Good Counsel: Meeting the Legal Needs of Nonprofits

261 Pages·2012·3.321 MB·English

by  Lesley Rosenthal

Contents

Preface

Acknowledgments

Introduction
Who Should Use This Book
Features of the Book
How This Book Is Set Up
Preliminary Observations
Illustrative Cases

Part I: An Overview of Nonprofits’ Legal Needs

Chapter 1: What Good Counsel Can Do for Nonprofits
What Legal Needs Do Nonprofits Have in Common?
Beyond Laws about Nonprofits: Complying with Business Laws, Too
First Stop for Legal Advice: CYA (Consult Your Attorney)
In Sum/Coming Up Next

Chapter 2: Nonprofit Legal Basics: Corporate Law and the Requirements of the
Tax Exemption
The Benefits of Incorporating
Getting Organized as a Nonprofit Corporation
Following Good Corporate Law Practices
Obtaining Recognition of Tax-Exempt Status
Maintaining Tax-Exempt Status
Meeting Additional IRS Expectations

Chapter 3: Good Counsel about Corporate Governance
What Does the Board Do?
Advocacy and Independent Judgment: Counsel in Relation to the Chief Executive
When Governance Fails: Learning by Negative Example

Part II: A Grand Tour of Nonprofits’ Business Law Needs

Chapter 4: Contracts and Intellectual Property: Laws that Matter to Program
Staff
Understanding the Organization’s Program
Contracts: At the Heart of the Program’s Legal Arrangements
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What Is Intellectual Property (and What Does It Have to Do with Nonprofits?)
Copyright Law for Nonprofits: An Introduction

Chapter 5: Counseling the Rainmakers: Legal Aspects of Raising Money
A Lawyer’s Introduction to Fundraising
Laws That Matter to Fundraisers
Other Places Where Legal Meets Fundraising
Better Fundraising Through Good Governance and Compliance

Chapter 6: Laws That Matter to the Finance Department (or Not-for-Profit, but
Not-for-Loss Either)
Understand the Big Financial Picture
A Year in the Life
Other Places Where Legal and Finance Meet

Chapter 7: Getting Personnel: Human Resources Law for Nonprofits
Human Dynamics, Nonprofits, and the Law
Key Legal Elements of Employment Relationships
Other Laws that Matter to Nonprofit Human Resources Professionals

Chapter 8: Getting the Word Out, Legally: Counseling the Nonprofit
Communications Team
Introduction to the Legal Aspects of Nonprofit Communications
What Nonprofit Marketing Directors Should Know about Trademark Law
Clearing Rights to Use the Protected Works of Others
Consumer Regulatory Laws
Getting the Word Out, Digitally
Other Places Where Legal Meets Communications

Chapter 9: Legal Meets Operations, Facilities Management, and Security
Laws That Matter to Operations
About Leases
Risk Management and the Chief Operating Officer

Chapter 10: Political Activities and Governmental Lobbying
Thou Shalt Not Politick
Lobbying: Advocacy with Limits
Recordkeeping, Registration, and Financial Disclosure
What Isn’t Lobbying?

Part III: For Good Counsel Only

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Chapter 11: Taking Charge of the Legal Function
Catalogue and Prioritize Legal Needs
The Softer Skills of Good Counsel

Chapter 12: Finding Your Dream Job as In-House Counsel at a Nonprofit
Where to Begin Searching for an In-House Job at a Nonprofit
How to Position Yourself to Win an In-House Job in a Nonprofit
Don’t Believe the Myths

Chapter 13: Mobilizing Other Legal Forces for the Good
Paid and Pro Bono Representations
A Broad-Gauge Role for the Legal Profession in the Nonprofit Sector

Notes

Index

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5
More praise for

Good Counsel: Meeting the Legal Needs of Nonprofits

“Essentially a one-volume guide to the entire practice of law relating to nonprofits—a remarkable
achievement!”

—Kelly Kleiman, The Nonprofiteer; Principal, NFP Consulting (Chicago)

“A remarkable, comprehensive, thoughtful, wise, and useful book. Good Counsel will be of immense value
to new and experienced board members, regulators and commentators, and counsel. I have not seen
anything like this in a publication. An exceptional tour de force, drawing upon Rosenthal’s incredible
range of experience as a General Counsel.”

—Scott Harshbarger, former Attorney General of Massachusetts

“Good Counsel serves as a layman’s legal primer for nonprofit organizations. It is everything about
nonprofits that you need to know, and a must read for its leaders, boards, and donors.”

—Philip L. Milstein, Trustee, Columbia University

“Lesley Rosenthal’s Good Counsel fills a much-needed void of information for the nonprofit world. It is an
invaluable resource in furthering the public good.”

—Damian Woetzel, Director, Aspen Institute

“Good Counsel was desperately needed, and Lesley Rosenthal was the perfect person to write it.”

—Jeannie Suk, Professor of Law, Harvard Law School

“Good Counsel is an invaluable first-stop reference for anyone who now does—or has ever wanted to—
work or volunteer as a nonprofit lawyer or executive.”

—Victoria B. Bjorklund, Head, Exempt-Organizations Group, Simpson Thacher & Bartlett LLP, and co-author,
New York Nonprofit Law and Practice

“ . . . an absolutely invaluable book for any lawyer who does pro bono work for nonprofits . . . ”

—Jeffrey S. Tenenbaum, Chair, Nonprofit Organizations Group, Venable LLP, Washington DC

“Good Counsel, Lesley Rosenthal’s extraordinary work about the legal issues, problems, and obligations
facing nonprofits, is a magnificent resource, full of practical advice for officers, directors, trustees,
employees, and corporate partners. Anyone so engaged should purchase Good Counsel for frequent
reference.”

—John P. McEnroe, director of a family foundation and The Irish Repertory Theatre

“I’ve read many books and guides for these various audiences, but never something this comprehensive
and accessible. Lesley Rosenthal has done a terrific job in striking all the right notes. Easy and fun to
read!”

—Marnie Berk, Director, Pro Bono Programs, New York Lawyers for the Public Interest

“Good Counsel is a valuable contribution to members of the nonprofit bar and all those who seek insight
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into the world of inhouse lawyers: their day-to-day responsibilities, what motivates them, and the issues
they confront.”

—Michael S. Solender, Americas Vice Chair and General Counsel, Ernst & Young; Lecturer, Yale Law School

“Good Counsel is an indispensable training manual on corporate governance. It is a must-read for anyone
serving the legal needs of nonprofits.”

—Tracee E. Davis, Trustee, Literacy, Inc.

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Copyright © 2012 by Lesley Rosenthal. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Limit of Liability/Disclaimer of Warranty: We hope you will find this book to be a useful preliminary
guide to the legal issues facing nonprofits. The book is for informational purposes only and does not
constitute legal advice. While this information can help you understand the basic subjects, it is very important
that you obtain the advice of a qualified professional where appropriate.

While the publisher and author have used their best efforts in preparing this book, they make no
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Library of Congress Cataloging-in-Publication Data:

Rosenthal, Lesley, 1965–

Good counsel : meeting the legal needs of nonprofits / Lesley Rosenthal. — 1

p. cm.
8
Includes index.

ISBN 978-1-118-08404-5 (cloth); ISBN 978-1-118-22279-9 (ebk);

ISBN 978-1-118-23667-3 (ebk); ISBN 978-1-118-23683-3 (ebk)

1. Nonprofit organizations—Law and legislation—United States. I. Title.

KF1388.R67 2012

346.73′064—dc23

2011039741

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Preface
Every nonprofit organization I have served has had a tiny or nonexistent legal team. From the modern dance
company with a shoestring budget I helped out as a fledgling attorney, to the child care advocacy organization
I served when its outside pro bono general counsel suddenly passed away; from my childhood summer camp
that tracked me down as an adult and invited me to join the board, to the foundation of one of the greatest
violinists in history and to the largest voluntary state bar association in the nation with 75,000 members—the
total number of in-house counsel in each organization has been binary: zero or one.
Even when I arrived at Lincoln Center for the Performing Arts, Inc., the world’s largest and most
comprehensive performing arts center, from Paul Weiss Rifkind Wharton & Garrison, a 500-lawyer major
law firm in Manhattan where I had practiced for the previous 13 years, Lincoln Center’s Legal Department
consisted of just an executive assistant and me. When friends who knew the size of my previous practice
setting asked me how big Lincoln Center’s staff of lawyers was, I would look myself up and down and joke,
“Oh, around five-foot-five!”
These experiences are not at all unusual: Of the nation’s one million charitable organizations, only a
minuscule fraction has regular access to counsel, whether in-house or outside, paid or voluntary. The
organization’s first hire is its executive director, usually its founder; next come program managers: drug
counselors for drug treatment programs, teachers for educational organizations, curators for museums, and so
on. Successive hires may include fundraisers, financial and accounting staff, and an administrative manager to
take care of personnel and office matters. Public relations may soon follow, and if the organization has
physical facilities to operate and secure, someone will eventually be hired to oversee and coordinate that work.
Early on the organization may have an outside accountant, an outside public relations firm, management,
and/or fundraising consultants. But unless the organization has an unusually high-risk profile or is particularly
savvy about legal matters, it is generally not until the organization has reached a much larger size—perhaps
the hundredth employee—that consideration will be given to putting an attorney in charge of the
organization’s legal affairs.
Until now. Tectonic shifts in the nonprofit landscape are persuading directors and senior executives that it
is necessary and desirable to bring on counsel to oversee the organization’s legal function at a much earlier
stage in the organization’s life. Fortunately, there is a great deal of goodwill for nonprofit organizations among
public-spirited lawyers, and there is more time and willingness to serve among the legal profession than has
been fully tapped to date. Lawyers can serve nonprofits as in-house counsel or from the outside, at law firms.
Outside or in-house, paid or volunteer, there should be one person—a general counsel—in charge of
overseeing the legal affairs of most tax-exempt nonprofit corporations.
With this book, I hope to show nonprofits how to better recognize their legal needs and, at the same time,
to inspire and empower a new generation of lawyers and law students, whose primary exposure may be far
afield of the issues facing nonprofits, to help meet those needs.
My arrival at Lincoln Center in 2005 coincided with a budgetary mandate to significantly cut the Center’s
expenditures for outside legal fees in order to ensure that scarce mission-critical funds would go to core
program areas such as arts and education.
Meanwhile, the organization’s legal, governance, and regulatory complexities were about to grow
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