08/07/2026
Private Equity/Investment Operation Funders and Law Firm Business Consultant Models: Traps and Rewards
Craig Kyle Hemphill
CKH
Legal
Copyright 2026
My experience with private-equity companies funding corporate entities for profit stakes is a mixed bag.
On the one hand, I love equity firms doling out funding for corporate operations. On the other hand, the equity firms come with a governing board that expects results or a profit stake for the money, however. That is the rub. Often equity firms are not well-versed in a company's business or operations. The working dynamic becomes a conflict.
Law firms are venturing into allowing investment firms to take stake in legal business operations. Consequences and landmines are all over the playing field here.
Professional conduct rules prohibit any influence concerning case decisions by non-lawyers on client matters and a law firm from sharing fees with non-lawyers from a client matter. As a corporate lawyer, I can structure a deal to make this work. Yet, the reality can be dark.
I recognize the benefit of having a business operations model as a lawyer and economist. If one side of a firm's operation are consulting based in business matters versus legal client engagements, then private equity funding makes sense. Here, the law firm exists as a business advisor and legal advocate. There is trouble when the two mix.
A board of non-lawyers having a stake in law firm profits is a bad idea. Investment firms cannot w**d out expectations anchored in legal matter fees. Thus, either the law firm evolves into an entity like a tax firm, or the pivot turns into an investment consulting firm itself. Law practice becomes too complex here.
Bank funding versus having business investment partners might continue to be a lawyer's best bet. Recall the end of the law firm that took investment interests into its client's businesses? Only lawyers recall the firm because it no longer exists. No one else remembers the firm's name.
