INSTITUTIONAL CHECKLIST · LAW FIRM MSO
The 13-item governance file for law-firm MSO structures, designed to preserve attorney ownership, professional independence, and regulatory governance while supporting non-legal infrastructure.
By Alex Jones, EA, CFP®, CLU®, ChFC®, CEPA, Managing Principal, Guardian Tax Consultants®.
How to use this checklist
A law-firm MSO must respect a different governance perimeter than an ordinary commercial MSO. Attorney ownership, professional-independence rules, conflict and confidentiality obligations, and state-by-state ethics requirements set the boundary. This checklist is the 13-item file index for that governance perimeter. It is a diligence tool for law-firm leadership, ethics counsel, and outside advisors, not a tax or ethics opinion.
1. Non-legal services only (Management Services Agreement)
- ☐ MSA limits MSO services to non-legal infrastructure (finance, HR, IT, marketing, procurement, real estate, operations).
- ☐ No legal services or attorney supervision provided by the MSO.
- ☐ Service scope reviewed and signed off by ethics counsel.
- ☐ Annual confirmation that actual services delivered match MSA scope.
- ☐ Documentation file preserved.
2. State-by-state ethics review
- ☐ Identify each state in which the law firm practices.
- ☐ Document each state’s rules on fee-splitting, non-lawyer ownership, and MSO arrangements.
- ☐ Confirm the MSO structure complies with the most restrictive applicable state.
- ☐ Refresh on material state-rule changes.
- ☐ Ethics counsel sign-off on the multi-state analysis.
3. Attorney professional-independence policy
- ☐ Written policy preserving attorney professional judgment on client matters.
- ☐ No MSO influence on case acceptance, client selection, settlement, or legal strategy.
- ☐ Policy distributed to all attorneys and MSO personnel.
- ☐ Annual attestation by attorneys and MSO leadership.
- ☐ Documentation file preserved.
4. Non-lawyer control limitations
- ☐ No non-lawyer ownership of the law firm.
- ☐ No MSO voting or veto rights over legal-services decisions.
- ☐ MSO board representation limited to non-legal matters.
- ☐ Reserved-powers schedule documents the perimeter.
- ☐ Annual review by ethics counsel.
5. Conflict-check and confidentiality boundary memo
- ☐ Written boundary memo defining what client information may and may not flow between firm and MSO.
- ☐ Conflict-check process retained inside the law firm.
- ☐ MSO personnel bound by confidentiality and information-barrier obligations.
- ☐ Technology systems segmented to enforce the boundary.
- ☐ Periodic audit of boundary integrity.
6. Management fee methodology / FMV support
- ☐ Selected fee methodology documented (cost-plus, GSM, CPM, or hybrid).
- ☐ Independent RC or transfer-pricing support refreshed on a documented cadence.
- ☐ Methodology supports IRC §162 and §482 positioning for related-party arrangements.
- ☐ Annual review by CPA and counsel.
- ☐ Invoices, payments, and intercompany reconciliations preserved.
7. Data access and cybersecurity protocols
- ☐ Written data-access policy defining MSO access to law-firm systems.
- ☐ Privileged client data segregated from MSO access where required.
- ☐ Cybersecurity and incident-response plan covers both entities.
- ☐ Annual penetration testing or risk assessment.
- ☐ Documentation file preserved.
8. Board minutes and reserved-powers schedule
- ☐ Separate board minutes maintained for each entity.
- ☐ Reserved-powers schedule documents which decisions sit where.
- ☐ Material decisions minuted contemporaneously.
- ☐ Annual minute-book review by counsel.
- ☐ Schedule refreshed for material structural changes.
9. Related-party allocation workpapers
- ☐ Cost-base components defined and documented.
- ☐ Allocation keys tied to actual operating data.
- ☐ Inter-entity allocations reconciled at least annually.
- ☐ CPA review of the allocation file.
- ☐ Workpapers preserved in a retrievable format.
10. Annual compliance refresh
- ☐ Annual review of MSA, RC/transfer-pricing support, ethics-rule compliance, and reserved-powers schedule.
- ☐ Annual attestation by firm leadership and MSO leadership.
- ☐ Documentation file index updated.
- ☐ Material changes flagged for counsel review.
- ☐ Refresh cadence calendared and tracked.
11. §482 fee support
- ☐ IRC §482 transfer-pricing alignment documented for related-party arrangements.
- ☐ Benchmarking study refreshed on a documented cadence.
- ☐ Range analysis with positioning rationale.
- ☐ Counsel and CPA sign-off on the methodology.
- ☐ Workpapers preserved.
12. §1202 continuity memo (if positioned)
- ☐ If §1202 QSBS treatment is positioned for the MSO C-corp, run the full §1202 diligence checklist annually.
- ☐ Document active-business, gross-asset, and redemption posture.
- ☐ Track holding-period tiers.
- ☐ Coordinate with counsel on any structural changes that could break qualification.
- ☐ Annual continuity memo preserved in the file.
13. Regulatory put review (if PE capital is involved)
- ☐ If PE or other outside capital sits in the MSO, document the regulatory-put framework that preserves attorney ownership of the law firm.
- ☐ Identify trigger events and put mechanics.
- ☐ Confirm valuation methodology for any future put exercise.
- ☐ Coordinate with ethics counsel on the boundary.
- ☐ Annual review of the put framework.
Disclosures
This checklist is published by Guardian Tax Consultants® for educational and diligence purposes. It is not a tax opinion, legal opinion, or financial-product recommendation, and it does not establish an advisor-client relationship. Specific facts, applicable state law, and the federal tax code in effect at the relevant time will govern any actual planning. CPA firms, tax counsel, and family-office advisors should review each item with qualified professionals before relying on it. Past results do not guarantee future outcomes.