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LegalTech Boom Brings Big Contenders in the Legal Industry to Consider Alternative Business Structures

As LegalTech gains traction in nearly every facet of the legal industry, LegalZoom and Deloitte are focusing on opposite approaches.

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LegalTech Boom Brings Big Contenders in the Legal Industry to Consider Alternative Business Structures

A handful of U.S. states (California, Utah and Arizona) have launched regulatory sandboxes to test out nontraditional legal service entity ownership structures and ways of serving consumers. The response from the legal community has been polarizing. 

LegalZoom announced it has started the process of obtaining an alternative business structure (ABS) license in Arizona, allowing it to operate much like a law firm. The newly-public legal tech company plans to employ attorneys who will be able to offer LegalZoom customers legal advice directly (instead of relying on a network of independent lawyers). The company has been successful in this approach overseas since obtaining a license in 2015 with the Solicitors Regulation Authority and partnering with the QualitySolicitors law firm network in the U.K.

Traditional arguments against this action revolve around the idea that attorneys employed at a company’s offering direct legal advice to clients will not be motivated to provide sound and ethical legal services, instead focusing on the company’s bottom line; profit. And, without any effective regulatory regime in place to protect members of the public, there would be no way of guiding this process. However, after the Arizona Supreme Court eliminated the state’s Rule of Professional Conduct 5.4 - lifting the ban on nonlawyers from having economic stakes in a law firm or participating in fee-sharing - this topic was forced to center stage. Now companies like LegalZoom and RocketLawyer (with its interest in similar business ventures in Utah) will have the chance to test this argument.

Nicole Miller, LegalZoom’s GC, thinks these regulatory evolutions will help bridge the access to justice gap and allow for “...greater technological innovation in the delivery of legal services and encourage investment in providing legal services at affordable prices”. 

Operating under the name LZ Legal Services, LegalZoom has stated that it will attempt to bring the following to fruition during its first year of business under Arizona’s ABS:

  • Launch low-cost small business solutions to help Arizona’s small businesses
  • Fulfill attorney-led trademark needs for small businesses across the US
  • Provide small businesses with access to attorneys for estate planning and various other legal matters via a monthly membership plan.

Not every legal service provider is moving as briskly as LegalZoom. For example, Steve Kimble, U.S-based CEO of Deloitte Tax, has stated that the firm is monitoring the changes in Arizona, Utah and California noting that “At this point in time, though, we just don’t believe it’s practical to enter the practice of law.”