How SRA-Regulated Law Firms Are Restructuring: Incorporated 20% to 58.7%, and the Tax Angle

The Shift in One Chart

The structure of the SRA-regulated law firm base has changed substantially over 15 years. According to aggregate SRA Regulated Community Statistics, incorporated companies have grown from about 20% of the regulated firm base in 2011 to about 58.7% by 2026. Over the same period, LLPs have held at about 15.9% and traditional partnerships have contracted to about 10.2%.^[1]

Constitution type	Approximate share of the SRA-regulated firm base
Incorporated company (2011 baseline)	20%
Incorporated company (2026)	58.7%
LLP (2026)	15.9%
Traditional partnership (2026)	10.2%

Source: Solicitors Regulation Authority, Regulated Community Statistics. Aggregate shares of the regulated firm base; used with attribution under the SRA custom licence, not OGL. No named-firm data cited.^[1] The remaining share of the firm base is made up of sole practitioners and other body types, including Alternative Business Structures.

Stock, Not Flow: The Distinction That Matters

Before drawing conclusions, it is essential to be clear about what these figures measure. They are stock figures: they describe the mix of firms that are regulated and operating today. They are not a flow measure of how many new firms register each year, and they are not drawn from Companies House.

This distinction is easy to get wrong. A separate and much-quoted statistic says that around 98% of new legal-sector companies registered at Companies House take limited-company form. That is a flow measure about new incorporations. It does not mean that 98% of law firms are limited companies. The correct stock figure is that incorporated companies are about 58.7% of the existing SRA-regulated firm base. Conflating the two produces a materially wrong picture of the profession.

We set out both measures, and the reasons they differ, in our UK Solicitor Profession Structure research and our UK Legal Incorporation Index.

What Is Driving the Restructuring

Alternative Business Structures and External Ownership

The Legal Services Act 2007 created Alternative Business Structures, which became operational from 2012. ABS entities allow non-solicitor ownership and external investment in law firms. Because outside investment and shareholding fit most naturally into a company with a defined share structure and Companies Act governance, ABS entities are typically incorporated. Their steady growth has directly reinforced the incorporated share of the regulated firm base.

Corporation Tax and Profit Extraction

For much of the period since 2011, the main rate of corporation tax fell while personal income tax rates on higher incomes did not. For firm owners extracting profit primarily as dividends from a company they controlled, this widened the after-tax advantage of the incorporated structure. The position became more nuanced from April 2023, when the corporation tax main rate rose to 25% for profits above £250,000, and again from April 2026, when dividend tax rates increased under Finance Act 2026. The incorporation advantage has narrowed at higher profit levels, but the structural shift built up over the earlier low-rate years persists in the firm base.

Limited Liability Without the LLP Regime

An incorporated company provides the same limited liability as an LLP, but without the salaried member rules that apply to LLP fixed-share members under FA 2014. For a small firm or an incorporating sole practitioner, the company offers a straightforward liability shield without exposure to salaried-member analysis. This has been a consistent driver of incorporation among smaller practices, alongside the tax considerations.

The Tax and Accounting Angle by Structure

Each structure in the SRA firm base has a distinct tax and accounting treatment. The restructuring trend is, in large part, a response to these differences.

Traditional Partnership

A traditional partnership under the Partnership Act 1890 is tax-transparent. Each partner is taxed on their profit share as trading income at income tax rates, plus Class 4 NICs, and the firm files an SA800 partnership return. There is no corporation tax and no salaried-member analysis, because all partners are self-employed. The trade-off is unlimited joint and several liability. This structure has contracted to about 10.2% of the firm base as firms have sought liability protection. See our law firm partnership tax guide.

LLP

An LLP is also tax-transparent, with members taxed on their profit share and the LLP filing an SA800. It provides limited liability equivalent to a company. The key complication is the salaried member rules under FA 2014: an LLP member who meets all three conditions (fixed reward, limited influence, insufficient capital contribution) is reclassified as an employee for NICs, bringing employer NICs into play. The LLP share has held broadly steady at about 15.9%, common among mid-size multi-partner firms. See our explainer on the salaried member rules for UK LLPs and our comparison of LLP versus traditional partnership.

Incorporated Company

An incorporated law firm pays corporation tax on its profits, currently 25% for profits above £250,000 with marginal relief between £50,000 and £250,000. Partners become directors and typically shareholders, extracting income through a mix of salary and dividends. Dividends in 2026/27 are taxed at 10.75%, 35.75%, and 39.35% under Finance Act 2026. The combined corporation tax plus dividend path can produce a lower overall burden than income tax plus Class 4 NICs on an equivalent profit share, but the margin has narrowed since 2023. At about 58.7% of the firm base, this is now the dominant structure. For the incorporation decision under the 2026 rates, see our note on whether a law firm should incorporate after the dividend rise, and for the conversion mechanics, our guide to converting a law firm to a limited company.

Service Company Structures

Some firms retain an LLP or partnership for regulated work while using an incorporated service company for staff, premises, and administration. This hybrid can capture some of the corporation tax and extraction benefits without a full conversion of the regulated entity. It also carries VAT and transfer-pricing considerations that need care. See our guide to service company structures for law firms.

What This Means if You Are Reviewing Your Structure

The restructuring of the SRA-regulated firm base is a genuine, sustained trend, but the sector average is not a reason on its own to change your structure. The right answer depends on your firm's specific position:

• Liability: Incorporated and LLP structures protect partners from firm debts beyond their capital; a traditional partnership does not.
• Tax on profit: LLP and partnership profit shares are taxed at income tax rates plus Class 4 NICs; the incorporated route introduces corporation tax and dividend extraction, more attractive at some profit levels than others after the 2023 and 2026 rate changes.
• Fixed-pay members: An LLP with fixed-share members requires annual salaried-member analysis; the incorporated structure avoids it.
• Investment and sale: The incorporated company and ABS route is the standard vehicle for external investment or sale to a consolidator.
• Conversion cost: Converting an unincorporated firm to a company can crystallise a chargeable gain on goodwill; incorporation relief and the current BADR position need to be modelled before any change.

The structural shift documented in the SRA data reflects thousands of individual firm decisions taken under different tax regimes over 15 years. Yours should be modelled on your actual projected profits and extraction needs. Our team works exclusively with solicitors and law firms and can model the options for your specific situation.

Sources

1. Solicitors Regulation Authority, Regulated Community Statistics: Solicitor Firms (firm counts by constitution type). Aggregate data, used with attribution under the SRA custom licence; not OGL; no named-firm data cited. Available at: sra.org.uk. Accessed July 2026.
2. The Law Society of England and Wales, Annual Statistics Report. Aggregate statistics used with attribution. Available at: lawsociety.org.uk. Accessed July 2026.
3. Accounts for Lawyers Editorial Team, UK Solicitor Profession Structure. Available at: /research/uk-solicitor-profession-structure. Data through June 2026.