U.S. Law Firms’ Business Patterns

I analyzed data collected from the U.S. Census for the years 2017 through 2020 that measures business patterns of U.S. law firms.

Areas of practice include corporate law, family law, estate planning, patent attorneys, legal aid services, real estate law, tax law and others. The data does not include public defenders, prosecutors, US attorneys, or attorney generals.

I used Power BI to clean, transform, and analyze the data. After reviewing the data, I created charts, plots, tables and other visualizations and built an interactive report. Click on the different parts in the report below to see how the data changes.

What can you conclude about this data?

  1. Most law firms in the U.S. have between one and four employees and are S-corporations. This reflects something unique in terms of how most law firms are really tiny in terms of the number of people working for the firm. In fact, the Small Business Association defines “small businesses” as having 250-1500 employees, depending upon the industry! Most small business law firms in the U.S. have very few people who shoulder all of the business and legal responsibilities. They are truly multi-taskers.
  2. The total number of law firms has decreased every year. By clicking on each of the years, we can see that the total number of law firms went from 173,019 in 2017 to 169,582 in 2020. And this data does not include the effect the pandemic had on the existence of U.S. law firms.

However, if we look at the changes in the total number of firms by employee size, our calculations show that the total number of firms with one to 19 employees decreased from 2017 to 2020, while total number of firms with 20 to over a thousand employees increased in that same time period.

20172020Changes
All firms173,019169,5822.0% decrease
1 – 4 employees127,001123,8322.5% decrease
5 – 9 employees25,29824,8411.8% decrease
10 – 1911,74211,6460.8% decrease
20 – 496,1556,3112.5% increase
50 – 991,7591,8535.3% increase
100 – 2498258543.5% increase
250 – 4991851871.1% increase
500 – 99945462.2% increase
1000 +91233.3% increase

We can see the change in number of law firms visually as well, although it is slight. The charts below is interactive and shows changes in the number of law firms from 2017 through 2020. You can click on it to see more information and also hover over each vertical year area to see tool-tips that show the exact number of law firms with various employee sizes.

Since I broke apart the number of employees, I decided to do the same for type of organization. What organizational type increased in number from 2017 to 2020? What decreased? Below are the answers.

Right off the bat we can see that S-corporations increased in numbers from 2017-2020, while it appears the other business organization decreased or remained about the same. Just to make sure, I ran the following calculations…

20172020Changes
S-corporation 83,40388,6276.3% increase
Sole proprietorships39,99034,07914.8% decrease
Partnerships28,14226,8534.6% decrease
C-corporation19,24017,7397.8% decrease
Non-profit2,2262,2350.4% increase
Other noncorporate2352126.1% increase

Although the large percentage increase in “Other noncorporate” is unique, remember there are very few law firms that are categorized as this versus the other traditional business types. We can add more information to the what we concluded earlier: that overall, the number of law firms has decreased from 2017 to 2020, with the largest employee size being between one to four employees. Although the number of law firms decreased, the change did not happen at the same rate across all business types. Sole proprietorships saw the biggest decrease while S-corporations actually increased in numbers.

Finally, the Census data I pulled was only available from 2017 through 2020. A LOT happened in the last 2 years, of course. How did the pandemic affect law firms? What about the forgiveable loan program called the COVID-19EIDL, which many solos and small law firms received? Did that have an effect on the business type change? All interesting things to ponder.

Sara Kubik