At Avisen Legal, we bring our entire work bench of business and tax tools to attend to the unique issues that affect nonprofit and tax-exempt organizations, social enterprises, benefit corporations or B-Corps and cooperatives. To us, they are all “social enterprises” – organizations that bring together economic services or activities to solve social or market concerns for others or the members these organizations serve. We help guide social enterprises to the ideal structure for the social venture. We assist with formation (or start-up), financing, day-to-day legal operations, contracts, employment matters, mergers and combinations, and more.
LAWYERS FOR NONPROFITS, SOCIAL ENTERPRISES AND COOPERATIVES IN MINNEAPOLIS MN
Proudly Serving Nonprofit Organizations in Minneapolis MN
The nonprofit and tax-exempt organizations that make up the nonprofit sector have unique legal needs that require experienced legal professionals. We advise clients on a wide array of legal and business issues facing nonprofit and tax-exempt organizations, including the organization and incorporation of nonprofits, governance and management issues, social enterprise, donation planning, employment issues, and director and officer responsibility and liability matters.
At Avisen Legal, we also address a wide array of tax issues, including obtaining and maintaining an organization’s exempt status, unrelated business income, program-related investments, applicability of sales and use taxes, and audits and regulatory compliance. We also assist with investigations by the attorney general or the Internal Revenue Service. Our experience includes taxable and tax-exempt nonprofit organizations, as well as both public charities and private foundations. Our work encompasses the spectrum of nonprofit corporations, including public charities, corporate and community foundations, churches and other religious organizations, educational organizations, social service agencies, charter schools and supporting organizations for donor advised funds.
The legal and tax regimes governing nonprofit organizations are complex and demand lawyers who are immersed in this area. We stay on the cutting of edge of both the tax and legal developments impacting nonprofit enterprises and we provide clients the benefit of this insight.
Benefit Corporations or B-Corps
Our team is a leader in both Minnesota and around the country when it comes to benefit corporations and B. Corps. Creatures of state law, Benefit Corporations present both a unique and obvious entity option for social entrepreneurs, but this is not always the best.
We assist social entrepreneurs with the various considerations — from taxation, financing to governance – facing these modern options. Once you get beyond the entity type, we assist numerous benefit corporations with their regular legal needs and reporting obligations. We also work with benefit corporations and other social enterprises with accessing alternative capital such as Program Related Investments.
Cooperatives are unique entities that are not just for grain elevators. The cooperative structure – both the traditional cooperative and the hybrid-cooperative – allow smaller sub-groups in the economy to obtain more economic power. There are many types of cooperatives that span the entire economy: marketing cooperatives; group purchasing cooperatives; worker (you name the worker) cooperatives, retail cooperatives. At Avisen we are one of the few firms nationally that bring the tool of the cooperative as a unique and creative option to the sharing economy and business structuring. In addition to helping with building and structuring cooperatives, Avisen has deep and extensive experience with cooperative securities law compliance.
Working with Tribes Business and Corporate Organization and Governance
We work with tribal clients to assist them in establishing business ventures and structuring business entities, including corporations organized under federal or tribal law, Section 17 corporations, state-chartered entities, cooperatives, LLCs, partnerships and other joint ventures. These projects involve tax, financing, governance, sovereign immunity and other liability issues. In addition, we use our legislative drafting skills to assist tribes and tribal counsels with enacting tribal laws and codes.
- Social Service Agencies that provide direct services to those in need
- Financial intermediaries that serve as fiscal and managerial agents for HUD, state and county grants and services
- Churches and the social ventures they undertake and support, such as senior housing facilities
- Community Funds
- Healthcare related organizations
- Teachers Cooperatives
- Group Purchasing Cooperatives
What Makes Avisen Legal Unique
Our attorneys bring their state and national experience with structuring and managing social enterprises as well as their immense depth and experience in structuring and navigating the relationship between nonprofit and for-profit enterprises and inter-woven complex structures. Being deeply steeped in all of the social enterprise options, our team brings a unique set of skills to our clients needs and desires.
Contact Our Minneapolis Lawyers for Nonprofits, Social Enterprises and Cooperatives
Find out more about how you can take your Nonprofit, Social Enterprise, or Cooperative to the next level. Contact us today with your questions. We are here for you.
Frequently Asked Questions about Nonprofits, Social Enterprises and Cooperatives
Nonprofit organizations function differently than for-profit enterprises, and therefore encounter different legal issues and concerns. The most important characteristic that differentiates nonprofit organizations from for-profit enterprises is the fact most but not all nonprofit organizations are tax-exempt organizations. Tax exemption is granted by the IRS, which imposes an additional level of legal compliance. In addition to tax status, nonprofit organizations tend -but are not required- to be funded by charitable giving or charitable activities. This connection between charitable donations and giving, and the operations of nonprofit organizations, results in legal issues related to fundraising, charitable giving, charitable fundraising regulation, as well as state-level attorney general protection over charitable fundraising activities. Another legal aspect that nonprofit organizations face is grappling with interactions with the people being served by the work of the nonprofit, as well as the volunteers who might be participating in the delivery of such work. Even though nonprofit organizations tend to have unique legal issues not experienced by for-profit enterprises, generally nonprofit organizations are still businesses that operate within the same stream of activity as for-profit businesses. Nonprofit organizations still have employees, rent office space, and deal with the purchase of goods and services by vendors and other parties.
Social enterprises – businesses that are in the stream of economic activity but have a mission broader than just profit – can be structured many different ways. When I work with social entrepreneurs on structuring their social enterprise, I help these entrepreneurs buildout an entire business plan for their social enterprise. Through the process of building out a business plan, we can discover what legal structure is best: a for-profit enterprise such as an LLC or a corporation, a benefit corporation, or a nonprofit corporation. I ask social entrepreneurs to consider the following questions:
- Is your proposed business selling a good or service that will be purchased by consumers or other businesses?
- Who is going to pay for the good or service that the proposed business is offering? The person who is receiving it; another party who is donating money to pay for the good or service to be delivered to another person; or the government?
- What sources of funding are available to start this social enterprise? Money from investors. Grant dollars from foundations. Donated dollars from people interested in the work of the social enterprise?
- If the answer to the first questions are that the social entrepreneur knows there are grant dollars for donated dollars available to start and operate the proposed business, ease the proposed activity charitable, or is otherwise able to qualify for tax exemption by the IRS
- Does the proposed social enterprise require tax exempt charitable status to do the work proposed? If the answer is yes (for whatever reason) then we advise social entrepreneurs to form a nonprofit enterprise that can obtain tax exempt status.
Typically, after working through the business planning questions, we do not recommend the social enterprise be formed as a nonprofit corporation. If the nonprofit entity doesn’t work for the social enterprise than we look at traditional for-profit entities or benefit corporations.
A B–Corp (or more formally a Certified B-Corporation) is a for-profit enterprise, either an LLC or corporation, that has been certified by the nonprofit organization B-Lab as a B-Corp. To be certified, as a B-Corp,the business needs to complete B-Lab’s B Impact Assessment. The Assessment is administered online and is open to any business that wants to complete the Assessment. If the business achieves a high enough score on the B Impact Assessment, the business can be certified by B-Lab as a B-Corp. B-Lab charges a fee for the certification and allows businesses certified by it as a B-Corp that can use the B-Corp logo. Certified B-Corps must repeat the Assessment periodically to maintain certification as a B-Corp.
In contrast a benefit corporation is a state law business “structure” available for social entrepreneurs that want to form a benefit corporation as the type of business it forms. Not every state in the US has benefit corporation laws so the ability to form a benefit corporation is not available to all social entrepreneurs.
Regardless of form – Certified B Corp or Benefit Corporation – both business structures (or certifications) require the business enterprise have and operate with more than just a purpose to earn a profit for the enterprise’s owners. Often these purposes are referred to as either a triple or quadruple bottom-line.
The answer to this question depends on the market positioning of the business and the expectation of the owners of the business.
It goes without saying that customer-facing businesses such as goods or services sold to the public in a retail setting, might find a tremendous advantage to be either a benefit corporation or a Certified B Corp. As consumer tastes and practices change, consumer products in the businesses that sell them may need to change to continue to attract customers. The best way to think about this advantage is to look at one of the oldest social enterprises — Newman’s Own brand products. Directly on its package labeling Newman’s Own proclaims that “100% Profits to Charity” since 1982. Newman’s Own more than likely found customers for a salad dressing because of this proclamation. Modern social enterprises structured either as a Benefit Corporation or Certified B Corp do more (or less) than just give away profits to charities. Many make commitments such as sourcing through free trade, acting in a way that protects the environment, or employing members of the workforce who are challenged (such as veterans, developmentally disabled adults, etc.). People like to buy products from businesses that help others.
From the business owner’s perspective – shareholders, members, partners, etc. – if a social purpose is important to the activities of the business enterprise, having either a Benefit Corporation or becoming a Certified B-Corp ensures owners that management of the business will operate the business in accordance with these ideals.
Only for-profit enterprises can be Certified B-Corps and generally, under most state laws, only corporations (not Limited Liability Companies or cooperatives) can elect to be Benefit Corporations.
The primary disadvantage to B-Corps or Benefit Corporations is the lack of understanding about how and what they are. Many people assume (wrongfully) that the enterprise that elects to be certified as a B Corp or become a Benefit Corporation has elected to make no profit or low profit, to the disadvantage of those who invest in these types of enterprises. This is a misunderstanding. The decision to become either a certified B Corp or a Benefit Corporation does not eliminate the opportunity for the business to do well. Many profitable for-profit enterprises have taken the benefit route and are profitable, with their investors receiving a healthy return on their investment.
Another disadvantage of the current options for benefit corporations is that we cannot take advantage of the LLC structure because state laws generally do not allow for the formation of Benefit LLC’s. In many startup business situations, the LLC is the best structure because it provides the entrepreneur with some tax advantages. Because benefit corporations are limited to a corporate structure, some of the more aggressive tax planning available with the LLC is just not there. While we can make the S Corp election for a benefit corporation, the selection limits the ability to raise capital from outside investors.
Nonprofit organizations, social enterprises and cooperatives are all businesses operating within our economy. As businesses they have the same legal needs as any other type of business. They enter into contracts, they buy and rent real estate, they pay taxes, they have employees, they can sue and be sued, and they can be bought and sold. When serving as an Outside General Counsel for a nonprofit social enterprise or cooperative we often deal with the same issues we deal with for other businesses. But because of the unique legal nature of nonprofit organizations, social enterprises and cooperatives, when we serve as Outside General Counsel, we always need to keep in mind these unique characteristics and provide legal advice and services that take these into account and do not create additional problems. For example, when you serve as Outside General Counsel for a nonprofit organization that is hiring or firing its executive director, you need to have a strong understanding of nonprofit corporate law and any limitations imposed by the IRS on hiring and firing of key employees of a tax-exempt organization. Outside General Counsel who does not have the special awareness of these additional legal frameworks would be challenged to provide competent legal advice to a nonprofit organization. Similarly, while serving as Outside General Counsel for cooperatives, we must always be aware of the unique realities of cooperatives such as democratic voting (one member one vote) and certain exemptions from antitrust and securities laws.