Why employee ownership is reshaping law firm succession

Employee ownership is one of the fastest-growing business models in the UK. As of July 2025, there are approximately 2,470 employee-owned businesses and over 335,000 employee owners nationwide.   

The structure is gaining traction across a wide range of industries and companies of all sizes thanks to the benefits it offers to owners and employees alike — and the legal sector is no exception.

Here, Stephen Hadlow — a leading expert in employee ownership from our specialist professional services team — explores why a law firm might favour an employee ownership model and outlines the common themes behind their choice.

A smarter way to exit

Employee ownership can be the right succession solution where current partners are looking to retire but an exit via a legal sector consolidator or an internal buy-out is either undesirable or unachievable. 

 This may be the case where:

• Being acquired by a competitor or market consolidator is unappealing.
• Junior partners don’t have the appetite or financial means to structure a buy-out.
• In family-owned firms, there’s no next generation willing to take over.
• Partners are struggling to secure a fair price for the business from a third-party. 

That said, strong management remains important. A leadership succession plan is needed for partners who are still central to the firm’s day-to-day operations but are looking to step back. Unlike with a trade sale where change is far more rapid, an employee ownership trust (EOT) structure allows retiring partners to manage the handover gradually — typically over a number of years — to allow for a smooth succession.

Preserving legacy & culture

The overriding reason why law firms look to transition to employee ownership is to preserve the integrity and continuity of the practice — especially when there’s a proud history of independence and strong culture nurtured over many years. Independent law firms work hard to create and instil a distinct ethos and market reputation. Employee ownership offers a way to protect and enhance that culture and independence for the long term.

Backed by tax incentives

There are key tax incentives associated with becoming employee-owned. In today’s shifting tax climate, it’s worth noting that law firm owners selling to an EOT benefit from 50% capital gains tax relief (effectively paying CGT at 12%) and employees can benefit from receiving tax-free bonuses. 

The rationale behind these tax incentives is often misunderstood. They’re not simply financial perks — they reflect the ongoing Government support for employee ownership as a means to encourage stable and resilient businesses where ordinary workers have a share in their success. 

In June 2025, the Secretary of State for Business and Trade reaffirmed the Government’s commitment to doubling the UK’s mutual economy with employee ownership at the core of that ambition.

Funded by profitability

An important factor in transitioning to an EOT is how the exit is funded. Unless external debt is used, the purchase price to be paid to outgoing partners must come from the firm’s after-tax profits. Affordability is therefore an important consideration and requires careful planning. For owners of profitable firms, employee ownership can offer a more achievable and straightforward exit route — especially compared to those whose businesses face a less certain future.

Built around people

Employee ownership ultimately works best for law firms that already place their people at the heart of their business. Becoming employee-owned can strengthen that culture by providing a greater sense of wellbeing alongside financial rewards to staff. 

Talk to us

As with any decision as significant as the future ownership of your firm, it’s important to weigh up all relevant factors carefully. Our specialist advisors are nationally recognised experts in EOTs as a succession strategy with a focus on professional services — and have already supported over 80 businesses through the transition.

Thinking about succession or exit planning? With one of the UK’s largest corporate law teams — backed by our extensive deal advisory expertise — we guide you through asset and share sales so you can move on knowing your interests, legacy and future obligations are all taken care of.

Talk to us by calling 0333 004 4488, emailing hello@brabners.com or completing our contact form below.