Arizona's Nonlawyer-Owned Law Firms Must Now Serve Arizonans “At Least in Part,” and the State Bar Wanted Those Words Cut

Arizona now requires nonlawyer-owned law firms seeking an Alternative Business Structure license to serve Arizonans “at least in part.” Chief Justice Ann A. Scott Timmer signed the amendment on March 18, 2026. It adds that licensure must, at least in part, further regulatory objectives for persons located in Arizona.

The State Bar of Arizona wanted those three words removed. It argued that “at least in part” could allow approval when Arizona's benefit was only incidental. The Arizona Judicial Council approved the amendment on March 12, and the Supreme Court adopted it without that change.

The amendment adds two tests for ABS applications

Arizona eliminated its ethics rule barring nonlawyer ownership of law firms in an order dated August 27, 2020. The change took effect January 1, 2021. Firms licensed under the program are called Alternative Business Structures, or ABSs. The first two ABS licenses were approved in March 2021.

ABS licensing runs through Arizona Supreme Court Rule 33.1 and Arizona Code of Judicial Administration section 7-209. The 2026 amendment affects Administrative Order 2025-227 and leaves the other provisions of section 7-209 in effect.

Under new section E(2)(a)(2), the Committee on Alternative Business Structures must consider the regulatory objectives “in light of the Supreme Court's jurisdiction given that licensure is sought in Arizona.” The licensure must, at least in part, further those objectives for persons located in Arizona.

The five objectives are protecting and promoting the public interest; promoting access to legal services; advancing the administration of justice and the rule of law; encouraging an independent, strong, diverse, and effective legal profession; and promoting and maintaining adherence to professional principles.

New section E(2)(a)(3) adds a separate requirement. Lawyers practicing law with an ABS must be or will be, at least in part, providing legal services to persons. The existing governance-structures provision is renumbered as item (4).

The Committee's recommendation test in section E(2)(e)(1) now also refers to the new items. An application must satisfy them before the Committee must recommend approval.

The signed order differs from the draft

The Committee met on February 10, 2026 and voted on edits before the Council acted. The draft attached to the Council's March 12 request memo said lawyers working for the ABS “are or will be providing legal services to clients.”

The signed order uses “persons” and adds “at least in part.” The Committee also dropped “entities” from the legal-services item. The memo says “persons” has the meaning defined in the code.

The editors read the Judicial Council's request memo and the Chief Justice's signed order side by side. Those documents show two details worth knowing. The draft used “clients,” while the signed order uses “persons” and includes “at least in part.” The State Bar's comment cited section E(2)(c), but the Division corrected the citation to E(2)(e).

Check which version you are quoting. The draft and the adopted text are not identical.

The State Bar said the amendment could permit incidental Arizona ties

The State Bar opposed the amendment. Its comment said the language conflicted with Administrative Order 2025-241, which the memo described as requiring ABS licensure to advance regulatory objectives for persons or entities located in Arizona, “not to be incidental.”

The Bar also said the legal-services requirement was too broad because it contained no time frame or geographic limit. In its view, that could permit approval of entities whose services were speculative or primarily outside Arizona.

The Bar argued that applicants should show how licensure would benefit Arizona persons or entities. It said the amendment instead added factors for the Committee to consider, shifting responsibility away from applicants. It also warned that licensing national firms with only incidental Arizona ties could burden State Bar resources.

The Bar raised a separate concern about ABS structures. Fee-sharing with nonlawyers may violate ethics rules in other jurisdictions, it said, and could expose Arizona lawyers to misconduct charges under Arizona Rule 8.4(a). The Bar pointed to Utah's regulatory sandbox, which it said prohibits bare referral-fee structures and requires applicants to show meaningful in-state consumer benefit.

The Bar recommended removing “at least in part,” stating clearly that licensure must benefit Arizona persons or entities, and clarifying that ABS lawyers must provide legal services primarily to Arizona consumers.

A consultant urged a broader benefit test

Crispin Passmore, a UK-based global legal-market consultant who contributed to ABS Taskforce discussions on third-party funding, supported the goal of ensuring Arizona benefits. He urged restraint.

Passmore said traditional law firms are not individually tested for their contribution to the rule of law or access to justice. ABSs therefore should not face a stricter standard, he said. If the rule requires a benefit to Arizona, he argued, the benefit should be defined broadly.

He also said future proposals should treat the attraction of nationally focused firms as a positive. Overregulating ABSs could push firms toward management services organization models, he said. Passmore added that significant change was coming in 2026 and 2027, without specifying what that change would be.

The Division and the Committee recommended approving the modifications as proposed. The only change incorporated from the State Bar's comment was the citation correction from E(2)(c) to E(2)(e). The memo says additional comments will be considered in future code proposals.

Applicants will face an undefined Arizona-benefit threshold

The adopted text does not say how much Arizona benefit is enough. It sets no percentage and no time frame. For an ABS applicant, that means the Committee will weigh Arizona-located persons in every application, with the threshold set application by application.

For Arizona lawyers who work for or share fees with an ABS, or who take referrals from one, the amendment does not change Rule 8.4(a) or fee-sharing rules. The State Bar's concern remains tied to arrangements that may violate another jurisdiction's rules.

Lawyers in other states should separate Arizona licensing from their own state's rules. The adopted text speaks to licensing in Arizona. It does not change what another state permits when a lawyer there associates with an Arizona ABS.

A firm weighing an outside-ownership or referral relationship will want to identify, matter by matter, where each inquiry came from and who handled it. Archivar answers the call, runs intake, and remembers the firm's work, so the first-call-to-matter trail exists in one place.

If you are quoting the rule, use the signed March 18 order rather than the draft memo.