branch website show concern for access to justice and specializations for auto accident cases, personal injury, health care law, and immigration.

Amongst this cohort, the new law firm proclaims its ability “to deliver a focused set of technology-enabled legal services powered by artificial intelligence and KPMG Digital Gateway, building upon the firm’s established Legal Business Services practice,” according to KPMG’s website.

Although the law and accounting firms are independently managed, “[t]ogether, KPMG Law US and KPMG will provide legal managed services, legal operations consulting, and advanced legal technology innovation, to help clients gain efficiencies and empower their legal teams to concentrate on strategic priorities.”

KPMG Law US, LLC’s license conditioned approval on semiannual audits by the firm’s compliance lawyer to maintain internal policies and procedures consistent with court rules. The order also prohibits the firm from providing legal services to clients that rely on KPMG for “financial statement audits or attestations.”

Arizona’s Rule

Arizona’s hopes for ABSs appear in regulatory objectives codified in Arizona Code of Judicial Administration section 7-209. These ideals include “promoting access to legal services,” and “encouraging an independent, strong, diverse, and effective legal profession” – in addition to ensuring lawyer professional responsibility.

The rule defines an ABS as “a business entity that includes nonlawyers who have an economic interest or decision-making authority in the firm and provides legal services,” under Arizona rules.

The rule’s length of 26 single-spaced pages illustrates the scrutiny the Arizona judiciary holds on ABSs. Initial licensure involves an applicant’s submission of extensive corporate documentation and background checks.

Even if granted, licensure lasts for only two years. The rule recommends that ABSs submit renewal applications at least 90 days before the license expiration date.

Both applications and post-licensure audits seek to protect the professional independence of lawyers who provide legal services.

Corporate ownership and governance form a critical element in this review. The organizational structure manifested in policies and procedures must protect client confidentiality and ensure that the ABS’s lawyers “make decisions in the best interests of clients.”

In effect, the organization itself remains obligated to professional responsibilities of lawyers, reviewed by compliance attorneys, and regulated by the supreme court.

Arizona’s means of ensuring professional responsibility resembles regulations in Utah, whose supreme court regulates ABSs, and the District of Columbia, where nonlawyer owners and managers submit to the same regulation as lawyers.

No Interest Shown in Wisconsin

Nationwide, the idea has cooled somewhat, Peterson explained, with Illinois, California, and New York turning down proposals allowing nonlawyers to own or manage law firms in those states.

“When it first happened in Arizona, … there was more momentum behind it then. I don’t think there’s as much momentum behind it now, especially when you have the larger legal markets saying, ‘not in our state.’” Peterson said.

No one has proposed a rules petition to the Wisconsin Supreme Court that would allow nonlawyer managers or owners to a law firm in Wisconsin. “As far as I know there are not currently any committees or other groups working on it,” Peterson said.