MSOS law firms are used to allow private shares and external investment

Real estate, airlines, fashion.

Special stocks may seem climbing the American Economy Mountain, announcing everywhere light touches as part of their kingdom.

But one angle is still in the shade: the law firms.

Almost every country has adopted a The base of professional ethics from the American Lawyers Association Lawyers are forbidden to work for non -owned companies.

Of course, lawyers discovered a way around him.

The vulnerability, known as the “Organized Services Organization”, or MSO, allows non-attorneys to possess an effective part of the law firms through a second company entity.

Business Insider spoke to lawyers who advise law firm on this arrangement, which they said has become increasingly common.

In June, Supreme Court in Puerto Rico Non -local investment in law firms was allowed to stimulate economic development in the region. Arizona, the only country to get rid of the ABA base, in 2020, now has more than 100 lawyers open for external investors, according to Study the Faculty of Law in the recent Stanford. Large companies like KPMG and Rocket Lawyer now explicitly own the state’s law companies.

The MSO model, which is not limited to Arizona only, can resume the owners of the law company who want to retire or who do not want to hand their companies to the law partner.

“We are in the midst of the largest retirement circulating for lawyers in history,” said Lucian Pera, a lawyer for legal ethics at Adams & Reese who advises lawyers and companies about the creation of MSOS. “The number of births increases, and it is a real opportunity for some people.”

The use of MSO can give private stock companies – or other types of companies – an opportunity to buy a segment of legal practices effectively. Lawyers give the opportunity to sell their companies’ shares for cold and difficult money.

It can also provide an opportunity for partnership with a deep pocket company that can enhance the company and help expand its scope to new horizons.

No one says that Msos are not fine

Traditionally, law firms have worked as partnerships between lawyers, as stock partners have shares in the company and help manage them.

This is partially due to the rules of ethics designed to preserve the independence of the lawyer, such as the ABA Al -Qaeda 5.4 (D) model, which largely prevents non -analysts from the possession of law firms or the right to control professional ruling from a lawyer.

The ABA rules have made distinguished legal practices from many other white collars, such as financing or consulting, which may have strong ethical rules and rules but do not impose such strict limits on ownership. There are a lot of banks circulating for the public and consulting companies, but there are no law companies circulating publicly.

As an alternative solution, the lawyers can put themselves as two companies for companies, Peera said. One of the laws office itself is exclusively consisted of lawyers and owned only by lawyers. The second is the Services Organization, which anyone can own and act as a lawyer seller. It is basically the back office, with attention to all unbalanced tasks, including marketing, accounting, human resources, real estate contracts and employing legal assistants. Corporate entity enters into a long -term contract.

Under this MSO arrangement, employees can invest in the service company, although the law office is not itself. Examined! You have a morally independent set of lawyers who work exclusively with a company that can sell stocks, says PERA.

According to PERA, none of the state tapes issued the opinions of ethics that explicitly blessed the MSO model, but no court or regulator found a problem with that.

“The pieces are well fit, and there is no regulatory approval required for a law firm to do so, just like the lack of regulatory approval required for a law firm to remove a bank loan,” Bera said.

A spokesman for the American Lawyers Association said that the center of its professional responsibility has no moral opinions on the investment of non -lawyers in MSOS.

“The lawyers are not subject to the rules of the ABA model,” the spokesman said. “Instead, it is organized by the Supreme Courts of the State in which it is licensed.”

Opportunities for both lawyers and investors

Tom Linxte is a founder and CEO of the law market exchange, a type of Crigzin menu for law firms.

He says that private stock companies are usually concerned with the companies driven by the consumer, such as personal injury.

Linviste, who is also advised to integrate the law firm and acquisitions, said investors may be able to introduce new competencies into those companies and get a continuous flow of revenues into a larger portfolio.

He said that private stock companies may be more careful than investing in large law firms, which usually serve companies and have lower but larger customers. He said that lawyers can always jump on the ship and take customers with them, but consumer law firms tend to do more stable work.

“The personal injury is listed in the brand-it’s advertising paintings, it’s TV, it’s digital marketing,” Business Insider told Business Insider. “He is not a relationship based on a relationship.”

Since law firms are not required to reveal their use of service institutions, it is difficult to know the extent of this practice.

PERA and Lenfestey refused to include the companies they worked with using the temple, noting the secret obligations towards their customers, but they said they became more common.

Bera said he knows one company that has used the structure since 2006. In recent years, more law firms and investors are interested in using MSOS, PERA and Lenfestey.

“There are a lot of things that are taking place at the present time, and some are very large,” Praira said. “There is a fairly large insurance defense company in this country looking to do so. There is a large law firm in the classification of isolation that looks at this. So there are no trivial number of these things that happen.”

Lawyers who have built their practices, who want to spend, can do this by selling an actual part of their company to another person to manage it.

They can also help companies on a large scale. Selling MSO shares can help finance a generation or advertisement.

Catalex Network, which was launched earlier this year, uses the MSO model to invest in law firing companies with a longer timetable. Although the private stock company may want to adhere to a law firm for a few years before selling its share, Network Network says it aims to form long -term partnerships with law firms by helping them to create MSOS, buy great risks in it, combine their background offices, and giving companies resources to compete with the major law.

Catalex Network provides bread and butter services such as information technology, salary statements, compliance management, and accounting. But also the most specific services for the legal industry, such as employment and advanced institutions programs that will be costly for smaller companies.

“I have seen somewhat large law resources and I saw small law resources,” said Jeffrey Goldenhrch, a founding partner of the Catalax network, who was previously working for the big company Skadden Arps before moving to boutique.

For Catalex, the MSO structure provides a means for the company to grow with law firms. The rules of the American Lawyers Association aimed at maintaining the independence of the lawyer, such as the limits of sharing fees with non -lawyers, are not a case.

While Catalex Network deals with the rear office, lawyers can do less and more law, says Goldenhersh.

“So we are trying to help them catch up with the knees and be able to enter the circuit with some of the largest companies that have been unified, have the best technology, the best Amnesty International, and the best background employees, and make them able to compete and remain relevant in the industry,” Jesse Hamilton, another partner of the establishment of Catalix, told BI.