AN ECONOMIC ANALYSIS OF ALTERNATIVE BUSINESS STRUCTURES FOR THE PRACTICE OF LAW

Abstract

Regulations constrain the choice of legal form that a law firm may assume. The legal form that an organization assumes has consequences for the way it will operate its business, and hence will affect the public and private values that the firm generates. Relying on the economic literature on the theory of the firm and optimal capital structure, this article reviews the predictable economic impact of such restrictions on a law firm’s business structure, and, conversely, the predictable impact of liberalization. Alternative business structures for law firms, such as publicly-traded corporations, have the potential to generate economic gains. Our focus is on the economics of these restrictions, but we note that economic gains for law firms could help address access to justice concerns.