Legal MSO Insider
Legal MSO Articles & Analysis
The Next Billion-Dollar Industry: Legal MSOs
by Frederick Shelton
Originally published in The American Lawyer
This article introduced the Legal MSO model to a national legal audience before it entered the mainstream conversation. It explains how MSOs mirror structures long used in other regulated professions and why law firms are increasingly exploring them as an alternative to mergers, private equity ownership, or internal operational build-outs.
The article has since been cited by major law firms and industry commentators as the Legal MSO market has accelerated.
Link: Law.com – The Next Billion-Dollar Industry
​​​
A Closer Look at Five Types of Legal Management Services Organizations
by Frederick Shelton and Ayven Dodd
Originally published in Law360
This article provides one of the earliest structured frameworks for understanding the different Legal MSO models emerging in the market. It categorizes MSOs based on ownership, economics, and governance rather than marketing language.
Because the article is behind a paywall, a summary is provided here with a direct link to the original publication.
​​
Less Work, More Wealth: The Legal MSO Model Explained
by Frederick Shelton
Originally published in Attorney at Law Magazine
This piece examines Legal MSOs from the law firm partner’s perspective, focusing on workload, economics, and long-term optionality. It distinguishes between standard MSOs and capital-driven models, and explains why structure matters more than branding.
The article is frequently cited in discussions around succession planning and partner liquidity.
​
​
ANALYSIS
​​
​
​
​
​​
​
​
Legal MSO Structures: Why Deals Look So Different Right Now
By Ayven Dodd
​
Law firms that begin exploring Legal Management Services Organizations are often struck by how inconsistent the proposed structures appear. One firm may be offered a straightforward services arrangement with no equity component. Another may be presented with a combination of equity participation, upfront consideration, and performance-based earn-outs. Governance rights, termination provisions, and renewal mechanics can vary just as widely.
This lack of uniformity can feel disorienting, particularly for firm leaders accustomed to more standardized transaction models. In the context of Legal MSOs, however, this variability is better understood as a reflection of where the market currently stands rather than as an indication of irregularity or misconduct.
Legal MSOs do not yet operate within a settled transactional framework. Unlike law firm mergers, partner compensation systems, or traditional financing arrangements, MSO structures are still being defined. Participants on both sides are testing assumptions about value, control, and alignment in an environment where few long-term outcomes have yet been fully observed.
As a result, there is no single structure that can be described as typical.
Equity participation illustrates this point clearly. In some arrangements, equity reflects a limited interest in a narrowly scoped services entity with modest growth expectations. In others, it represents a longer-term stake in a broader operational platform designed to support multiple firms over time. In still other cases, equity serves primarily as an incentive mechanism rather than a meaningful source of governance or control.
Without understanding what the equity actually represents, percentage figures alone provide little insight.
The same is true for earn-outs and deferred consideration. Some are directly tied to operational improvements delivered by the MSO. Others are linked more generally to firm performance, regardless of the MSO’s contribution. These distinctions matter, particularly when evaluating whether projected economics are realistically aligned with the services being provided.
Governance terms often prove even more consequential than headline economics. Budget authority, approval rights, expansion constraints, renewal provisions, and exit mechanisms shape how the relationship functions over time. In a developing market, these provisions vary substantially, reflecting differing views on how much influence an MSO should exert and how much flexibility a firm should retain.
This is one reason that two MSO proposals with similar financial terms can lead to very different long-term outcomes.
The absence of uniformity should not be mistaken for a lack of discipline. In most cases, it reflects the fact that Legal MSOs are adapting concepts drawn from other professional services industries to the unique constraints of legal practice. Some adaptations will prove durable. Others will not. That process has not yet fully played out.
Over time, as more arrangements mature and more data becomes available, common practices will begin to emerge. Certain structures will become more prevalent. Others will quietly fall away. Until then, variation should be expected.
For law firms, the practical implication is straightforward. The presence of widely differing deal terms does not, by itself, signal elevated risk. It does, however, place a premium on careful evaluation. Comparing MSO proposals based solely on upfront consideration or equity percentages risks overlooking the factors that will matter most over the life of the relationship.
Understanding how a particular structure aligns incentives, allocates control, and preserves flexibility is far more important than whether it resembles another deal seen elsewhere in the market.
In a market that is still taking shape, clarity matters more than precedent.
​
​
​
​​
​
​
​
​
​
​
​
​
​
Legal MSO's and Rule 5.4: What Actually Matters
by Janae Smith
​
Much of the discussion around Legal Management Services Organizations eventually turns to Rule 5.4. For many lawyers, it is the first and last concern. The rule prohibits nonlawyer ownership of law firms and restricts fee sharing with nonlawyers. Any structure that appears to blur those boundaries understandably invites scrutiny.
Legal MSOs sit close enough to those boundaries that questions are inevitable.
At a basic level, Rule 5.4 does not prohibit MSOs. It does not prohibit outsourcing. It does not prohibit third parties from providing operational services to law firms. What it does prohibit is nonlawyer ownership of the practice of law and nonlawyer influence over legal judgment. The distinction is subtle, but it is critical.
A properly structured MSO does not practice law. It does not employ lawyers. It does not represent clients. It does not direct legal strategy or exercise control over professional judgment. The law firm remains fully responsible for legal services, client relationships, and ethical compliance. The MSO provides nonlegal services under a contractual arrangement.
Where concerns arise is not in the existence of the MSO, but in how its economics and governance are structured.
Critics often raise what has come to be described as the described as disguised equity concern. The argument is not that an MSO is labeled incorrectly, but that its financial or operational terms may function in a way that closely resembles ownership or fee sharing. If an MSO’s compensation is directly tied to legal fees, if it exerts meaningful control over firm decision-making, or if it captures economics that mirror equity ownership, regulators may look past form and focus on substance.
This is not a theoretical concern. Professional responsibility analysis has long emphasized that substance prevails over labels. Calling an arrangement a services agreement does not insulate it if the underlying economics or control mechanisms cross ethical lines.
At the same time, the presence of investor capital or sophisticated operational infrastructure does not automatically create a violation. Many regulated professions have long separated professional practice from business operations through MSO structures. In medicine, MSOs have existed for decades, operating alongside strict prohibitions on the corporate practice of medicine. The legal profession is not unique in facing these questions. It is simply encountering them later.
What matters most is alignment. An MSO’s compensation should reflect the value of the services it provides, not the revenue generated by legal work itself. Governance provisions should preserve lawyer control over legal decisions and client matters. Term lengths, renewal rights, and termination provisions should be designed to allow firms to adapt as circumstances change rather than locking them into arrangements that effectively transfer control.
Because the Legal MSO market is still developing, there is no single model that regulators have blessed or rejected wholesale. Instead, each structure must be evaluated on its own terms. This is why firms considering an MSO are often advised to engage both an MSO attorney, who may bring experience from healthcare or other regulated industries, and an ethics attorney familiar with professional responsibility rules in the relevant jurisdiction.
That dual perspective is not redundant. It reflects the reality that Legal MSOs sit at the intersection of business structure and professional ethics.
For law firms, the practical takeaway is not that Rule 5.4 makes MSOs unworkable. It is that Rule 5.4 makes care essential. Well-structured MSOs can coexist comfortably with professional responsibility rules. Poorly structured ones invite risk.
Understanding that distinction is far more important than focusing on headlines or labels.
​
​
​​
​
​
​
​
​
​​
​
​
​
​
​
Legal MSO Risks Every Firm Should Understand
by Ayven Dodd
Legal Management Services Organizations are often introduced as solutions to operational strain. In many cases, they can be. At the same time, an MSO is not a neutral decision. It is a long-term structural relationship that reshapes how a firm operates, allocates control, and plans for the future.
Understanding the risks does not require assuming bad intent. Most risks arise from misalignment, unrealistic assumptions, or insufficient diligence rather than misconduct.
One of the most common risks involves equity. Capital can solve problems that debt cannot, but it also introduces permanence. A loan can be repaid. Equity cannot. Once equity is granted, it shapes incentives indefinitely. Firms should be clear about what they are receiving in exchange for equity and whether that exchange remains appropriate as the firm evolves.
Cultural disruption represents another frequent concern. Some MSOs bring operational discipline and professional management. Others introduce priorities that feel foreign to law firm culture. This risk is most pronounced in models where outside capital seeks rapid growth or short-term returns. Even well-intentioned operational changes can create friction if they are implemented without sensitivity to how law firms function.
At the opposite end of the spectrum are MSO arrangements that promise support but invest too little to produce meaningful change. Litigation finance backed or lightly capitalized platforms may offer limited infrastructure, minimal recruiting support, or underdeveloped technology. In those cases, firms may surrender flexibility without gaining the operational leverage they expected.
Time commitment is another area that deserves careful attention. Many standard MSO arrangements involve multi-year service agreements with automatic renewals or narrow termination rights. These provisions are not inherently problematic, but they require scrutiny. A firm should understand how long it is committing, what exit options exist, and how those options function in practice rather than theory.
Scaling is often cited as a benefit of MSO affiliation, but it is also a risk when poorly defined. Law firm partners rarely have the time to recruit lateral partners with portable books while also practicing law. If an MSO promises to help a firm scale, the firm should understand exactly how that will occur. Who will recruit. What track record exists recruiting for small to mid-sized firms. How success is measured. Scaling without a clear execution plan remains aspirational.
Governance provisions can introduce additional risk if they are not fully understood. Budget approval rights, technology mandates, hiring authority, and expansion controls can subtly shift influence over time. None of these terms may appear alarming in isolation. Together, they can meaningfully affect autonomy.
Finally, regulatory and ethical risk remains central. Because Legal MSOs are still a developing model, many attorneys advising on them come from healthcare or other regulated industries. That experience can be valuable, but it should be complemented by ethics counsel familiar with professional responsibility rules in the relevant jurisdiction. Structural compliance depends on both perspectives.
The presence of risk does not mean an MSO should be avoided. It means the decision should be made deliberately. Firms that approach MSOs as strategic relationships rather than transactional solutions are better positioned to avoid outcomes that feel constraining or disappointing over time.
Understanding the risks is not about pessimism. It is about clarity.
​
​
​
​​
​
​
​
​
​​
​
​
​
​
​
All Law Firms Already Use Legal MSOs. They Just Do So Poorly.
By Frederick Shelton
The debate around Legal Management Services Organizations often assumes that MSOs represent something new or radical. In reality, most law firms already operate in a way that closely resembles an MSO structure. They simply do so informally, inefficiently, and without the strategic discipline that a true MSO requires.
Law firms have outsourced operations for decades. Payroll, accounting, IT support, document management, marketing vendors, recruiters, e discovery providers, and now artificial intelligence platforms are all external services that support the business of practicing law. The difference is not whether firms outsource. The difference is how fragmented and unmanaged that outsourcing typically is.
In many firms, operational responsibility is spread across partners who never asked for it and were never trained to handle it. One partner becomes the technology lead by default. Another oversees marketing. Another negotiates with recruiters. Decisions are made episodically, often in response to problems rather than as part of a coordinated strategy. Vendors are hired individually, rarely integrated, and almost never measured against firm wide objectives.
This approach works until it does not.
As firms grow, operational complexity compounds. Technology stacks expand. Compliance obligations increase. Recruiting becomes more competitive. Clients demand greater efficiency and transparency. What once felt manageable becomes a persistent distraction from the actual practice of law.
At that point, firms begin hearing about Legal MSOs.
What an MSO changes is not the existence of outsourced services, but their organization. Instead of relying on a patchwork of vendors and internal committees, a properly structured MSO centralizes operations under professional management. Systems are designed deliberately rather than accumulated over time. Decisions are evaluated for long term impact rather than short term convenience.
In other words, the firm stops managing its business as a series of exceptions and starts managing it as a business.
This distinction matters because the risks associated with MSOs are often misunderstood. Critics worry about loss of control, cultural disruption, or outside influence. Those risks are real when structures are poorly designed. They are far less pronounced when the alternative is an informal MSO already operating inside the firm, with less accountability and fewer safeguards.
Most firms already rely on nonlawyers to influence how the business runs. They already pay substantial sums to vendors whose incentives are not aligned with firm wide success. They already make long term operational commitments without clear exit strategies. The difference is that these arrangements are rarely examined holistically.
A Legal MSO, at its best, forces that examination.
This does not mean every firm should adopt one. For some firms, the status quo works well enough. For others, incremental changes or targeted consulting support may be sufficient. The point is not that MSOs are inevitable. It is that the line between having an MSO and not having one is far thinner than many firms assume.
The real question is not whether a firm is ready for an MSO. It is whether the firm is satisfied with how it already manages the business side of practicing law.
For many firms, the answer to that question is what drives the conversation forward.
​
​​​​​
​
EXTERNAL ARTICLES
​
Sidley on Legal MSOs and Rule 5.4
Sidley Austin (Frederick Shelton cited as Subject Matter Expert)
This article examines Legal MSOs through the lens of professional responsibility and regulatory risk, with particular focus on Rule 5.4 and the distinction between form and substance. Sidley emphasizes that MSOs are not inherently problematic, but that economic arrangements, governance provisions, and operational control must be structured carefully to avoid fee sharing or nonlawyer influence over legal judgment.
The piece reinforces a central theme in the MSO discussion: compliance depends on how the model is implemented, not what it is called.
Link: Sidley – Legal MSOs and Professional Responsibility
​
Ex-Virtual Firm Leader Joins Veteran Am Law 200 CFO to Launch Back-Office Support Venture
The American Lawyer (Frederick Shelton predicts the advent of Legal MSO's a year before it happens)
Coverage of the launch of Federate Legal, a standard MSO providing integrated back-office services to law firms.
McDermott Will & Emery Explores the Legal MSO Model
McDermott Will & Emery
McDermott Will & Emery publicly announced that it is exploring the use of an MSO structure to support firm operations, marking a notable signal from an Am Law firm evaluating the model at scale. The announcement reflects growing recognition that operational complexity, technology investment, and administrative burden have reached levels that challenge traditional law firm structures.
While exploratory in nature, the announcement underscores that MSOs are no longer confined to smaller or alternative firms, and are being actively evaluated by large, established practices.
Link: McDermott Will & Emery – Exploring an MSO Model
​
The Back-Office Back Door to Nonlawyer Investment in Law Firms
The American Lawyer
This article outlines concerns raised by ethics scholars and regulators regarding MSO structures that replicate ownership-like economics or influence through back-office control. It underscores why careful structuring and ethics counsel are essential.
Why Lawyers and Law Firms Should Be Paying Attention to MSOs
Holland & Knight
A conservative, ethics-focused overview of MSOs that explains why law firms are increasingly evaluating the model and what professional responsibility considerations must be addressed.
PE Firms Leap Into the Legal MSO Frontier
Reuters
A market-level look at investor interest in legal services infrastructure and the growing use of MSO-style arrangements to navigate regulatory constraints.
Private Equity Courts Law Firm Investments
Eudia
An examination of early private equity involvement in law firms and the structural evolution that followed, including the eventual migration toward MSO-based operational platforms such as Briefly.
Link: https://www.eudia.com/blog/private-equity-courts-law-firm-investments
MSO Platform: https://www.brieflylegal.com
​
​
​
