Carta vs Forge For A Law Firm's Ownership Structure

Before anything else, get written confirmation from ethics counsel of exactly which entity, the licensed law firm or an affiliated services company, holds the equity in question, and under which state's rules. Pitfall: assuming a management company structure automatically clears every state's ethics rules just because it works in one jurisdiction. Put this confirmation in writing and keep it with the firm's governance records, since it is the single document most likely to get requested if a bar regulator or a prospective investor ever asks how the structure was validated.

A small number of states, Arizona and Utah among them, now permit some form of non-lawyer ownership of law-related entities under an alternative business structure framework. Pitfall: applying an Arizona-style analysis to a firm operating only in states without that framework, which can create a real regulatory problem rather than just a documentation gap. Even within an alternative business structure state, the permitted scope of non-lawyer ownership and investment is specific and regulated, so confirm the exact boundaries with counsel rather than assuming the framework covers whatever structure you already have in mind.

For an affiliated services entity's internally funded, board-approved buyback among its own equity holders, Carta's tooling works the same way it would for any other private company. Pitfall: routing law firm partner capital accounts or distributions through the same platform as the services company's equity, which conflates two legally distinct pools of value. Keep the two entirely separate in every piece of documentation, from the disclosure packet down to the spreadsheet finance uses to model it, so nobody downstream has to untangle them later.

If the services company wants to bring in outside institutional capital, Forge's buyer network can source that, but only once ethics counsel has confirmed the new investor's relationship to the practice does not cross into prohibited fee-splitting or control over legal judgment. Pitfall: letting an institutional buyer's standard diligence request for board seats or governance rights go unreviewed against professional responsibility rules specific to this industry. A term that looks routine to an institutional buyer, such as approval rights over budget or hiring, can read very differently once mapped against a bar rule on non-lawyer control, so have ethics counsel review the actual term sheet, not just a summary of it.

Attorney-client privilege and confidentiality obligations mean client-specific information should never appear in a data room for either platform, even in redacted form, without a clear ethical basis for disclosure. Pitfall: an eager finance lead pulling matter-level revenue data into a diligence packet without first confirming with ethics counsel exactly what level of aggregation is safe to share.

A firm practicing across several states cannot assume one state's professional responsibility opinion on management company structures automatically satisfies another state's bar rules. Pitfall: relying on a single memo covering the state where the firm is headquartered when partners are also licensed and practicing in states with meaningfully different rules on fee-splitting and non-lawyer involvement.

A well-structured arrangement keeps the licensed law firm's ownership entirely with licensed attorneys, routes any outside capital or broader staff equity through a clearly separate services entity with its own governance, and documents in writing exactly what services that entity provides and what it does not control. Firms that get this right treat the structure as a standing piece of governance to revisit periodically, not a one-time legal opinion filed away and forgotten.

Elements of a clean structure:

• The licensed law firm's ownership stays entirely with licensed attorneys.
• Outside capital and broader staff equity flow through a separate services entity with its own governance.
• A written description states exactly which services that entity provides and what it does not control.
• Ethics counsel's written confirmation of the structure, and of each state's rules, sits with the firm's governance records.
• Client-specific information stays out of any diligence data room.

Once ethics counsel has cleared the entity structure and the eligible investor pool, the Carta-versus-Forge decision itself looks much like it would at any other private company: internal funding and confidentiality favor Carta, an outside capital need with a vetted, non-conflicted investor favors Forge. The unusual part of this industry is not the platform choice, it is everything that has to happen before you are allowed to make it.

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