Steve Blank, co-creator of the Lean Startup movement, offers a simple assessment for entrepreneurs to determine if they are entering a regulated market:
- Can I do anything I want or are there rules that might stop me?
- Are there incumbents that will view me as a threat to the status quo and rules they can leverage to impede my growth?
In the legal industry, both questions point to a heavily regulated market.
Each state has a complex (and different) set of rules that govern individuals and entities operating in the legal industry, scattered across statutes, court rules, and court decisions. Figuring out what these rules are and who they regulate can be very challenging.
Further, existing state regulations on legal services delivery are strongly aligned in the interests of incumbents–attorneys. Law is a self-regulating profession. Attorneys and judges hold the authority both to make and enforce the regulations. Understanding this dynamic is important for entrepreneurs trying to break into the legal services industry.
Although complying with all applicable rules and regulations is important, there are several regulations that can be particularly problematic for entrepreneurs building B2C legal technology solutions:
- Engaging in the unauthorized practice of law can get a company shut down and in some states land a person in jail
- Sharing fees between attorneys and professionals who are not attorneys is prohibited
- Co-ownership of a company between attorneys and professionals who are not attorneys is prohibited
We have amassed some resources for entrepreneurs who are navigating these complicated issues. These pages will be updated on an ongoing basis.
Know of resources that should be included? Please contact us!
Unauthorized Practice of Law
In most instances, the practice of law is reserved exclusively for licensed attorneys in a state. People found to be engaging in the unauthorized practice of law (UPL) can get in legal trouble.
Why It’s An Issue
The “practice of law” is notoriously hard to define, and these definitions vary across states. The UPL issues is complicated enough with human service provides; it can be especially tricky where technology is involved.
Fee-Sharing & Co-Ownership
Lawyers and professionals who are not lawyers cannot co-own a company. And legal fees cannot be shared between lawyers and professionals who are not lawyers.
Why It’s An Issue
The rules on fee-sharing and co-ownership restrict partnership opportunities, business models, access to capital, and other important aspects of doing business in the legal services sector,