Who may own a law firm? Tennessee says lawyers only, for now.

Tennessee keeps nonlawyers out of firm ownership

On October 2, 2026, the Tennessee Supreme Court declined to authorize nonlawyer ownership of law firms or fee sharing between lawyers and nonlawyers. The decision came in In re: Regulatory Reforms to Increase Access to Quality Legal Representation, No. ADM2025-01403, after months of public comments.

The court said that at this time it “has not identified sufficient need or support” for those reforms. Rule 5.4 of the Tennessee Rules of Professional Conduct, found in Tennessee Supreme Court Rule 8, remains in place. Tennessee lawyers therefore continue to face the same limits on firm ownership and fee sharing.

The court's decision followed an order entered on September 16, 2025. That order sought public comment on seven issues and said the court was reassessing regulation of the legal profession so Tennesseans could obtain affordable, quality legal services. The seventh issue asked whether Tennessee should modify, reduce, or eliminate its restrictions on nonlawyer ownership and fee sharing.

The court's 2025 order also observed that the supply of legal services is insufficient to meet the needs of many Americans. The original comment deadline was March 16, 2026. The court extended it to April 30, 2026. The Tennessee Bar Association held virtual town halls for its members in February and filed its own comment.

Opponents focused on independence and other states

A joint comment letter filed with the court's clerk on April 30 opposed nonlawyer ownership and fee sharing. The letter had 15 signers, including the Tennessee Defense Lawyers Association, DRI, the U.S. Chamber of Commerce Institute for Legal Reform, the Tennessee Chamber of Commerce & Industry, the International Association of Defense Counsel, the American Tort Reform Association, the Washington Legal Foundation, NFIB Small Business Legal Center, and the American Trucking Associations.

The organizations described themselves as representing lawyers who primarily represent civil defendants, along with business stakeholders. They argued that outside investors could impair lawyers' professional independence because investors would seek a return on their capital. In their view, investor money would flow toward profitable practice areas rather than underserved clients, and pro bono work could suffer.

The letter also compared investor-owned law firms to medical corporations whose physicians work as salaried employees. It cited the ABA's August 2022 Resolution 402, which reaffirmed that fee sharing with nonlawyers and nonlawyer ownership or control of law practices are inconsistent with the profession's core values.

The opponents also pointed to what followed elsewhere. Utah narrowed its regulatory sandbox in 2024 by adding an innovation requirement and requiring new entrants to show a benefit to Utah consumers. Arizona tightened its program in March 2026. California enacted AB 931 in October 2025.

The letter, quoting a 2022 Yale Law Journal Forum article by Stephen P. Younger, said there is “no evidence that nonlawyer ownership actually improves access to justice for the needy.” According to Legal Newsline, the Chattanooga Bar Association also opposed changing the restrictions, pointing to Arizona's experience and reported consumer complaints involving supervision and oversight.

Before publishing, the desk read the seven-page opposition letter alongside a federal FTC and Justice Department staff letter filed the same day. The FTC and DOJ letter addressed ABA accreditation, the issue the court changed, while the ownership question drew the more organized, multi-group opposition. Most of the opposition letter's argument section concerned developments in Utah, Arizona, California, Florida, and South Carolina.

Supporters tied ownership to access

Lucian Pera, a Memphis legal ethics lawyer and partner at Adams and Reese, has argued that the ban is outdated and unsupported by current evidence. In a January 2025 article in the ABA's Law Practice magazine, he wrote that the main rationale for the ban, protecting lawyers' independent judgment, is weaker than ever. Pera wrote, “It's time for more jurisdictions to seriously consider authorizing nonlawyer ownership.”

Supporters also framed the issue as one of access to justice. Their position is that outside capital could fund new ways to deliver legal services to people who cannot afford a lawyer. That argument tracks the court's own 2025 order, which focused on the shortage of affordable legal services.

Arizona, Utah, and the District of Columbia are the U.S. jurisdictions best known for allowing some form of nonlawyer ownership or fee sharing. The District of Columbia's rule is limited to nonlawyers who work in the firm and does not permit passive investors.

Arizona eliminated its version of Rule 5.4 effective January 1, 2021, and licenses alternative business structures. The Arizona State Law Journal reported 151 licensed alternative business structure entities as of January 2026. On March 18, 2026, Arizona's Administrative Order 2026-31 began requiring that lawyers at an alternative business structure actually provide legal services, rather than only referrals, and that the license benefit, at least in part, people located in Arizona.

Tennessee changed accreditation but not ownership

The same Tennessee order changed the accreditation requirement for bar admission. Tennessee Supreme Court Rule 7, Section 2.02 now requires graduation from a school accredited by an “Approved Accreditor,” meaning an entity approved by the Tennessee Supreme Court. Other state supreme courts may qualify as approved accreditors. ABA accreditation remains approved, but it is no longer the only path. Florida made a comparable move, covered in an earlier Docket piece.

The court also eliminated the prior requirement that graduates of schools not approved in Tennessee show three years of active practice. The change applies to accreditation, not to ownership or fee sharing.

The court created three task forces in the same order. One will examine alternative pathways to licensure, including apprenticeships and legal aid service. Another will study interstate mobility for lawyers licensed elsewhere. The third will consider limited-licensed paraprofessionals who would provide limited legal services. Appointment orders are expected later in 2026 and into 2027.

The ownership question therefore remains open in one sense. The court did not authorize the proposed reforms, but its “at this time” wording leaves room for reconsideration if more data becomes available. Bloomberg Law reported that Pera noted after the decision that the court had not permanently closed the door.

Cross-border firms still face different rules

The Tennessee result does not create a uniform national rule. An Arizona alternative business structure may have nonlawyer owners, while Tennessee continues to prohibit that arrangement for Tennessee lawyers.

California's AB 931 also creates a separate constraint. Signed October 10, 2025, it bars California lawyers from sharing contingency fees with out-of-state alternative business structure entities for contracts entered from January 1, 2026, until January 1, 2030. An August amendment exempted fixed-fee arrangements.

For firms handling matters across state lines, the governing rules can therefore differ by jurisdiction, ownership structure, fee arrangement, and contract date. Tennessee's October 2 order leaves its own Rule 5.4 limits unchanged.

Archivar, which publishes The Docket, builds an operating system for law firms: it answers every call 24/7 in English and Spanish, runs intake, manages matters, and remembers everything the firm does. It is software a firm runs for itself, so who may own a firm and who may share in its fees shapes the kind of firms the desk's readers run; that is why the desk follows these ownership decisions.

Tennessee's court kept the Rule 5.4 ownership and fee-sharing restrictions in place.

The opposition groups continue to view nonlawyer ownership as a threat to independence and client protection.

Supporters did not obtain the change they sought, but the court left the issue open to later review with more data.