Why Lawyers And Law Firms Should Pay Attention To MSO Partnerships

The traditional law firm model is under pressure from every angle. Technology companies and alternative legal service providers are competing for clients and talent – and the competition has never been fiercer. Clients demand efficiency, transparency and innovation; lawyers want flexibility, modern tools and relief from administrative burdens. Yet, the regulatory framework governing law firms – especially the American Bar Association's Rule 5.4 dual prohibitions on fee-sharing with nonlawyers and nonlawyers owning or managing law firms – has historically limited how law firms can raise capital, experiment with business structures or collaborate with nonlawyer investors and professionals.

Enter the management services organization (MSO) model.¹ After their significant percolation in the healthcare and accounting industries, MSOs are rapidly gaining traction in the legal sector as a creative and compliant way to bring business expertise, technology infrastructure and outside investment to law firms. Though the concept is not new, the strategic significance of MSOs for law firms in 2025 and beyond is.

What Is an MSO?

An MSO is a separate business entity – typically owned by nonlawyers – that provides operational, administrative and business services to a law firm. Those services can include finance, marketing, human resources (HR), technology, facilities, compliance and more. The point is to allow lawyers to focus on what they do best: practicing law. The MSO, in turn, supports the law firm's business operations under a contractual arrangement.

The model is designed to comply with Rule 5.4 by maintaining a clear division between the legal and nonlegal functions of the enterprise. In essence, the MSO owns and operates the business operations, while the law firm retains ownership and control of the practice of law.

Why the MSO Model Is Drawing Attention

Several developments have converged to make MSOs especially attractive right now:

• Capital Constraints. Law firms cannot take on equity investment from nonlawyers. The MSO model allows outside capital to flow into the operational side of a business, funding growth, technology and innovation – all without violating Rule 5.4.
• Operational Complexity. Modern legal practices demand sophisticated business operations, including data analytics, cybersecurity, marketing automation and advanced HR systems. Many small and midsize firms cannot afford or manage those functions alone. The MSO model ensures that these firms can keep up with technological advancement and other operational complexities.
• Regulatory Momentum. Jurisdictions such as Utah, Arizona, Puerto Rico, Washington state and Tennessee are actively exploring or experimenting with limited reforms to allow nonlawyer participation in legal services. The MSO structure positions firms to adapt quickly as the regulatory environment evolves.
• Client Expectations. Clients increasingly want "one-stop-shop" solutions that combine legal knowledge with business, compliance and consulting services. MSOs allow law firms to scale to meet those demands without losing focus on their legal responsibilities.

What Law Firms Gain

Access to Capital and Business Expertise: Law firms often lack the ability to attract significant investment or scale operationally without debt. Through an MSO, a firm can secure funding for marketing, infrastructure or technology upgrades from nonlawyer investors who take equity in the MSO – and, importantly, not the law firm.

This structure brings professional management to functions that lawyers often manage reluctantly. Experienced executives can oversee finance, operations and technology, which frees up lawyers to focus on lawyering. For firms looking to expand geographically, build new practice lines or compete with national platforms, this can be transformative.

Artificial intelligence (AI) is another key trend that has the potential to significantly disrupt the way law has been practiced for decades. However, as evidenced by the numerous and seemingly daily examples of lawyers misusing AI in litigation proceedings and elsewhere, implementing and deploying AI requires – and for the foreseeable future will continue to require – major investments in technical expertise in order to calibrate these tools. Accordingly, this is an area where a true partnership between legal and business minds can generate meaningful opportunities for differentiation.

Strategic Flexibility: An MSO arrangement allows lawyers to experiment with business strategies that might otherwise be unattainable. The MSO can develop new client-facing technology, expand consulting arms or even create subscription-based services. Because the MSO is not itself engaged in the practice of law, it enjoys greater flexibility to innovate and diversify revenue streams.

Economies of Scale: MSOs create efficiencies by centralizing administrative services, including HR, IT, finance and compliance and can do so across multiple affiliated firms. This is especially valuable for boutique or regional practices that wish to maintain independence while sharing back-office resources. In this sense, an MSO can function like a "shared services hub" for a network of affiliated law firms, reducing overhead and improving profitability.

Talent and Retention: Lawyers today, especially younger ones, value modern workplaces with technology support, marketing infrastructure and business development resources. An MSO-supported firm can offer those benefits while keeping partnership and compensation models aligned with ethical rules. Moreover, by offloading nonbillable work to a centralized team, lawyers can focus on higher-value activities, with the goal of enhancing both satisfaction and retention.

Addressing the Ethical and Regulatory Questions

The benefits of the MSO structure are not free from risk. Lawyers should therefore approach any MSO partnership with caution and clarity. The ethical rules governing the practice of law still apply, and the line between permissible collaboration and improper fee sharing must be scrupulously observed.

The Texas Committee on Professional Ethics' Opinion No. 706 (2025)² offers helpful guidance. It confirms that lawyers may contract with a nonlawyer-owned MSO for administrative and business services, provided that the MSO does not direct or regulate the lawyer's professional judgment, share legal fees or interfere with client relationships. Although Texas is the only jurisdiction (so far) to have an ethics opinion that squarely addresses law firm/MSO partnerships, much can be gleaned from past ethics opinions on related subjects, such as a law firm's relationship with a staffing company or other third-party vendors. Similar reasoning has appeared in such opinions, which generally focus on maintaining independence, confidentiality and client loyalty.

To remain compliant, a number of important ethical lines must be preserved. For example, the law firm must retain 100 percent ownership of the legal entity and all legal fees. As a result, the MSO must be compensated on a flat-fee or fair-market-value basis. The agreements connecting the law firm and MSO should be clear and documented, delineating the responsibilities of each entity and affirming the lawyers' independent professional judgment. Most important, client confidentiality must be preserved. As such, the MSO should implement strict data-handling and access protocols.

The MSO as a Strategic Partner, Not a Vendor

The most successful MSO relationships are not mere outsourcing arrangements – they are strategic partnerships. The MSO aligns its growth with that of the law firm, investing in long-term infrastructure, client development and innovation. The firm, in turn, benefits from the operational expertise, technology platforms and capital resources the MSO brings to the table.

For example, an MSO might:

• build a cloud-based document management system that improves compliance and client experience
• develop AI-powered tools for intake or due diligence
• launch a marketing platform that unifies brand presence across multiple markets
• offer professional management of real estate, insurance and vendor contracts
• implement data analytics for pricing, profitability and matter management

These are not luxuries anymore in today's legal profession – they are imperatives.

The Bigger Picture: Future-Proofing the Profession

Lawyers have sometimes viewed MSOs with suspicion, worrying that they represent the "corporatization" of the legal profession. In truth, the MSO model can strengthen, not dilute, lawyer independence by separating the business side of law from the ethical core of legal practice. It allows lawyers to remain lawyers, while professionals who specialize in business operations manage the rest.

Moreover, the broader policy conversation around legal services delivery is moving quickly. Regulators are reconsidering long-standing restrictions on ownership, fee-sharing and multidisciplinary practice. Law firms that engage early with MSOs will be better positioned to adapt to whatever comes next, whether that's expanded nonlawyer ownership, alternative business structures or more flexible delivery models.

The Bottom Line

The legal profession is evolving, whether lawyers like it or not. The firms that will thrive are those willing to modernize intelligently while balancing ethical compliance with business innovation.

Partnering with an MSO is not a panacea, and it is not the right solution for every practice. But for firms seeking growth, investment or operational sophistication, it can be a powerful vehicle for transformation. Done right, it preserves what makes law firms special – the independence of the lawyer-client relationship – while importing what the modern marketplace demands: efficiency, scalability and professional management.

The future of law may not depend on whether lawyers practice differently – but on whether they're willing to partner differently. The MSO model offers one promising path forward.

Notes

1 See Holland & Knight's previous article, "Restructuring Law Firms Through Management Service Organizations," July 10, 2025.

2 See Holland & Knight's previous article, "Law Firm MSOs and Legal Ethics Regulations: Lessons from Texas Opinion 706," Aug. 8, 2025.

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