Legal MSO Insider

Legal MSO Structures

When lawyers talk about “Legal MSOs,” they are often talking about a concept. What actually governs outcomes, however, is structure. Two firms can enter into MSO relationships that look similar in name but differ radically in economics, control, and long-term consequences.

Structure is where theory becomes reality.

​

The Spectrum of Ownership and Economics
Legal MSO structures exist on a wide spectrum. At one end are standard MSOs that involve no equity transfer at all. The MSO is paid for services, and the law firm remains entirely lawyer-owned, with full control and economics retained by the partners.

At the other end of the spectrum are MSO structures where outside investors hold a substantial economic interest in the overall platform. In some arrangements, the MSO may control the majority of the economic value associated with the combined enterprise, even though the law firm itself remains lawyer-owned in name.

Between these extremes are countless variations. Understanding where a proposed structure falls on this spectrum is essential.

​

Why Structures Vary So Widely Today
Legal MSOs are still an emerging market. Unlike mature industries where deal terms have largely standardized, MSO transactions are being structured in real time.

As a result, valuations, earn-outs, partner cash-outs, retirement mechanisms, and long-term economic arrangements vary dramatically. Two firms of similar size and practice mix may receive proposals with entirely different pricing, payout structures, and obligations.

This variability is not accidental. It reflects the absence of settled norms and the influence of different capital sources, risk appetites, and growth strategies.

​

The Two-Entity Framework
Most Legal MSO arrangements rely on a two-entity framework. The law firm remains a separate entity owned and controlled by lawyers. It practices law, represents clients, and exercises professional judgment. The MSO exists as a distinct business that provides nonlegal services.

This separation is fundamental, but it does not determine economics on its own. Economic outcomes are driven by how the relationship is structured, not merely by the fact that two entities exist.

​

Services Agreements and Economics
The services agreement governs what the MSO provides and how it is compensated. Some arrangements use fixed or cost-based fees. Others incorporate variable components tied to operational performance. More complex structures may layer in revenue sharing, incentive payments, or long-term participation in enterprise value.

The line between paying for services and transferring economic value can be thin. Careful drafting matters.

Governance, Control, and Influence
Structural documents also define who makes decisions. Properly designed structures preserve a clear division between business operations and legal practice. The MSO manages operations. Lawyers control legal work.

Problems tend to arise when governance provisions allow operational influence to bleed into legal decision-making or when economic leverage effectively shifts control over time.

​

Term, Exit, and Long-Term Consequences
Because MSO deals are often long-term, structure also determines flexibility. Term length, renewal rights, termination provisions, and exit economics all affect a firm’s ability to adapt if circumstances change.

What looks attractive at signing may feel very different years later if growth stalls, leadership changes, or strategic priorities shift.

​

Why Structure Deserves Careful Attention
There is no single “standard” Legal MSO structure today. That creates opportunity, but it also creates risk. Law firms evaluating MSOs should assume that deal terms are highly negotiable and that outcomes are driven more by structure than by branding.

Understanding where a proposal sits on the spectrum of ownership, economics, and control is a prerequisite to making an informed decision.