Illinois Law Firm Tests New Models for Nonlawyer Investment
An Illinois firm is testing structures allowing nonlawyer investment under new HB 5487 rules.
Why it matters: This move could change law firm ownership models, impacting governance and client service. It reflects growing acceptance of nonlawyer participation in legal practice, signaling potential industry-wide shifts.
- Illinois passed HB 5487 on May 31, 2026, regulating MSOs and Alternative Business Structures (ABS).
- HB 5487 permits nonlawyer ownership or decision-making in firms under specific conditions.
- Arizona and Utah already allow nonlawyer ownership through ABS frameworks.
- The ABA’s Model Rule 5.4 generally prohibits fee sharing with nonlawyers, but some states have exceptions.
The Illinois General Assembly adopted House Bill 5487 on May 31, 2026, establishing new regulations for management service organizations (MSOs) and Alternative Business Structures (ABS) in the state. HB 5487 defines ABS as entities that provide legal services while permitting nonlawyers to hold ownership stakes or decision-making authority, a significant departure from the traditional lawyer-only ownership model according to Holland & Knight.
This change has spurred at least one Illinois law firm to explore innovative business structures, potentially allowing for nonlawyer capital infusion or more active involvement in firm management under the new legal framework.
Similar reforms have emerged in other states. Arizona, since 2021, permits ABS models with nonlawyer ownership, subject to certification by the Arizona Supreme Court as detailed by Holland & Knight. Utah uses a regulatory sandbox to experiment with innovative legal service models that include nonlawyer ownership per ABA Litigation News.
However, HB 5487 carefully limits nonlawyer interference, ensuring that lawyers retain independence over professional judgment and client relationships. Trisha Rich, a legal ethics attorney, emphasized that these models require lawyers to remain "in charge of the client relationship, in charge of the decisions" according to Holland & Knight.
The American Bar Association retains a general prohibition on lawyers sharing fees or control with nonlawyers under Model Rule 5.4 but has seen modifications in some states to accommodate ABS structures per ABA Litigation News. The evolving regulatory landscape is reshaping law firm business models, balancing ethical concerns with innovative opportunities to expand access and improve service delivery.
By the numbers:
- May 31, 2026 — Illinois passed HB 5487 regulating MSOs and ABS
- 2021 — Arizona began permitting nonlawyer ownership in law firms through ABS
Yes, but: While these structures permit nonlawyer investment, regulations strictly prohibit interference with lawyers' professional judgment to maintain ethical standards.
What's next: Other states may follow Illinois' lead in regulating or permitting ABS, potentially expanding nonlawyer participation in legal practice nationwide.