Non-Profit Nuts and Bolts: Top Legal Tips for Mission Success
Running a non-profit is not an easy task. Maybe you’re short on funding. You’re not sure what hoops you’ll have to jump through to start working in a new country. Or you have no idea how to review your first partnership agreement. Seeking legal counsel can make it all a bit easier (especially if that counsel is free!)
TrustLaw, the Thomson Reuters Foundation’s global pro bono service, is dedicated to connecting NGOs and social enterprises with leading law firms who provide free legal services around the world. Since 2010, we have assisted with free legal assistance in 177 countries ranging from commercial and employment advice, to legal research programs taking a deep dive on legislation across dozens of countries.
The big question we get asked – where should you start? Let me introduce you to the top legal considerations that come across our desks at TrustLaw everyday:
1. Should I restructure my organization?
As you scale your non-profit, you may hit a stage where your funding is too limited to achieve expansion or your operational activities evolve to a point that may diverge from their initial charitable purpose (e.g., an environmental non-profit may want to start developing and selling eco-friendly products). When faced with this challenge, a non-profit might explore legal restructuring so that its internal governance harmonizes with its strategic goals. One option is to restructure the non-profit into a hybrid organization, with both a for-profit and a non-profit entity. In one form of hybrid structure, the non-profit would own the revenue generating for-profit arm. The non-profit and for-profit entities could also share equal control as “sister” organizations.
In starting a for-profit arm, there are a variety of legal structures from which to choose, several specifically designed for enterprises with a social mission. These structures require an explicit statement of a public benefit or social purpose in the organization’s articles of incorporations to lock in a social mission in an organization’s governance.
2. How do I prevent others from stealing my idea or using my brand?
Your products, designs, inventions, otherwise known as your intellectual property (IP), should be protected, whether this is your brand or a training curriculum you’ve put together. It may seem in line with your social mission to leave your ideas open-source, but there may be negative repercussions if IP protection measures are not taken. For example, we’ve seen unauthorized organizations overseas use the name and logos of a reputable US NGO, but offer an inferior service. This can damage your reputation as well as create confusion for clients, and can be avoided by entering into a licensing or franchising agreement with your partners.
Lawyers also assist with registration of trademarks on names, logos or slogans, and give valuable guidance as to whether you should register the trademark domestically or internationally, as well as the time and cost involved. If you have designed and developed your own product, e.g. a solar lantern or cook stove, you might patent your invention. In the patenting process, it is essential to anticipate the amount of time it may take as well as to ensure that the design is actually unique.
3. What employment agreements should I use to manage my staff?
Social sector organizations often use template employment agreements so that the hiring process can be done with more ease. While that practice increases efficiency, it may be important to consider some employment cases individually. For example, you should consider what distinct agreements, if any, are necessary for supporting unpaid volunteers or interns, as it is different to obligations with paid staff. You might also want to create other human resources policies, for example addressing employee confidentiality, termination or non-disclosure.
4. I want to expand to a new program country. What should I do?
You should determine if you need to create a legal entity, whether your expansion is to create an operational office or simply a fundraising unit in the foreign jurisdiction. It’s important to seek local guidance when registering a new organization to ensure compliance with relevant local laws, from employment to civil society regulations. How will you define the legal relationship between your US headquarters office and your future overseas entity? The expansion could affect the tax status of the headquarters non-profit and could also require a revision of your employment agreement. Additionally, if the foreign entity is to be a fundraising arm, non-profits should be aware of funds transfer issues that could be strictly regulated by foreign laws, depending on the country.
5. Is there anything else I should be thinking about?
MOUs vs. Contracts – Though MOUs are common in the charity sector, it’s important to understand that they may not be legally binding like a contract. If you do need to draft a contract, you should avoid copying online templates as different circumstances will always apply. It’s a good idea to have your own standard set of terms and conditions to present to partners – starting with your own contract means you’re in a stronger negotiating position.
Social media – It’s always a good idea for a non-profit to have a social media policy in place, to minimize the risks to your organization. This could include guidance on how to avoid defamation when using your organization’s Twitter account, or complying with regulations related to online campaigning.
This is just a shortlist of the important governance issues international non-profits should address with the help of a qualified lawyer. Luckily, TrustLaw can help you find the right pro bono lawyer so you can focus on your mission rather than spending resources finding legal expertise. We invite members of the GlobalWA community to apply today and join our network of high-impact organizations working to create change. To learn more, contact us at firstname.lastname@example.org or visit our website.