Frequently Asked Questions
What is an Alternative Business Structure (ABS)?
An Alternative Business Structure (ABS) is a business entity that includes nonlawyers with an economic interest or decision‑making authority in the firm and that provides legal services in compliance with Arizona Supreme Court Rules 31 and 31.1(c).
(Defined in ACJA § 7‑209(A))
Does an ABS change who can practice law in Arizona?
No. The Arizona Supreme Court continues to regulate who may practice law, and the definition of the “practice of law” has not changed. Under Supreme Court Rule 31.2, activities such as preparing legal documents, negotiating legal matters for others, representing someone before a tribunal, and giving legal advice are all still considered the practice of law.
Can an ABS itself practice law?
No. A certified ABS entity is not authorized to practice law.
Who can provide legal services within an ABS?
Legal services within an ABS may be provided only by individuals authorized to practice law in Arizona.
Under Rule 31.1(c)(1), every ABS must employ an active member of the State Bar of Arizona to practice law and to serve as the ABS’s Compliance Lawyer, who is responsible for supervising legal services and ensuring compliance with all regulations.
When is ABS certification required?
If a business includes nonlawyers with an economic interest or decision‑making authority (as defined in ACJA § 7‑209) and wishes to employ, associate with, or engage lawyers to provide legal services to third parties, it must first be certified as an ABS.
(Arizona Supreme Court Rule 31.1(c))
Where can I find the rules, regulations, and application materials?
The ABS enabling regulations and code of conduct are found in Arizona Code of Judicial Administration (ACJA) § 7‑209. Application forms, regulatory information, and Committee materials are available on the Arizona Supreme Court website:
https://www.azcourts.gov/Licensing-Regulation/Alternative-Business-Structure
ABS Licensing Process
Applications for initial licensure are processed by the Arizona Supreme Court Certification and Licensing Division (CLD) according to ACJA § 7-209(E)(1). Background checks are conducted for all Authorized Persons (ie those with “decision-making authority” or a threshold ownership interest which is currently 10%) There is a particular focus on the credentials and experience of the compliance lawyer at all stages to ensure they have qualifications to manage the ABS and ensure all operations are conducted in compliance with the Rules of Professional Conduct.
When background checks are complete, the Division presents a recommendation to the Committee on Alternative Business Structures at a public meeting (application materials are also open to the public with certain redactions to protect sensitive information). The Committee considers the following information and typically asks questions of the applicant (with a particular focus on the compliance lawyer):
2. Committee Responsibilities.
a. Pursuant to Supreme Court Rule 33.1(b), the Committee must:
(1) Consider the following regulatory objectives:
(a) protecting and promoting the public interest;
(b) promoting access to legal services;
(c) advancing the administration of justice and the rule of law;
(d) encouraging an independent, strong, diverse, and effective legal profession; and
(e) promoting and maintaining adherence to professional principles.
(2) Ensure whether an applicant has adequate governance structures and policies in place to ensure:
(a) lawyers providing legal services to consumers act with independence consistent with the lawyers’ professional responsibilities;
(b) the ABS maintains proper standards of work;
(c) the lawyer makes decisions in the best interest of clients;
(d) confidentiality consistent with Supreme Court Rule 42 is maintained; and
(e) any other business policies or procedures do not interfere with a lawyers’ duties and responsibilities to clients.
The Committee then makes a recommendation to the court to ultimately approve or deny the ABS license. If the Committee recommends denial, the applicant can appeal to the Presiding Disciplinary Judge. After a hearing, the PDJ makes a recommendation to the Committee before it goes up to the Court for a final decision. Upon receipt of the recommendation, the Court may decline review or issue an order approving, denying, or approving with modification the recommendation. (See Ariz. R. Sup. Ct 33.1(a)(5))
After licensure, the ABS/compliance lawyer is responsible for semi-annual audits, updates to contact information, professional liability insurance reporting, and to seek approval for the addition of any new Authorized Person including a change of compliance lawyer and all other responsibilities set forth in the code. If a compliance lawyer “has ceased to be the compliance lawyer of the ABS” they must inform the court and the State Bar in writing within 30 days. (ACJA § 7-209(G)(3)(b)(6)).
Renewal applications are submitted to the court for review every two years and processed according to ACJA § 7-209(F). During the public meeting for renewal, the Committee will ask licensees detailed questions about their operations and how the ABS and seek confirmation that it meets the regulatory objectives set forth in the code. (See Ariz. R. Sup. Ct. 33.1(b))