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Most law firms exist as partnerships of their main lawyers who are the owners/directors.

Why isn't the model popular where a non-lawyer but talented leader/organizer/visionary just puppets lawyers on the payroll who represent clients of the firm? Are lawyers too smart and/or noble to be puppeted that way?

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  • This is the case in general. Companies are usually started by people who have certain expertise and want to go independent from their employers. – Davor Jun 15 '20 at 12:23
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    It probably would be a good idea if we ran nuclear plants by the same logic (well, with nuclear engineers instead of lawyers, of course :D ). – MSalters Jun 15 '20 at 12:59
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    @MSalters Let's prohibit running airlines by anyone but pilots! – Greendrake Jun 15 '20 at 13:52
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    Apple didn't become the behemoth it is now until they stopped hiring professional CEOs and put Steve Jobs in place. – Barmar Jun 15 '20 at 14:16
  • @Greendrake That's what they did with the USAF. – ZOMVID-20 Jun 16 '20 at 3:15
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In some jurisdictions it's against the code of ethics.

For example, in the , Model Rule of Professional Conduct 5.4(b) says:

A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.

The idea has to do with independence: Lawyers are officers of the court and—as members of a regulated profession—can be bound to professional codes. Talented leader/organizer/visionaries aren't bound in any such way. The comment to the Rule explains, "Where someone other than the client pays the lawyer's fee or salary, or recommends employment of the lawyer, that arrangement does not modify the lawyer's obligation to the client." This can create a conflict, and states resolve it by regulating the partnership's composition.

Other jurisdictions go even further and it’s prohibited in law.

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    In the uk the regulator straight up prohibits non-lawyers from having an ownership of general law practices. sra.org.uk/solicitors/standards-regulations/… Again the reason is that of the ethics that the lawyer should not be influenced by a non-lawyer, but also that any liabilities for negligence should rest with someone qualified to know what they are signing off on. – user1937198 Jun 14 '20 at 21:17
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    This is true in every U.S. jurisdiction, even though those rules are adopted on a state and territory by state and territory basis. And, for all practical purposes, the Rules of Professional Conduct have the force of law. They are not mere suggestions. The remedies would be to disbar and/or suspend from practice the attorneys involved and to, under a separate statutory enactment, prosecute the non-lawyers for unauthorized practice of law (which could lead to fines and incarceration). It doesn't mean, however, that non-law firms can't hire lawyers, just not for the purpose of being law firms. – ohwilleke Jun 15 '20 at 0:16
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    Side question, can companies have lawyers on payroll or are they always sub-contracted? – MonkeyZeus Jun 15 '20 at 15:51
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    @MonkeyZeus sure, companies can have lawyers on payroll ... to represent the interests of that particular company. The limitation is on hiring them out to someone else with the assertion that the lawyer on your payroll will fairly represent someone else's interests instead of doing what's good for their paymaster. – Peteris Jun 16 '20 at 0:59
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    @Mast No, it doesn't work like that in the UK at least. The SRA code of conduct requires solicitors to maintain confidentiality regardless of external factors. It trumps even a solicitor's duty to the court (so e.g. requiring a solicitor to cease acting if the two duties come into conflict). There are well established rules and procedures to keep information confidential between different individuals in the same firm. A director of a law firm would be no more entitled to receive confidential information than anyone else. – JBentley Jun 16 '20 at 9:51
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Lawyers have what are functionally continuations of Medieval Guilds(they may be called State Bars, Legal Associations, etc, but that's just window dressing) that set rules(either as legally enforceable "ethics" violations or by successfully lobbying for these to be made into laws) that prevent the dilution of their members' power and collective financial status by doing what you describe: e.g. a rich entrepreneur hiring a bunch of heavily indebted (through crushing law-school student debt) young lawyers, desperate for any work and experience, to toil away and massively undercut the Guild's rates.

A law firm that has to be owned by rich old lawyers, will not rock the boat and declare war on the rest of the Guild by undermining the system that made them rich, old lawyers in the first place. It's a self-perpetuating cycle.

The restrictions aren't any different from what a medieval Blacksmiths or Shoemakers Guild had, except that the former were open about the purpose of the rules. Tellingly, they haven't survived, but law guilds have, because lawyers are proverbially smart and connected and can come up with fancy excuses like the need for "independence".

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    How about other professional bodies, like engineers or accountants, many of which have similar restrictions for the exact same reasons. The difference between a lawyer and a shoemaker is the client should be able to know if they are being given a good product by a shoe maker. Most lawyers clients need a lawyer because they can't make that distinction themselves. – user1937198 Jun 15 '20 at 10:12
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    @user1937198: Engineering firms can be owned by non-engineers. Accountant firms can be owned by non-accountants. What you propose are restrictions on practice, not restrictions on ownership. Lawyers have that too (admission to the bar) but that's not the subject here. – MSalters Jun 15 '20 at 13:02
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    The question is not tagged with a country, so this answer is not valid for the general case. In the UK for example, law firms can structure as limited companies (subject to some additional regulation). The question from the OP is why such structures are not popular (as opposed to why they don't exist at all, which is what this answer seems to address). – JBentley Jun 15 '20 at 18:56
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    @DavidSupportsMonica, (2) these people are desperate for any legal job that will allow them to get some experience. If guild rules didn't prevent it, it would be a slam-dunk business model to hire them at minimum wage and charge like $35/h for legal services, especially routine stuff that can mostly be done by software, with a bit of human tweaking. That's why it's banned, with sweet sounding excuses like "professional independence of judgment". – Eugene Jun 16 '20 at 3:44
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    @Eugene The Bodine matter prohibits sharing fees. Does that set a lawyer's charges? It does not. All your underemployed lawyers can work for $35/hr if they wish, no one's stoping them. You have a firm POV, and seem far more interested in ranting than discussing. Please carry on without me. – DavidSupportsMonica Jun 16 '20 at 4:15
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The primary work product of a law firm is legal work, which the lawyers do directly. This is not a high-capitalization job: it's possible to be a Starbucks lawyer (or Lincoln lawyer lol) and not even have an office. It has this in common with the professional trades, like plumbers, electricians, etc.

Contrast that with a baker, who needs a workplace and significant capital infrastructure for mixers, ovens, cooling racks, trucks, packaging, inventory, etc. That's where the capitalist enters the picture.

If someone gave a law firm a cash infusion of $500,000, there isn't really a way to invest that into the business to get a payout. They can't buy better case files. There's no "litigation machine" that can litigate faster than ten lawyers. That's just not how that business works; it doesn't lend itself to capitalization.

It's true that many law firms have significant capitalizations, but they didn't get there overnight. They typically raise themselves on their bootstraps. Even then, the prestigious offices tend to be leased.

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    If there's unmet demand, cash infusion could go into hiring more lawyers and scaling the business up. – Greendrake Jun 16 '20 at 0:47
  • Or you can hire them with equity and shares in existing fees, so it wouldn't nessicarily help. – user1937198 Jun 16 '20 at 8:56

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