Are law firms considered to be corporate? This is a question frequently asked by lawyers and prospective clients alike. While law firms are often not corporations, they are still business entities, and their legal operations are governed by the same laws as those of other companies. There are some differences between corporations and partnerships, however. The biggest difference is in how the firms are organized. For example, a corporation is an organization that has shareholders, while a partnership does not.
Although law firms are not corporate, they do benefit from the tax advantages of being organized as a professional association. This structure is advantageous to virtually every attorney. In addition, an S corporation is more tax efficient than an individual sole proprietorship. And in most jurisdictions, this business model is the most common form of legal practice. The benefits are clear, however. It is possible that a corporate structure can make a law firm more profitable.
In the US, law firms are regulated by state statutes. Generally, only attorneys can own an interest in the firm. Consequently, they cannot engage in a stock market initial public offering. Therefore, they must raise capital through additional equity partners, or debt, which is often secured by accounts receivable. The only exception to this rule is if one of the attorneys is an in-house counsel.
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