Law firm structure in the UK: partners, LLPs and ABSs

A UK law firm's structure has two layers. The first is the legal vehicle: a sole practice, a partnership, a limited liability partnership (LLP) or a company, any of which can be a licensed body (ABS) if non-lawyers own or manage it. The second is the regulatory layer: approved managers plus named compliance officers, the COLP, the COFA and the anti-money laundering officers.

Most articles on law firm structure describe the first layer and stop. For anybody running a firm, the second layer matters just as much, because it decides who answers to the Solicitors Regulation Authority when something goes wrong. This piece covers England and Wales. It describes what published guidance says and is not legal or regulatory advice; your COLP or a regulatory adviser should confirm anything you plan to act on. It is part of our guide to legal operations in a law firm.

What types of law firm can the SRA authorise?

The SRA's firm authorisation guidance names three types of regulated business.

• Recognised sole practice. A solicitor practising on their own account, in their own name or under a trading name. It does not cover a solicitor practising through a limited company.
• Recognised body. A legal services body in which every manager and interest holder is legally qualified. It can be a partnership, a company or an LLP, and at least one manager must be a solicitor with a current practising certificate (or a registered European lawyer).
• Licensed body, also called an alternative business structure (ABS). A body with lawyers and non-lawyers in its management or ownership. The SRA's guidance says it must have at least one lawyer manager and one non-lawyer manager or interest holder. It can also be a partnership, company or LLP.

The guidance also says that companies and LLPs must be incorporated and registered in the UK under the Companies Act 2006.

What is the difference between a partnership and an LLP law firm?

In a traditional partnership, the partners personally share responsibility for the business, including its losses and bills. GOV.UK's guidance on partnerships says exactly that. Each partner pays tax on their own share of the profits.

An LLP is a separate legal entity registered at Companies House. GOV.UK's LLP guidance says it needs at least two members, at least two of whom are designated members at all times, and that members are not personally liable for debts the business cannot pay. Designated members carry extra duties, such as filing accounts and keeping Companies House up to date. Members are still taxed on their share of profits, much as partners are.

That is why many firms of any size have moved to LLP status while still calling their senior people partners. Strictly, the owners of an LLP are members. In conversation, and on most websites, they are partners. Liability for professional negligence is a separate question from business debts, and one to discuss with your insurer and adviser rather than assume.

Can a law firm be a limited company?

Yes. A company can be authorised as a recognised body if all its managers and owners are lawyers, or as a licensed body if some are not. Directors take the place of partners as managers, and shareholders are the owners. Some smaller firms choose a company for tax or succession reasons. That choice is one for an accountant and adviser who know the firm.

What is an alternative business structure (ABS)?

An ABS is a law firm that non-lawyers can own or help manage. The SRA calls it a licensed body. The model exists so that firms can bring in outside investment or non-lawyer expertise, and it is how some consumer brands, accountancy practices and investor-backed groups provide legal services. The SRA's guidance notes that licensed bodies must also nominate a COLP and a COFA and show they can obtain qualifying professional indemnity insurance.

In practice, an operations leader or a finance director who is not a lawyer can become a manager of the firm only through the ABS route. That is one reason the structure matters for the law firm hierarchy: it changes who can sit at the top table.

Which roles does every SRA-regulated firm have to fill?

Whatever the vehicle, a regulated firm needs named people in specific roles. These are the ones the SRA's own pages describe:

• Managers. Partners, members or directors. The SRA's guidance on approving role holders says that managers and owners of authorised firms must be approved, with limited exceptions.
• COLP, the compliance officer for legal practice. Per the SRA's guidance, the COLP must take reasonable steps to ensure the firm complies with its authorisation and the regulatory arrangements (other than the Accounts Rules), and must report serious breaches promptly. A COLP must be an authorised person.
• COFA, the compliance officer for finance and administration. Responsible for ensuring compliance with the SRA Accounts Rules and reporting serious breaches of them.
• MLCO, the money laundering compliance officer. Where the Money Laundering Regulations 2017 apply, the SRA describes the MLCO as a member of the board or senior management overseeing the firm's compliance with those regulations.
• MLRO, the money laundering reporting officer. The person nominated to receive internal suspicions of money laundering or terrorist financing and decide whether to report them to the National Crime Agency.

The SRA's guidance for new MLCOs and MLROs says the firm must tell the SRA who holds each role within 14 days of appointment, and that around 90 per cent of firms give both roles to one person. The COLP and COFA must be approved by the SRA before they act. In small firms, one partner often holds three or four of these hats at once.

Does appointing a COLP make them responsible for everything?

No, and this is the single most common misunderstanding in small firms. The SRA's guidance on compliance officers is clear that they do not replace the firm's own responsibility. The firm and its managers must still have effective systems and controls, and management should review whether the compliance officers are able to do their job. A COLP with no time, no data and no authority is a name on a form, not a control.

How is a UK law firm organised internally?

Below the legal and regulatory layers, most firms organise in the same three bands:

• Owners and management. Equity partners or members, a managing partner, often a senior partner or chair, and in larger firms a board or management committee. See what a managing partner does.
• Fee-earners. Salaried partners, legal directors, associates, solicitors, chartered legal executives, trainees and paralegals, usually grouped by department. Our guide to what a fee-earner is covers the term.
• Business services. Finance and cashiering, IT, HR, marketing and business development, risk and compliance, facilities, secretaries and reception. In small firms, a practice or operations manager covers most of this.

Departments are usually split by practice area: private client, family, property, commercial, disputes, employment, and so on. Some larger firms add sector groups across departments so that, for example, a lender client sees one team rather than four.

Law firm structure by size: what does it look like in practice?

The examples below are typical shapes, described for illustration rather than drawn from a survey.

• Sole practitioner. One solicitor, perhaps a paralegal and a part-time bookkeeper. The principal is manager, COLP, COFA, MLCO and MLRO. The weak point is cover: holidays, illness and out-of-hours calls.
• High street firm, three to eight partners. A partnership or LLP with a few departments, a practice manager and a small cashiering team. Compliance roles are split between two or three partners.
• Regional firm. An LLP with a managing partner, a board, department heads and dedicated finance, IT, HR and marketing teams. A COO or operations director often sits alongside the managing partner.
• National or international firm. An LLP with elected leadership, a chief executive or COO, practice group leaders across offices and large business services functions. Some are ABSs and some are listed.

A checklist: is your firm's structure written down?

The legal structure is on file at Companies House or in a partnership deed. The operating structure often exists only in people's heads. A short test, taken from how operations teams audit any business:

• Can you name, today, who holds each of the COLP, COFA, MLCO and MLRO roles, and who deputises for each?
• Is there a written list of who supervises whom, by matter type? The SRA Code of Conduct for Firms requires an effective system for supervising clients' matters.
• Does every department know who owns new enquiries that arrive out of hours?
• Is there one place where the firm's structure chart, roles and deputies are kept, and is it dated?
• When a partner leaves or retires, is there a written handover for each regulatory role they held?

If two or more answers are no, the gap is not the vehicle. It is the lack of a law firm operations manual that records how the structure actually works.

How does structure affect how clients experience the firm?

Clients do not see partnership deeds. They see who picks up the phone and who calls them back. A firm organised strictly by department often has no owner for the enquiry that fits no department, or arrives when that department is in court. That is a structural gap, not a staffing one. Our piece on client handoffs looks at where those gaps sit.

For many firms the first fix is simply covering the line. Cam, our AI Engagement Coordinator, takes calls on the firm's line at any hour, says it is an AI, asks the firm's own qualifying questions and books the call back and sends the firm a summary. If that is a gap in your structure, we can talk it through.

What changes when a firm converts from partnership to LLP?

Operationally, less than people expect, and more than the paperwork suggests. The things that usually need attention, from an operations point of view rather than a legal one:

• Contracts and letterheads. Engagement terms, website, email footers and invoices need the new entity name and registered number.
• Bank and client accounts. New accounts or mandates, planned around the COFA's reconciliation cycle so nothing falls between two ledgers.
• Supplier contracts. Case management, phones, insurance and leases may be in the old partnership's name.
• The SRA record. The firm's authorisation needs to reflect the new body. Your COLP should manage this with the SRA.
• Staff. Employment contracts transfer to the new entity, which people need telling about plainly.

None of this is advice on whether to convert. It is the list an operations lead will be handed on the day the partners decide to, and it is better seen early.

Frequently asked questions

What is the most common structure for a UK law firm? Firms trade as sole practices, partnerships, LLPs or companies. Many firms beyond a handful of partners are LLPs, which give members limited liability for business debts while keeping partnership-style profit sharing.

Can non-lawyers own a law firm in England and Wales? Yes, through an alternative business structure, which the SRA calls a licensed body. It must have at least one lawyer manager and at least one non-lawyer manager or interest holder.

What is the difference between a COLP and a COFA? The COLP is responsible for compliance with the firm's authorisation and the SRA's regulatory arrangements other than the Accounts Rules. The COFA is responsible for compliance with the Accounts Rules.

Does a law firm need an MLRO? Firms within the scope of the Money Laundering Regulations 2017 must nominate an MLRO and, where relevant, an MLCO, and tell the SRA within 14 days. Check with your COLP whether your work is in scope.

Are partners in an LLP really partners? Legally they are members of the LLP. The word partner is still used in practice, and firms often distinguish equity partners, who own a share, from salaried partners, who are paid a salary.