As AI transforms from an operational tool to a core asset, a new question arises: will the partners who own the law firm own the technology that drives its value?
I recently walked past a construction site in central London where a historic façade had been carefully propped up while everything behind it was gutted and rebuilt.
From the street, little appeared to have changed.
It is a familiar sight in the capital, and it got me thinking about the modern law firm.
The partnership model remains central to how many leading firms are structured and present themselves to the world. Yet the economics driving that structure are shifting. Competing internationally now demands elevated levels of investment in proprietary technology, AI and data infrastructure – capital outlays that would have been unthinkable a generation ago.
This shift may be forcing us to rethink what it means to “own” a law firm. We are rapidly approaching a reality where the partnership remains outwardly intact, yet the core assets and economic value underpinning the firm sit somewhere else entirely.
When the LLP structure was introduced over two decades ago, it offered professional firms an attractive compromise. The LLP provided separate legal personality and limited liability while retaining much of the flexibility of a traditional partnership, as well as the tax benefits.
More than two decades on, the LLP still dominates the legal profession. What has changed is the business sitting inside it.
For years, law firms were fundamentally people businesses. Their greatest assets walked through the door each morning. That remains true, but it is no longer the whole story. Increasingly, those people rely on AI, proprietary technology, data and digital infrastructure that require significant and continuing investment.
A LLP can certainly retain profits, but its partners are taxed (often at 47%) on their allocated share of those profits regardless of whether the cash is actually distributed. A private company, by contrast, can retain post-tax earnings for reinvestment within the business. While this does not prevent a LLP from building capital, it can make retaining and reinvesting profits less attractive. Firms may therefore find themselves relying more heavily on partner capital, tax reserves, deferred distributions and external borrowing.
The UK has been moving towards greater external ownership of legal businesses, although the regulatory position differs across its jurisdictions. Yet for the major international law firms, private capital has barely crossed the threshold.
One of the biggest complications lies across the Atlantic.
For firms with substantial US practices, restrictions on non-lawyer ownership and fee-sharing across many US jurisdictions create significant complications. Introducing external equity into an integrated global firm becomes much harder when parts of that firm operate under restrictions on who can share in its ownership and economics.
Major London firms have instead continued to adapt the partnership model.
Transatlantic mergers, remuneration reforms, and increasingly tiered partnership structures have fundamentally changed what being a “partner” actually means. Increasingly, the title itself tells us very little about who actually owns the business.
The rise of AI makes this distinction critical. There is no fundamental rule stating that the assets powering a law firm must live inside the same entity delivering the regulated advice. Imagine a dual structure: the LLP continues to practice law, while a separate corporate entity employs the developers, holds the intellectual property, and owns the proprietary AI. This so-called tech company could retain earnings, offer equity to non-lawyer talent, and attract external capital, seamlessly licensing its technology back to the LLP.
At that point, the more interesting question becomes where the economic value actually sits.
If technology starts doing work that once depended on thousands of professional hours, the question of who owns that technology suddenly becomes far more important.
That creates an unusual possibility: the partners could own the law firm without owning all the assets increasingly responsible for its productivity and competitive advantage.
Historically, ownership was straightforward. The partners owned the firm, did the work, and split the profits. But if the data and digital infrastructure are stripped out into a separate corporate entity, a partner could hold a lucrative stake in the legal practice without owning a single share of the technology powering it.
That becomes less straightforward if the technology and data on which the firm relies are owned by a different corporate entity. A partner could comfortably hold an economic interest in the regulated legal practice without owning a single share of the technology responsible for the firm’s productivity and competitive advantage.
Take this logic to its natural endpoint and the architecture of the global law firm begins to look radically different. Local LLPs will continue to oversee the regulated casework, while the intellectual property and permanent capital sit securely in separate, external corporate entities.
The partnership model is not going anywhere.
Its professional heritage and regulatory shielding remain incredibly useful. But its outward survival will tell us less and less about where the true economic power of the firm lies.
Which brings us back to that building site in London. The interesting question for the legal sector is not whether the historic façade will survive. It certainly will.
The real question is who will own what is being built behind it.
