THE LAW, LAWYERS AND YOUR NONPROFIT
Episode aired Feb. 10, 2021: Hire A Pro
Jess Birken of Birken Law is a nonprofit lawyer who helps nonprofits solve problems. She knows what happens when nonprofits don’t hire a professional for certain tasks: It can turn into a disaster. In this episode Jess discusses
- why having a lawyer on the Board is complicated
- 3 myths about the IRS and how to avoid falling into traps
- who owns a nonprofit
- why hiring a professional is going to save you headaches and money in the long-run and
- how a professional can help you through a crisis.
Below you can listen, watch or read this podcast episode.
Ephraim: Welcome to this edition of the Your Weekly Dose of Nonprofit Podcast, the podcast that delivers actionable items you can implement at your organization right away. I’m your host Ephraim Gopin of 1832 Communications. Today I’m really happy to have with us a nonprofit specialist who’s also a lawyer, Jess Birken. Jess, how are you doing today?
Jess: I am doing great. Thanks so much for having me.
Ephraim: An absolute pleasure. Let’s introduce you to our listeners, watchers and readers.
Jess Birken is the owner of Birken Law Office, where she helps nonprofits solve problems so they can quit worrying and get back to what matters most, their mission. Jess is not like most attorneys. She likes to think outside the box. In her spare time she makes videos, courses, ebooks and other materials that empower nonprofits to do things right, such as her ebook entitled ‘Starting a Nonprofit: Five things every founder must know’ which can be downloaded at her site birkenlaw.com
Help Nonprofits Build
In today’s episode we’re going to discuss nonprofits, lawyers and the law. Let’s dive right in: Jess, you’re a lawyer but you call yourself a builder. What are you helping nonprofits build and how do you accomplish that?
Jess: So I like to say I’m a builder because my personal mission, why do I get up in the morning, is to help my clients build something strong and sustainable and successful. I actually don’t like putting out big dumpster fire problems and fixing big emergencies. My favorite kind of work is preventative and helping my clients lay a solid foundation and so that helps them just put all their effort on mission delivery and not on putting out big dumpster fires.
Lawyers And The Board
Ephraim: That is important. Lawyers and the Board. Some might consider lawyers to be well off financially and therefore a target to add to an organization’s Board. How can that relationship get sticky and how can that affect the everyday operations of the nonprofit?
Jess: I actually got a question to my website chatbot the other day that was, am I legally obligated to have a lawyer and an accountant on my Board at the nonprofit I’m starting? I thought that was actually hilariously accurate. That is the stereotype of what we need to do when we build our Board is to fill it with a lawyer and an accountant and somebody else, right? So at least in my home state there’s no legal requirement that you have a lawyer, even though everybody wants to do that.
But the problems that can come from having a lawyer on the Board is that you think that lawyers know everything legal and the reality is lawyers are a lot like doctors. They typically have something that they specialize in and so just like if you needed heart surgery and you said, I had brain surgery two years ago and I think I’m gonna go to my brain surgeon for this heart operation, your family would like pin you down, tie you up and yell at you, tell you you were crazy. They would be terrified and honestly I don’t know why that doesn’t translate to the legal community but people think lawyers are just, oh you know the law like it’s just like medicine.
But the fact is a personal injury attorney is really really good at what they do and then you ask them something about landlord/tenant rights and they’re like, I’m not really sure. Maybe I took that in law school which was 15 years ago and I don’t really do that every day. So the thing you need to know is that the lawyer on your Board probably isn’t an expert in your mission area or nonprofit law. They’re an expert in what they do and so they have really good business acumen and they have a good spidey sense for when something is not right and when they say I actually don’t know, we should ask somebody else, you need to just listen to them and say, yes, okay, that’s good advice because that really is the best advice they’re giving you.
And then the other struggle with lawyers on your Board can be that wearing two hats gets really difficult. When you’re a Board member, you have fiduciary duties and you have to execute your fiduciary duties but when you’re a lawyer, you also are a kind of fiduciary to your client and sometimes those things can get mixed up and get crosswise of each other. I don’t want to wade too far into like lawyer ethical rules and yadda yadda yadda but it’s just putting your Board member in a spot that can be kind of tough for them professionally and so that’s just something to be aware of when your lawyer on your Board says, hey look, I’m really here to volunteer and not to be the organization’s lawyer. Try and respect that because they’re trying to keep that boundary clear. They’re there because they’re passionate about your mission, not about giving you legal advice.
And then I think everyone assumes that lawyers are rich but the reality is, especially these days, a lot of lawyers are broke. We go to law school, it’s like $200 grand to go to school and then you’re not making millions of dollars being a lawyer anymore. So don’t assume that they’re just gonna turn on this faucet of big donations from your lawyer Board member. They might be in a practice area like mine that’s scrappy and small. So that’s kind of my schtick for lawyers on the Board.
Ephraim: Got it. As my dad taught me, don’t look in other people’s wallets. Don’t judge. Don’t assume somebody can give when they can’t.
Jess: That’s right, that’s good advice. I like that.
3 IRS Myths
Ephraim: Today’s actionable item: Please tell us three myths about nonprofits and the IR and then for each one, what does the organization have to do to avoid falling in any traps?
Jess: Alright, I can do this. So one myth, I work with a lot of startups and people starting nonprofit organizations have to go through a lot of IRS process and then when you’re running a nonprofit organization, you have to file things with the IRS every year, whether that’s tax forms or your 990. Don’t do that yourself, right? The IRS forms are like… what I always say is they’re not designed for human consumption. They’re very confusing and it’s very hard if you aren’t living in that world all day, every day. You may not even really understand what the question is asking for and I’ve seen so many times that people think that they know what the question is asking but they don’t and they say the wrong thing and they end up being like a private operating foundation when they’re trying to start a public charity. So the first myth is thinking that the IRS is user friendly. They’re not and you should get help. So whether you’re filing your 990 or you’re filing a 1023 application, get help. Get help from a professional.
Another myth would be oh, I don’t need to worry about doing my financials or having a budget because we’re going to be a nonprofit and we’re tax exempt. So people that are starting out tend to kind of just blow by the financial budgeting piece and I mean I get that because building a budget is really depressing and most people are not numbers people anyway and so you’re just like, oh this is boring and horrible and it’s making me think about how hard this is going to be because I have all these things that are going to cost money once I actually want to do the thing. But the reality is the IRS actually wants to know all of your financial information and so not only are you going to need it for your application, they want a detailed budget for the current year and projected future years but they also are going to want to see your financials going forward. So once you stop filing that postcard that has nothing on it, you actually have to have your books in order. And that’s kind of a misnomer that people get in their mind early on and I’ve seen this even with organizations that are very small and many years old. They’d keep all their financials on an Excel sheet and then they hit that point where they’re like they have to do the easy or the full form and they’re just up a creek without a paddle.
Then I would say the third, if I come up with a third one, a big myth especially that people who are starting nonprofits have is that nonprofits don’t pay tax. We just don’t pay tax because we’re a nonprofit. Well that’s a good way to get in trouble because actually you apply for income tax exemption but you may have to pay sales tax if you’re selling cute little mugs or tchotchkes and you’ve got a little merch table or something and you’re selling stuff, you probably have to remit and pay sales tax to your state, depending on what state you’re in the U.S. If you have employees, you have to pay payroll tax. I’ve had clients who just didn’t think they had to do that and ended up having a huge bill for back taxes and penalties because they didn’t pay payroll tax. Your state may collect unemployment insurance for the employees that you have. They want you to put money into an account in case there’s an unemployment payout.
So the things that you can do there for the financial piece and the tax piece, get help, right? Hire a CPA. Don’t look at Uncle Larry on the Board who used to be an accountant in the past. Go get help, pay a professional to set up Quickbooks, to set up a general ledger. Pay a professional CPA to help you with your tax situation. That’s the best way you can navigate those things.
Who Owns A Nonprofit
Ephraim: That is a fantastic answer. So if we’re talking about starting a nonprofit, who actually owns a nonprofit?
Jess: Not the person who starts it, that’s for sure. On the taxable side, when you start a corporation, you own it. It’s your company, right? That’s not the way nonprofits work. Nonprofits don’t have shareholders. Nonprofits don’t issue dividend checks. We don’t have stock, we have what are called stakeholders and that’s because the nonprofit is really owned by the community. It’s an asset of the community that it serves. There’s really not any “owner” quote unquote of a nonprofit. It really belongs to the community.
Ephraim: That’s an excellent answer and certainly when you think in those terms, then you think more along impact for the entire community, because everybody has a piece in its success.
Jess: Yes, I love that.
Ephraim: Your firm birkenlaw.com offers crisis management services. What’s your specific workflow when providing emergency services and what are your end goals when navigating the crisis?
Jess: Yeah, this is great. I do a lot of startups but one of the other ways that people come to me is they’re pulling the oh no, the oh s$$t handle. You can bleep that out later. It’s like something terrible is happening and maybe you’ve never gotten legal advice before but something bad is happening and it’s like we’re having this emergency. Our Board member was high on cocaine and got up and gave a speech at our gala that was off the rails. That’s a true story.
Something happens, right? So the first thing when I’m dealing with crisis management with my clients, I want to minimize your lost time and money because every moment that you’re focused on this emergency is taking away from you delivering your mission. It’s wasting your time, it’s wasting your human resources and your money. And then the other thing is I want to help my clients make clear decisions. The worst place to be for decision making is when your limbic system is firing and you’re in this crisis emotion or emotional mode, especially if it is something like Board member high on cocaine. You’re really upset about these things and sometimes it is a people problem, so there is… emotions are high.
So my job is to kind of come in and try and help cool the temperature down so that we can make clear decisions and I can help my clients understand what the best path forward is. Then of course we’re going to try and reduce the harm to the nonprofit and that goes along with minimizing your lost time and money.
But then also and this is one that I think gets forgotten about a lot is preserving you working relationships because sometimes, especially in the States, we have such a litigious response to conflict and we want to go in and just be like hard charging and you are going to make this better and blah blah. But you might have to turn around after this is over and still work with them, whether they’re another partner in the same mission area as you, whether it’s actually a funder, whether it is just people inside the organization that potentially are going to have to look at each other on Monday after this is over. So really finding a way to preserve the working relationships that you need to have going forward is something I’m always thinking about, because that’s absolutely critical in the nonprofit sector.
Let’s Learn More About Jess
Ephraim: An excellent answer and just so you know, you’re not the only one on this podcast who has a story about drugs in a gala event. I’ll leave that for another time but yes something somewhat similar, which is crazy. Let’s move on to the lightning round and learn more about you. How did you get started on your nonprofit career path?
Jess: I like to say the answer is the recession in 2008. I basically went to law school thinking I was going to be a criminal trial attorney and then I started down that road and I absolutely hated it. So I was trying to get a different job and the bottom fell out of the economy and there were no jobs, so I ended up doubling down on education and got a Master’s in nonprofit management thinking I wouldn’t even be a lawyer anymore. So that’s kind of how I got my start. My first day at grad school for nonprofit I was like, oh, these are my people. So I knew I was in the right place.
Ephraim: Excellent. So with all your years in the nonprofit sector, if there’s one thing you could shake up in the nonprofit world, what would it be?
Jess: I would somehow take a magic wand and erase the poverty mindset that the nonprofit sector seems to be chronically stuck in. I get super irritated when I see people trying to… oh well, here, you can get this free thing and this is free and this person will donate their service to you and I’m like what we’re doing is training you that you can’t spend money on the things that matter. That’s not good in your home, that’s not good in your work life. It’s certainly not good at your nonprofit. So I wish we could kind of just take that poverty, that we have to take a vow of poverty to be running a nonprofit. I think we should spend more on our infrastructure and not feel ashamed about it.
Ephraim: Well if you can find that wand, make sure you trademark it because it’s worth a lot of money.
Ephraim: Yes and as a lawyer, I assume you know all about trademarking law.
Jess: Yeah, I could trademark that thing. We’ll figure it out.
Ephraim: Best part about living in Minnesota?
Jess: The best part about living in Minnesota? Well first of all I love having four seasons. People that live in San Diego claim it’s so great because it’s always 72 degrees. Forget that. I will take some spring, summer, fall, winter, all of the experiences. So that’s one. But then the second-best thing is that nobody knows how great it is here because it’s in the middle and we have amazing food and theater and natural resources and it’s just absolutely gorgeous here. It’s a really great place to live and it’s kind of a hidden gem I think.
Ephraim: Love it. Your two daughters are the light of your life. One lesson you want to teach them or have taught them that you hope will stick with them as they grow older?
Jess: Oh that’s a good one. Lately have been thinking a lot about how I want my daughters to trust their instincts. I think especially girls and women are sort of like trained to disregard our instincts and be like, well I’m sure they’re really a nice person and they were just having a bad day. And it’s like, you should for your own personal safety but also like, who should you do business with and what does your gut say about making this choice? So I’m hoping that that is something I can teach them, to listen to their gut and go with it.
Ephraim: That’s a good one. You say that you enjoy pretending to be a foodie. Why only pretending?
Jess: I mean, let’s just be real. That just means I love to eat and I like to eat nice food but I also like to eat really good junk food too. So the diners, dives and drive-ins type thing if it’s really good. I’m into it. So that’s I guess a word for foodie. But I could never really be a foodie because I could… I go to a specific wine shop to get wine because I can’t pick it. I mean, I don’t know what’s good and what’s bad. I end up shopping because the label is cute. I’m not really a good foodie because I don’t know all the regions of France that the cheeses come from or whatever. But I love food. I love all different… I love sushi, I love Indian food, I love all spicy food, I love good food of all kinds and I like to eat it. So there you go.
Ephraim: If you like to eat food, isn’t that a definition of a foodie?
Jess: I mean, I like to think so.
Ephraim: Then you’re a foodie! No more pretending. We have anointed you an official foodie today.
Jess: Thank you for curing my impostor syndrome.
Ephraim: A pleasure. And lastly, let’s turn the table. You get to ask me a surprise question. I have no idea what’s coming. Go ahead.
Jess: Okay. So we’re going to go with the food concept. I want to know what is your absolute favorite side dish. Not the main entree but like the little thing on the table that makes your meal extra special. What do you love?
Ephraim: Wow. Now that’s a tough one, because I’m a main food guy. I really am. I just… I will admit it here to everybody. I do usually have salad for lunch, but in terms of side dishes as vegetables, like cooked or baked, I don’t eat eggplant or string beans or peas or cauliflower or broccoli. I mean I could just go on and on. Zucchini.
Jess: Could be like a condiment, like chutney or horseradish.
Ephraim: It could be but you know what? I’m gonna go to something else, which is not something I ate that my grandmother of blessed memory introduced me to about 40 plus years ago. It’s just… it’s the shape, it’s noodles, I don’t even know… it’s like in a square shape and she just made it with margarine and onion soup mix and she baked it together like that and that’s it. So she cooked the noodles and then she would add the margarine, the onion soup mix, stick it in the oven for about half an hour,45 minutes and done. And I can still remember the first time I ate at her house in Boston and I was hooked to the point where my mom started making it every single sabbath when we sat down for the meals. And then I used to bring literally 20 bags of those specific noodles… it’s barley noodles, it’s barley noodles from the U.S. because I couldn’t get it here in Israel. So I used to bring 20 bags, that was 20 pounds of just barley noodles. So I had it here and now I haven’t had it in years. It’s all good. When I go to the States, I do go find it and I do make it for myself. It is by far….
If I’m gonna do a close second, it’s spicy french fries, which is awesome. I can’t get it here. I go to the States, I go to the pizza place, they serve spicy fries. I mean you can get it at any store basically…
Jess: But like what is the spice though? Is it like seasoned salt or is it like spicy?
Ephraim: So it’s got… it’s spices and it’s dipped in a batter so it comes out fried with this batter around it, plus all kinds of different spices.
Jess: Oh my God, is this a Boston thing?
Ephraim: No I don’t… it may be a northeast thing. I don’t know.
Jess: I gotta find these spicy fries.
Ephraim: I will go online…
Jess: Not in the midwest. I don’t have that here in Minnesota. We need this.
Ephraim: But the only issue is it’s not like… I also, like you, like spicy foods. So for me spicy fries… for some people is like, oh my God my mouth is burning and for me it’s like no, it just tastes better than regular fries. It’s not very very spicy.
Jess: That’s the joke in Minnesota that people here think ketchup is spicy. So like most Minnesotans… I know! That is the face, the face was boing, what?! Yes that is the… ketchup is not spicy, just for the record. It’s not but…
Ephraim: I like all the Minnesotans I know but now I’m kind of starting to doubt…
Jess: I think it’s got something to do with like a lot of Swedish and Norwegian ancestry. Maybe they didn’t have good spice trade in those countries back in the day. I don’t know what happened there.
Ephraim: That’s a strange one That’s a strange one. Okay, I learned something new today.
Jess: Yeah, white Minnesotans can’t tolerate the spice.
Ephraim: Got it. Thank you very very much for appearing on the podcast. You can learn more about Jess’s work on her website at birkenlaw.com and you should definitely connect with her on Linkedin and on Twitter. You can find her on Twitter at @JessBirken Jess, thanks so much for being here today.
Jess: Thank you.
Ephraim: Have a good day.
Jess: You too.