Nonprofit organizations often bypass much-needed legal services because they're operating on a limited budget. But it's often cheaper to avoid problems than to fix them. Plus, with many options available for obtaining legal services, your charitable organization should be able to get needed legal advice without spending huge sums.
Here are some questions and answers about when and how to bring in an attorney for help.
How Much Will a Nonprofit Lawyer Charge?
The total cost will depend on the services you need as well as the lawyer's fee structure. Most lawyers charge in one of these ways:
- Hourly fee. This is the most common way that lawyers charge for services. Fees usually start around $150, and go much higher for lawyers who are experienced or work in bigger cities.
- Flat fees. The benefit is that the client will know exactly what to expect up front. They're not appropriate for every type of service, but lawyers may willingly charge a flat fee for 501(c)(3) exemption paperwork, contracts, business formation, intellectual property, and real estate transactions.
- Hybrid fees. A combination of hourly and flat fees is also an option, especially in litigation. For example, a lawyer may charge a flat-fee for preparing and filing a complaint or answer, and then hourly fees for depositions and trial work.
You can likely begin your relationship with the attorney with a free consultation, by phone, in person, or through a service like Skype. This could last as little as 15 to 30 minutes. A paid consultation might last an hour or more, and you'll get more in-depth information.
Why Can't We Find a Free Lawyer to Help Our Nonprofit?
Your nonprofit would doubtless rather spend its limited funds on its cause rather than on legal advice. However, many lawyers won't agree to this type of arrangement. After all, you want a lawyer who specializes in nonprofits; but if none pay, how is the lawyer going to earn a living?
Alternatives are available, which will allow your nonprofit to gain valuable legal services without breaking the bank. Ask about:
- Reduced fees. If a lawyer's normal hourly rate is $200, you might try to negotiate a lower rate of $150 or $100. Some lawyers will reduce their fees for a good cause.
- Limited scope representation. This means the lawyer handles only a certain part of your legal needs. For example, if your nonprofit is filing for 501(c)(3) exemption, its board members could prepare the paperwork and then hire a lawyer solely to review it before filing.
- Payment plan. For example, if your lawyer charges a flat fee of $2,000 to form your nonprofit and file for 501(c)(3) exemption, your nonprofit may be able to pay over a few months, rather than all of it up front.
It may be frustrating that a lawyer won't represent your nonprofit for free, but keep in mind the amount of time a lawyer will be spending on your legal issue, and that the lawyer is also running a business.
Should I Consult a Lawyer Before Forming a Nonprofit?
While many tools are available to help form a nonprofit without a lawyer, every nonprofit is unique. It's all too easy to go astray, for example by:
- Forming the wrong type of business. You'll need to choose between forming a nonprofit corporation or a nonprofit limited liability company (LLC). Each has advantages and disadvantages. If you form one that turns out not to fit your nonprofit's activities, you'll have to spend time and money fixing this. A brief consultation with a lawyer can help determine which to choose.
- Failing to follow applicable laws. Nonprofits must abide by both state and federal laws, the applicable portions of which can be difficult to find, combine, and interpret. For example, nonprofits are required to be transparent with how they spend their funds, and implement strict financial record-keeping systems. A lawyer who understands the complexities can guide you.
- Not including proper language in internal documents. Nonprofits must adopt bylaws and a conflict of interest policy, using specific language, in order to receive tax exemption from the IRS and have its articles of incorporation accepted by the state where it does business.
- Using the wrong type of contract. Let's say the board of your nonprofit decides to require each member to spend ten hours a month fundraising. If that's not stated in the board contract, there's no legal way to hold board members to that promise. While sample contracts for such purposes can be found online, a lawyer is in the best position to draft or review such a contract and make sure it complies with state law.
- Improper filings. A lot needs to be filed when you form a nonprofit; for example, with the state where your nonprofit will be operating, as well as with the IRS, for tax exemption. Mistakes can extend the time it takes to form your nonprofit and get it operational.
- Not considering issues with nonprofit's name and logo. You can start the research process as to whether another nonprofit is already using your chosen name or logo on your own. But if you discover that another nonprofit is using a similar name or logo, you'll probably want a lawyer to analyze whether you truly face trademark issues, so as to prevent a legal showdown and expensive rebranding.
What Questions Should I Ask When Choosing an Attorney?
Consider asking prospective attorneys these questions to better get to know them:
- How long have you been practicing law?
- Do you work with other nonprofits?
- What type of work do you do for nonprofits?
- What are your fees?
- Would you consider accepting alternative fee arrangements for nonprofits?
- How do we contact you if we have an issue?
- What are your working hours?
- Will you personally be working on our issue, or assigning it to another, perhaps junior attorney?
Will One Attorney Be Enough?
Lawyers tend to specialize, but nonprofits have a variety of legal needs. Thus, if you hire just one lawyer, who works solo rather than with a firm, that might not ultimately be enough. If your solo lawyer handle mostly contracts, for instance, and your nonprofit has a trademark dispute, you will have to find another lawyer.
A good option is to find a larger law firm that covers numerous practice areas, ideally including nonprofit and general business law, contracts, intellectual property, real estate or landlord/tenant, employment law, and litigation.
The down side to larger firms is that their rates tend to be high. You may also face hurdles getting in direct touch with the attorney who's your primary contact, as larger firms usually put receptionists, assistants, and paralegals on the front lines.