The Modern Law Office

Who may own a law firm?

Who may own a law firm? At Temko & Eden, the small Daytona Beach firm in this course’s scenarios, Ron Pike keeps the books and runs the office. Suppose the partners wanted to give him a tenth of the firm, or sell a tenth to an investor who would pay for new software. In most businesses the owners decide who else may own. In a Florida law firm the Rules Regulating The Florida Bar decide, and the answer to both questions is no.

The reasons behind that answer draw most of the lines on a firm’s organization chart. They decide who may own it, who may direct the lawyers, who must supervise everyone else, and where a nonlawyer’s work has to stop. The activity has you find those lines on a real Florida firm and then test the last one in ten scenarios. This reading explains where each line comes from, starting at the top.

The top of the chart starts with the firm’s legal form. Rule 4-8.6 lists the forms a Florida practice may take, which it calls authorized business entities: professional service corporations, professional limited liability companies, partnerships, sole proprietorships, and qualifying nonprofits. The letters after a firm’s name usually tell you which one it is. Under section 621.12, Florida Statutes (opens in a new tab), a professional corporation’s name must say “professional association,” “P.A.,” or “chartered.” The P.A. in Temko & Eden, P.A. marks a corporation, and in Florida its shareholders must be lawyers. The same statute lets the name keep the surnames of shareholders who have retired or died, which is why the firm still carries the names of Temko and Eden, its late founders.

The owners, and why only lawyers

Rule 4-5.4 protects what its title calls the professional independence of a lawyer, and it closes every door an outsider might use to get in. A lawyer may not share legal fees with a nonlawyer. A lawyer may not form a partnership with a nonlawyer if any of the partnership’s work is practicing law. And a lawyer may not practice in a for-profit firm where a nonlawyer owns any interest, serves as a director or officer, or can direct a lawyer’s professional judgment. Rule 4-8.6 says the same from the firm’s side. Only a person qualified to practice law in Florida, or an out-of-state lawyer working through a bona fide interstate firm, may own equity in a Florida firm or set its policy. Only a person qualified in Florida may direct a Florida lawyer’s legal work.

So Ron Pike cannot own a tenth of Temko Eden, but he can still share in its success. Rule 4-5.4(a)(4) allows a bonus to a nonlawyer employee for work performed, including extraordinary effort on one case or over a stretch of time. The bonus may not be based on cases or clients the employee brought in, and it may not be calculated as a percentage of the legal fees the firm receives. Rule 4-5.4(b) adds that a firm may include its staff in a qualified pension, profit-sharing, or retirement plan. A bonus for the months of trial preparation that won a case rewards work. A cut of the fees from every client the office manager recruits is the fee sharing the rule forbids.

Why draw the line so hard? The Supreme Court of Florida answered in 2021, in a case about an app. TIKD Services let drivers upload a photo of a traffic ticket, decided which tickets it could handle at a profit, and charged the driver a percentage of the ticket’s face value. It then sent each accepted case to a Florida lawyer it had contracted with, at a flat fee TIKD set, and the lawyer did the legal work. TIKD’s website said it was not a law firm. In The Florida Bar v. TIKD Services LLC, 326 So. 3d 1073 (Fla. 2021) (opens in a new tab), four of the seven justices agreed that TIKD was practicing law without a license anyway, and the court enjoined it. Justice Lawson’s opinion for three of them located the problem in who held the controls. A nonlawyer business that earns its income from legal services, or controls them, puts its own profit between the lawyer and the client. And the court has no power to discipline it.

Three justices dissented. Justice Couriel pointed out that TIKD filed no papers, made no court appearances, and gave no customer individualized legal advice; what it sold, in his view, was a business bargain. That is the usual shape of the argument over who may own a law firm, with cheaper access to help on one side and protection from unaccountable control on the other. For anyone drawing a firm’s chart, the question underneath is plainer. Whoever sits at the top decides which cases the firm takes and what it charges, and Florida keeps that seat for someone the Supreme Court of Florida can discipline.

What Arizona did instead

Arizona answered the same question the other way. In Order No. R-20-0034 (opens in a new tab), signed August 27, 2020, its supreme court abolished its version of Rule 5.4 as of January 1, 2021, and put a license in its place: the alternative business structure. In a licensed entity, nonlawyers may own a share, manage the business, and split fees with the lawyers. Only lawyers and others the court licenses may deliver the legal services, though. Each entity must also have a compliance lawyer, whose duties include keeping the nonlawyers from interfering with the lawyers’ ethical duties to clients.

Florida weighed the same ideas and said no. A special committee proposed testing nonlawyer ownership and fee sharing, and widening what paralegals may do. In March 2022 the Supreme Court of Florida told the Bar it would adopt none of those proposals (opens in a new tab). It took only one recommendation, letting nonprofit legal service providers organize as corporations and seat nonlawyers on their boards, and that change became Rule 4-5.4(f) later that year.

Where ownership is closed, money looks for another way in. A management services organization is a separate company, often owned by investors, that sells a firm the business side of practice: staff, office space, software, marketing, billing. The firm pays it a fee, and the investors own the company, not the firm. Florida’s rules still bind the lawyers on the other side of that contract. A fee figured as a share of the firm’s legal fees would run into Rule 4-5.4(a)‘s ban on sharing fees with a nonlawyer. A company that steered the lawyers’ work would run into Rule 4-8.6, which lets only a person qualified in Florida direct a Florida lawyer’s professional judgment.

The supervisors, and the title they supervise

Below the owners, every line that ends at a nonlawyer runs back to a lawyer. Rule 4-5.3 builds the supervision of nonlawyers in layers. Partners and other managing lawyers must make reasonable efforts to put measures in place. The measures must give reasonable assurance that the staff’s conduct fits the lawyers’ professional obligations. A lawyer who directly supervises a nonlawyer must make reasonable efforts to keep that person’s conduct in line. A lawyer also answers personally for a nonlawyer’s misconduct if the lawyer ordered or ratified it, or learned of it in time to limit the harm and failed to take reasonable steps.

The rule then says what supervision does not require. A paralegal may carry out delegated work without the lawyer present, but the lawyer must review that work and is responsible for it. The comment to the rule marks the outer edge: a task that needs the lawyer’s independent judgment and participation cannot be delegated at all. The rule states that principle without a list, and the Bar’s pamphlet on Florida Registered Paralegals (opens in a new tab) supplies one. Even a registered paralegal may not serve the public directly, accept a case, set a fee, give legal advice or an opinion, or represent a client in court without the court’s leave. Drafting a demand letter for the lawyer’s signature is delegated work. Deciding whether to make the demand, and for how much, is the lawyer’s.

The title on the chart is regulated too. Rule 10-2.1(h) defines a paralegal as a person qualified by education, training, or work experience who works under a lawyer’s supervision and performs specifically delegated substantive legal work for which that lawyer is responsible. The same definition covers “legal assistant,” a title some firms give to secretarial jobs, so a chart built from titles alone can mislead you. The rule’s last sentence gives the definition teeth. Anyone who uses either title to offer services directly to the public without meeting the definition is practicing law without a license.

The line only a lawyer may cross

The last line on the chart is the one a paralegal carries all day. Section 454.23, Florida Statutes (opens in a new tab), makes the unlicensed practice of law a third-degree felony: practicing law in Florida without a license or other authorization, or holding yourself out as qualified to practice. The statute does not say where practicing law begins. The Supreme Court of Florida decides that, and it has resisted reducing the answer to one definition.

Rosemary Furman learned where it began. She ran Northside Secretarial Service in Jacksonville, had no legal training, and by her own account charged no more than $50 to prepare the papers for a divorce. Many customers came back with her intake sheet unfinished. Some found the legal terms unfamiliar and some could not read, so she asked the questions and filled it in herself. She typed the petition, told customers where to file it, followed each case, and briefed them before the final hearing on what would happen in front of the judge. Every customer knew she was not a lawyer, and none claimed to be harmed. In The Florida Bar v. Furman, 376 So. 2d 378 (Fla. 1979) (opens in a new tab), the court held that she was practicing law and enjoined her permanently.

The court was not writing on a clean slate. A year earlier, in The Florida Bar v. Brumbaugh, 355 So. 2d 1186 (Fla. 1978) (opens in a new tab), it had told secretarial services what they could do. They could sell forms and printed guides, and type a form using only what a customer supplied in writing. They could not ask questions to fill in the blanks, tell customers which forms they needed, or correct their mistakes. Furman admitted she could not run her business that way, because her customers could not write the information down. The court enjoined her anyway, and in the same opinion ordered The Florida Bar to study better ways of getting legal help to people who could not pay for it.

Rule 10-2.2 later loosened one knot. A nonlawyer may now ask the factual questions needed to fill in the blanks on a form the Supreme Court of Florida has approved, and may explain how to file it. For any other form the Brumbaugh rule stands: type exactly what the person wrote, and say nothing about the form. Either way, legal advice and advice about remedies stay on the lawyer’s side.

Inside a firm the line sits somewhere else, because a lawyer supervises the work and answers for it. That is why a paralegal may interview a client and draft the complaint, the very things the court stopped Furman from doing for her customers. What stays with the lawyer is the judgment: what the client should do, which claim to bring, what to charge, and whether to take the case. When a client asks the paralegal a question that only that judgment can answer, the paralegal’s job is to get the question to the lawyer.

Drawing the chart

A real firm’s chart rarely states any of this. Its website lists lawyers and staff by title, and its job postings describe duties, name a supervisor, and often name the software. That software is the firm’s technology stack: practice management for matters and calendars, document management, billing and trust records, and communication. The stack is where the chart’s lines turn into permissions, because who may open, edit, or send in each system is a decision about roles.

Now draw one. The activity starts with a real Florida firm’s pages and the Firm Mapper, which sorts what the pages state from what it guesses. Then you add the lines this reading traced: the firm’s form and its owners, the lawyers who supervise, what each role may do, and where section 454.23 stops it.