Law Firm Structure & Incorporation Guide

SRA Regulated Community Statistics show incorporated companies now make up about 58.7% of the SRA-regulated firm base, up from around 20% in 2011, while LLPs account for about 15.9% and traditional partnerships have fallen to about 10.2%. This article sets out what is driving the restructuring, why these stock figures are not the same as Companies House incorporation-flow data, and the tax and accounting implications of each structure for solicitors.

There are 218,036 solicitors on the roll in England and Wales, but only 177,841 hold a current practising certificate. That leaves roughly 40,195 admitted solicitors, about 18.4% of the roll, who are not currently practising. This article explains the difference between the roll and a practising certificate, why the gap exists, and the tax and structure implications for solicitors who move in-house, go locum, take a career break, or return to practice.

SRA Regulated Community Statistics show the incorporated company share of regulated UK law firms rose from 22% in July 2011 to 59% in June 2026, while traditional partnerships fell from 30% to 10%. Companies House data confirms that new firms now almost always incorporate as limited companies rather than form partnerships or LLPs. This article explains what drove the shift, how the two datasets measure different things, and what the change means for partners, LLP members, and sole practitioners weighing structure.

Incorporating a law firm into a company or ABS is two parallel projects: SRA authorisation of the new body, and the tax-efficient transfer of goodwill, WIP and debtors. This guide covers section 162 incorporation relief for the partners, the related-party goodwill trap that blocks the company's 6.5% relief, and why this is a different step from converting a partnership to an LLP.

Admitting a company as a member of a law firm LLP can retain profit at the corporation-tax rate, but only to the extent of the company's genuine commercial return. This guide explains the mixed-membership rules (ITTOIA 2005 sections 850C to 850E), which reallocate any excess profit back to the individual partners, and why the structure is not a clean way to halve tax.

A demerger or partner team move is the mirror image of a merger, and it is a tax decision and a regulatory decision at the same time. This guide explains how WIP and debtors (income) and goodwill (capital) are split on the way out, how a departing partner's capital account is settled, when Business Asset Disposal Relief applies, why each affected client must consent before files and client-account money transfer, why a new entity needs SRA authorisation, and how restrictive covenants and run-off PII fit the picture.

A service company is a separate company that owns the back office (staff, premises or IT) and recharges those costs to the trading LLP at arm's length. This guide explains the VAT on the recharge (standard-rated at 20% unless the entities are VAT-grouped under VATA 1994 s.43), the post-2019 extension that lets an LLP join a VAT group with its service company (s.43A), the arm's-length cost-plus pricing requirement, why a genuine cost-recharge entity is not a profit-sharing corporate member under the mixed-membership rules, and why firms use the structure.

The 2026/27 dividend rise narrows the tax case for incorporating a law firm: at typical partner profits, once you extract everything, the company route is rarely a clear win. This guide works the breakeven and explains why the real drivers are retained earnings, limited liability and sale planning, not the headline tax rate.

Converting your law firm partnership to an LLP triggers specific tax consequences that require careful planning. Understanding the capital gains, income tax and stamp duty implications is essential for a successful conversion.