The expansion of accounting firms into legal services in the United States is a direct response to evolving regulatory frameworks and strategic business imperatives.
Historically, stringent state bar and accountancy rules prohibited non-attorneys from owning law firms and non-CPAs from owning accounting firms. However, recent changes in certain jurisdictions have facilitated new business structures that allow for greater integration between legal and accounting services. The following key factors explain this shift:
1. Regulatory Changes Permitting Non-Attorney
Ownership of Law Firms: Arizona and Utah have led the charge in reforming legal ethics rules to permit non-attorneys to own law firms. In 2020, Arizona eliminated Rule 5.4 of its Rules of Professional Conduct, which had long prohibited fee-sharing and non-lawyer ownership of legal practices. This allowed alternative business structures (ABS) to operate within the state, facilitating partnerships between legal and non-legal professionals. Utah introduced a regulatory sandbox in 2020 that allows non-attorneys to invest in and co-own law firms on a trial basis, subject to ongoing regulatory oversight. Other states, including California, have considered similar reforms but have not yet implemented comparable changes.
At Cummings & Cummings, we offer both legal and CPA services to clients: these joint ownership and alternative business structure topics are non-issues for my firm because of my dual-licensure. Prospective clients particularly appreciate this confluence of experience and find it a tremendous value as compared with the costs of onboarding one or more “consultants,” attorneys, accountants, and tax advisors.
2. Strategic Expansion to Offer Comprehensive
Advisory Services Accounting firms, particularly those operating in tax, forensic accounting, and advisory services, frequently encounter legal issues that require coordination with law firms. By integrating legal services within their corporate structure, accounting firms can provide a seamless experience for clients who require both tax and legal advice, particularly in areas such as mergers and acquisitions, international tax law, estate planning, and regulatory compliance. The launch of Aprio Legal LLC in Arizona and KPMG’s introduction of KPMG Law US illustrate this trend toward multidisciplinary service offerings.
3. Global Precedent for Multidisciplinary Firms
Outside the United States, major accounting firms have long offered legal services. In the European Union, Canada, and Australia, major accounting firms such as Deloitte, PwC, EY, and KPMG have established legal practices that work alongside their accounting and consulting divisions. As regulatory restrictions in the United States loosen, accounting firms are seeking to replicate this globally successful model domestically.
4. Competitive Advantage and Market Differentiation
The ability to offer legal services allows accounting firms to compete more effectively with traditional law firms and consulting firms that provide adjacent services. Clients increasingly seek holistic solutions rather than engaging separate providers for legal and accounting needs. Firms that integrate legal services can distinguish themselves from competitors that still operate under a siloed professional services model.
5. Adaptation to a Changing Professional Services Landscape
The legal and accounting industries have undergone significant technological and regulatory disruptions, requiring firms to rethink their traditional service models. Demand for traditional compliance services in accounting has been eroded by automation and artificial intelligence, prompting firms to expand into advisory services, including legal. The loosening of regulatory restrictions presents an opportunity for accounting firms to capture new revenue streams in legal practice areas closely aligned with their existing expertise.
Conclusion
As more states experiment with allowing non-lawyer ownership of law firms, it is likely that additional accounting firms will follow the path of Aprio and KPMG in integrating legal services into their business models.
