What is an Alternative Business Structure (ABS) and how to set one up

If you’re a solicitor planning to launch your own practice, or a business owner exploring a joint venture with an established firm, the phrase Alternative Business Structure (ABS) is likely to come up early.

Introduced under the Legal Services Act 2007, ABSs allow non-lawyers to own and manage authorised law firms in England and Wales. This creates genuine options: outside investment, non-lawyer leadership at board level, and multidisciplinary service models. But it also raises the bar on governance, conflicts and compliance — especially where ownership and control are shared.

What is an Alternative Business Structure (ABS)?

An ABS is a firm licensed to carry out one or more reserved legal activities and whose owners and/or managers include non-lawyers.

A firm may also be treated as an ABS where another entity is a manager of the firm or has an ownership-type interest, and at least 10% of that body is controlled by non-lawyers. In this context, a manager can include a director of a limited company, a member of an LLP, a partner in a partnership, or a corporate director.

To be clear though, even if less than 10% of the firm is owned by non-lawyers, the firm would still need to be an ABS if there is any non-lawyer owners or managers.

Benefits of an ABS model

Potential benefits include raising equity from outside the legal sector, widening the pool of potential owners/managers to include other professionals and non-solicitor employees, increasing employee buy-in via ownership or leadership roles, and diversifying services through multidisciplinary practice.

These benefits can support growth, succession planning and service innovation, but, crucially, they only land well when governance and compliance are prioritised from the start.

Key considerations before setting up an ABS

• Governance and decision‑making: If non-lawyer owners or managers are involved, agree early how decisions will be made when commercial goals collide with professional duties. The SRA will assess management and governance arrangements during ABS authorisation.
• Outside investment: Think through the purpose of investment, the level of control the investor will have, whether they can sell/withdraw, and what happens if they do. Investor rights need to be structured so the firm can still act in clients’ best interests.
• Services and conflicts: Multidisciplinary models can create conflicts between professional duties (for example, confidentiality vs disclosure). Some service combinations may be a ‘no‑go’ because conflicts can’t be mitigated.
• Regulated vs non‑regulated services: In multidisciplinary practice, some non‑legal activities may be excluded from SRA regulation. Clients must understand which services are regulated and what protections apply.
• Insurance and regulatory attention: Becoming an ABS can alter your perceived risk profile. Notify your insurer early and plan for minimum cover expectations. The SRA may also apply conditions to licences to help monitor compliance.

Setting up a new ABS law firm

To be eligible to set up a new firm as an alternative business structure, the body must have at least one manager who is an authorised person. Companies must be appropriately incorporated and have at least one practising address in England or Wales.

Typical application pack: expect forms for the body and for owners/managers/compliance officers, evidence that insurance will extend to the ABS, constitutional documents, and usually a business plan, financial projections and a structure chart. If information changes after submission, update the SRA as inaccurate or misleading information can lead to refusal or withdrawal.

The SRA will grant a licence only where it is satisfied the firm can meet ABS requirements, has appropriate compliance officers, approved role holders, insurance arrangements, and suitable supervision of SRA-regulated work.

Partnering with an existing law firm under an ABS

If you are considering a joint venture, merger, investment or adding non-lawyer leadership to an existing firm, focus first on ownership and influence: the SRA treats ‘owners’ as those with a material interest (for example, 10% in a corporate body or significant influence). Partnership terms, shareholder rights and governance controls can matter as much as headline percentages.

Plan role-holder approvals and ongoing changes. Managers, owners and compliance officers may need SRA approval, and approvals may be required as people and roles change over time.

Be clear on compliance resourcing. The firm will need a COLP (legal practice) and COFA (finance and administration) with sufficient seniority and support. In a joint venture, agree who supplies these roles and how they’re backed day-to-day.

30-day action plan for launching an ABS

Whether you’re starting a new firm or linking with an established one, early momentum comes from turning interest points into a short action plan. Start by mapping ownership and influence (including any 10%+ stakes or governance rights), then draft a simple governance map showing who decides what and how client-interest issues are escalated.

In parallel, identify your COLP and COFA candidates and pressure-test whether they have enough seniority, time and systems support to do the job. Finally, run a conflicts workshop against your proposed service lines (especially if you’re adding non-legal services), draft client-facing wording that explains what is regulated and what isn’t, and speak to your insurer early so cover aligns with the intended structure.

The following checklist outlines key action points:

1. Ownership and control: Who holds (or will hold) 10%+ or significant influence, and what approvals are needed?

2. Governance: Can you clearly evidence adequate management and governance arrangements?

3. Compliance leadership: Are COLP/COFA identified, senior enough, and properly resourced?

4. Insurance: Has the insurer been notified, and is cover confirmed for the intended structure?

5. Conflicts: Have service lines and partnerships been checked for conflicts and client-interest risks?

6. Client clarity: Do engagement materials explain what regulated vs is not, and what protections apply?

7. Application discipline: Do you have a process to keep application information accurate and updated?

Here at Armstrong Watson, we support ABS applications via our 12-page conversion/application checklist that details all of the required steps, and then by guiding on and then vetting all application documents. Further detail can be found at: SRA ABS Application Advice for Law Firms | Armstrong Watson

Is an ABS right for your law firm?

ABS authorisation can enable modern ownership, investment and leadership models in legal services — but only if governance, transparency and compliance are treated as foundational.

Whether you’re starting from scratch or linking with an established firm, design the operating model first, then choose the structure that supports it.