Like any sort of new business, a nonprofit rarely has the budget to hire a lawyer right away. But as most businesses find out, the longer they wait to hire a lawyer, the more legal trouble they may get into.
Exactly when to hire a lawyer depends on what stage your nonprofit is in. At its earliest stages, your nonprofit can get away with a brief consultation and using a lawyer on an as-needed basis. As it grows, it may find that developing an ongoing relationship with a lawyer—or even hiring one as a staff member—is beneficial.
Here are the different times when your nonprofit might want to consider hiring a lawyer in some capacity.
If you have not yet started your nonprofit, or if your nonprofit is in its first year of business, the founding members of the nonprofit should meet with a lawyer for an initial consultation. Initial consultations can be free, although a free one may not provide enough time for the lawyer to cover all of the necessary information and answer all of your questions.
It is well worth paying a lawyer for one to two hours of time in order to get advice on the legal issues your nonprofit may encounter. Initial consultations will vary, but they usually cover a variation of the legal aspects of running a nonprofit. These include filing formal business documentation with your state(s) of business, filing paperwork with the Internal Revenue Service (IRS) in order to obtain tax exemption, working with volunteers and employees, using contracts, and the basics of intellectual property law.
When your nonprofit is in the start-up stage, it won’t need to contact a lawyer on a regular basis, so there’s no need to put a lawyer on retainer. Instead, your nonprofit will consult with a lawyer on an as-needed basis, often paying an hourly fee or a flat-fee for advice.
Finding a lawyer at this stage can also help your nonprofit establish a relationship with a lawyer for future legal needs that arise as your nonprofit grows.
As your nonprofit grows, its legal issues will grow with it. Your nonprofit may find itself contacting a lawyer more often and for more complex issues.
For example, as your nonprofit begins working with volunteers and employees, it may need an attorney to draft volunteer and employment contracts or help handle disputes. As your nonprofit’s budget grows, it may want to work with an attorney to start protecting its intellectual property.
Your nonprofit may also start hosting bigger fundraising events, and may need a lawyer to discuss the various legal issues surrounding those events, such as liability for injuries, or more complex tax questions around auction gifts and so forth.
It’s best to find a general business lawyer, preferably one with experience working with nonprofits. A general business lawyer can assist your nonprofit with employee issues, contracts, and day-to-day legal advice.
Keep in mind that a general business lawyer might not be able to help your nonprofit with all of its legal needs. While one might be able to advise your nonprofit on a contract, that same lawyer might not be able to advise on intellectual property issues or handle litigation. In those situations, an established lawyer should be able to refer your nonprofit to a trusted colleague.
If your nonprofit is able to find a general business lawyer who works with nonprofits, it may be possible to negotiate work for a reduced fee or flat-fee, or even work out a payment plan. At this stage, it’s probably not necessary to have a lawyer on retainer (a sort of down payment as part of an hourly or per job fee agreement). Still, if your nonprofit finds itself relying on a lawyer every week, or even every month, it might be more cost-effective to either have a lawyer on retainer, or hire a lawyer in-house.
Once your nonprofit is established, and if it reaches a significant size, it may find itself using a lawyer on a regular basis. When hourly fees begin to mount, it may be time to look into having a lawyer on retainer or hiring a staff lawyer, also known as in-house counsel or general counsel.
These types of lawyers are available on call and allow your nonprofit to pay a set fee to the lawyer or law firm without being nickeled and dimed. It might take awhile before your nonprofit reaches this stage, but once it does, hiring a lawyer in this capacity can be cost-effective.
Hiring a lawyer is an important step for your nonprofit, and there are many options available depending on what stage your nonprofit is in. The important thing to remember is to not wait until the last minute to find a lawyer. Establish a relationship sooner than later so your nonprofit has someone to turn to, who knows your group and has already protected it from common legal mistakes, and can step in when the need arises.