Law Practice Management Asked and Answered Blog

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March 2026

Mar 18, 2026

Law Firm Practice Sale to Another Firm or Merger v.s. Internal Sale to Associates

Question:

I am the owner of a small estate planning firm in Columbus, Ohio. Besides myself there are two associates working in the firm. I am 67 and the associates are in their early-fifties. I am planning on retiring in the next couple of years and moving to Florida. I would like the practice to continue after my retirement and I would like to (in order of priority):

What is my best option – sale or merger with another law firm or sale of the practice to the two associates working in the firm? Please share any thoughts that you may have.

Response: 

I always suggest in situations such as yours that internal sale/transfer be the default option – the option that you consider first. However, this assumes the following:

  1. That your associates want to own a law firm – either as partners with each other or individually. I am finding that many associate candidates do not want to take on the responsibilities and risk of law firm ownership.
  2. That your associates would be willing and able to be partners with each other.
  3. That your associates have the experience and legal skills to serve clients in your absence.
  4. That your associates will be able to retain your clients and referral sources.
  5. That your associates will be able to effectively run and manage your practice after you are no longer there.

If the above listed assumptions are not the case you may have no choice but to sell or merge your practice with another practitioner or law firm.

If you don’t wait too long you may have time to develop your associates if the interest is there.

Developmental and transitional work typically falls into three general categories:

  1. Legal (lawyering) skills
  2. Client and Referral Sources
  3. Firm Management

Legal Skills

Frequently this is a major issue that requires attention in small sole owner/founder firms. There are no other lawyers in the firm with the legal skills that the owner has and will be required for the firm to be successful in the future. For example, I have worked with some litigation firms where the other attorneys in the firm (associates and non-equity partners) have not ever tried a case. In such situations several years of training and development in this area will be required and seasoned laterals may have to be hired or the firm sold or merged with another firm. In your case since you have two associates on board I assume that they are seasoned lawyers and this is not an issue at your firm. If this is the case there be no to little transitional time needed in this area. If not, you have work to do.

Client and Referral Sources

This is an area of concern for most firms. Typically, the firm owner/founder has brought in most, if not all, of the client business into the firm and he or she controls the clients and the relationships with clients and referral sources. In these firms if the owner/founder were to leave the firm abruptly it is questionable whether the firm could survive after the owner/founder is no longer there. If this is your situation you will need to begin a focused and planned transition with specific clients and referral sources, tasks, timelines, and assigned lawyers. How long this will take will be dependent upon the number of clients, number of relationships that you have within the client organization for institutional clients, and the number of referral sources that you have that send the firm business.

Law Firm Management

Law schools do not train lawyers in management. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. It has been my  experience that lawyers who are “loners” have traditionally been poor managers. You are going to have to decide who will be a good manager, or managers, and begin training and transitioning appropriate functions over to them.

The following are recommended areas in which the management skills should be developed:

  1. Client relations, including origination, development and retention.
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties.
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination.
  4. Administrative staff organization, relationships and utilization.
  5. Financial management including budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information to manage and run the firm.
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists.
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills that will be required.

I suggest that your develop a transition project plan in Excel with a breakout of tasks, responsibility for accomplishment, start date, and end date under the following broad categories:

Legal skills
Client and Referral Source
Firm Management

Under the client and referral source category each client/referral source contact should be listed.

You should also begin bringing other lawyers into your matters in order the your clients can experience working with them. Assign them as co-responsible attorneys on cases and gradually have them be responsible for billing and communications with your clients.

I have recently completed engagements with two estate planning firms where two associates bought out the equity interest of the founders. In both firms, the results turned out exceptionally well.

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John W. Olmstead, MBA, Ph.D, CMC

Mar 11, 2026

Non-Lawyer Ownership and Investment in Personal Injury Plaintiff Law Firms

Question:

I am a partner in a six-lawyer plaintiff personal injury firm in Indianapolis, Indiana. There are three equity partners and three associates in the firm. We are in our 20th year of practice. The equity partners are in their mid fifties and our associates are in their late 30s and early 40s. The firm started out as a general practice firms and ten years ago we began focusing one hundred percent on personal injury plaintiff work. Our cases range from typical auto accident and slip and fall cases to medical malpractice, product liability, and complex catastrophic injury cases. While we receive much of our work from the internet and other forms of advertising, referrals from other law firms is where we receive the lion’s share of our cases.

Over the years we have been approached by other law firms interested in merging with us our firm and we have declined. However, we are beginning to have second thoughts. The large national personal injury are having an impact on our practice and we are losing some business to them. We also have concerns about the impact that venture capital and private equity investment is going to have on the future of personal injury firms. Arizona now allows non lawyer ownership and other states may follow. We would appreciate your thoughts concerning this trend.

Response: 

Most U.S. states follow rules derived from the American Bar Association Model Rule 5.4, which generally prohibits non-lawyers from owning law firms or sharing legal fees. However, some jurisdictions are experimenting with new models:

Venture capital firms are pushing for similar reforms in other states where restrictions block traditional venture investment.

Private equity and venture capital firms are increasingly investing in:

These models blur the line between law firm, consulting firm, and tech company.

While full venture capital ownership of traditional U.S. law firms remains limited due to ethical rules against nonlawyer ownership. The Management Services Model is the primary workaround approach being used. This model separate the practice of law from the business operations. Two separate legal entities are created.

The law firm signs a long-term management agreement with the management services organization.

The management services organization typically handles all non-legal operations, including:

In large consumer-facing practices (like personal injury firms), the management services organization may also run:

Instead of owning the law firm directly, investors earn revenue through service fees.

The management services organization model is most widely used in high-volume consumer legal sectors, such as:

While we Arizona, Utah, and Management Services Organization workaround models are in play these models are raising concerns among regulators and bar associations.

The key worry is that investors may indirectly influence legal judgment, potentially violating rules established by the bar associations that require lawyers to maintain independent professional judgment.

It is imperative that strong ethical walls be put in place between the law firm and the management service organization.

Since a majority of your business is referral based I don’t believe you need to be concerned in the short-term. If the trend continues there will a competitive impact and an impact on your internet and other marketing investments. Non-lawyer ownership of law firms has been in full force in the United Kingdom and Australia for several years and a trend likely to continue in the United States. Several other status are exploring now-lawyer ownership.

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John W. Olmstead, MBA, Ph.D, CMC

 

 

Mar 04, 2026

Law Firm Management Structure for a Small Insurance Defense Law Firm

Question:

I am a partner in a eighteen – lawyer insurance defense firm in Houston, Texas. There are ten equity partners and eight associates in the firm as well as an office manager/bookkeeper and six other paralegals/legal assistants. We started the practice nine years ago. Other than administrative matters handled by our office manager, the management of the firm is handled by involvement of all the partners. Currently, we are getting more and more frustrated with this method of governance and management. It takes forever to make decisions and the quality of our decision-making leaves a lot to be desired. It recently took us nine months of discussions to agree to get the carpet cleaned. There has to be a better way. What are you finding that similar law firms are doing?

Response: 

Your experience and current frustration is what we see in law firms using the “democracy approach.” While it made have been a good approach when you started the firm and were smaller, you have outgrown this approach.

Most smaller to medium sized law firms choose one of the following approaches to governance and management.

  1. Democracy
  2. Managing Partner
  3. Executive or Management committee.

Democracy

This is the method your firm is currently using. Under this method each member of the firm has an equal voice in management or in some cases a voice based upon the number of equity shares held. Any decision must be agreed by all partners, and various administrative tasks may be assigned or rotated among partners or delegated to an office administrator or office manager. While benefits to the partners by participating in firm management is influence and control over their own practices, law firms that utilize this method of governance progress more slowly and at a less profitable rate than firms governed under one of the other approaches to governance and management.

Managing Partner

This approach is probably the most efficient form of managing a law firm.  Authority and accountability for all firm matters is controlled by one partner or a tightly knit group of dominant partners. The managing partner is often responsible for originating and retaining the firm’s major clients. The managing partner may  receive all work assignments from clients and assign work out to other partners and associates. The managing partner typically determines the partners’ and associates’ compensation and perquisites.

While the other partners may be able to focus entirely on billable/productive legal work, this type of structure is not the best approach for many firms. A major fundamental problem involves partners being “left out” totally of the management of the firm. The managing partner becomes overloaded with firm decisions. Furthermore, as an active attorney, this partner may not be able to devote the time or follow-through on management and operational matters. Since no other partner may be trained in managing the firm, this partner may not feel comfortable in relinquishing power to anyone else. This is a problem which may be especially troublesome if the managing partner dies, becomes ill or disabled.

Some attorneys may be dismayed at the prospect of having their firm dominated by an individual or group of partners. However, if properly handled, this form of structure can be productive, and economically and professionally rewarding. To be effective, the managing partner should maintain communication with other partners. The managing partner should seek advice from other partners (and associates) on matters that will affect them. The managing partner should obtain other partners’ input on decisions, appoint individuals or committees of partners to perform particular functions and require a report of their achievements.

Executive or Management Committee 

The executive or management committee is an approach typified by a committee of partners having defined authority, accountability and responsibility. In most smaller firms this committee, frequently consisting of three partners, may be responsible for recommending and implementing policy for the firm, planning for the future, appraising results and recommending corrective action, as required.

A three partner-executive or management committee is the most common configuration used to avoid deadlocks or inaction and to spread the burden of administration among appropriate partners. One of the partners should be designated to chair the committee. Each of the other members may be assigned authority, responsibility and accountability for coordinating and/or performing specific functions. For example, one partner may serve as the financial partner. This would involve responsibility for ensuring the preparation and analysis of income and expense budgets and financial reporting. This partner would oversee attorney production, fees, collections, etc. A second partner may be responsible for the personnel functions including associate career development, i.e., employment, training, evaluation, etc., and implementation of policy for the administrative staff. A third partner may serve as the general administrative partner, and oversee the implementation of administrative policy, systems, information technology (IT), etc. These partners may be assisted by an office administrator, office manager, bookkeeper, etc.

To preserve continuity on a management/executive committee, it is generally recommended that tenure of partners on the executive or management committee be staggered over a two-or-three year period. The executive committee should communicate with the partners regularly or as issues arise. The executive committee should meet weekly, or if that isn’t convenient, as frequently as required.

Meetings with all of the partners and associates should be scheduled monthly or quarterly.  Following the departure of the associates, the partners can discuss matters relating to financial and policy issues.

I believe that based on your present situation and past history you should consider a three-member management committee with a governance plan that outlines that responsibilities and authority of the committee and the full partnership. Identify and outline the restrictive decision areas that the require full partnership to weight in on and vote.

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John W. Olmstead, MBA, Ph.D, CMC

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