What's the point if your clients can't understand your advice?

As you probably know by now, Janelle Orsi, Executive Director of the Sustainable Economies Law Center,  loves drawing cartoons. For our Fellows Week, Janelle drew this to inspire lawyers to be better communicators. 

Interested in our Fellows Program? Our Fellows receive at least 25 hours of free classroom training (CLE credit may be available), mentorship from staff and volunteer attorneys, and take part in a variety of hands-on learning and networking opportunities offered at the Law Center. Legal Fellows, once accepted, may retain the title of Legal Fellow and participate actively in the program for as long as they find it useful and relevant to their work contributing to local, sustainable, resilient, sharing economies.

Read more about it here!

Cartoon of reasons for Lawyers to draw

Here's a few articles and podcasts that are inspiring our work and the research we need to reinvent economic systems.

We'd like YOU to contribute to this monthly feature. We'll share some of what we're reading and finding interesting but if you read (or write) an article you'd like to share on Next Legal please send the link to me!

Historic Federal Law Gives Employee-Owned Businesses Access to SBA Loans from Nonprofit Quarterly by Steve Dubb
The bill, called the Main Street Employee Ownership Act of 2018 (S 2786 and HR 5236), has been advancing since it passed in committee last March. It was tucked inside the $717-billion, Fiscal Year 2019 John McCain National Defense Authorization Act, which was signed into law yesterday. Nestled in that law is Section 866, which makes employee-owned businesses eligible for Small Business Administration (SBA) section 7(a) loans for the first...

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Introduction

Although they are for-profit businesses, cooperative corporations can have little to no federal income tax burden depending on how they share their profits with their patrons. This is true even when the cooperative retains most of those earnings and allocates them to patron accounts. Patronage dividends, as defined under Subchapter T of the Internal Revenue Code, are tax-deductible to the cooperative. Patronage dividends must meet a specific definition, however: amounts paid by a cooperative to its patrons on the basis of the quantity or value of business done with or for the patrons, under a pre-existing  legal obligation, and based on net earnings from business with or for patrons. Patronage dividends can still be tax-deductible even when up to 80% of the dividend is retained by the cooperative as operating capital.

The “pre-existing legal obligation” language in the statute is vague, and can lead coops to wonder how, when, and in what context they must commit to paying patronage dividends. Does the cooperative have flexibility to decide, at the time of paying dividends, how much to retain and how much to pay in cash? If it has an unallocated or indivisible reserve, does it need to determine the amount that will be allocated to that reserve before the fiscal year begins? How firm does the obligation language need to be, and where should it appear?

As lawyers, we should be able to help clients decide how to balance considerations like their tax bill, their desire for financial flexibility, and their ability to retain earnings that are owned by the cooperative and not allocated to members. Clients will often prefer permissive language around the obligation to pay patronage dividends, so we should watch for that when reviewing draft bylaws, and have a clear explanation for clients to explain why a firm obligation is usually better. At the same time, we should understand what decisions the IRS does allow cooperatives to make...

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Tell us a little about yourself and the educational or career path you took to get to where you are now?

I grew up in small-town, rural Mississippi, but attended an elite prep school where I graduated as salutatorian. My privileged formal education was only one source of learning for me, though. My practical education came from an anti-intellectual, fundamentalist Baptist church where I developed as a leader and formed my identity. With this formal and practical education, I left Mississippi for college at Samford University in Birmingham, Alabama. I studied philosophy and religion and was generally exposed to a broader range of ideas than existed in my hometown. Within a year, I began to realize the error of my church’s misogyny, homophobia, and anti-intellectualism. I went home, naively approached the pastor to discuss these issues, and, after a tense exchange, was banned from teaching in the church and effectively expelled. I think that event crystallized the tension in my upbringing between intellectualism and populism. It established in me an abiding interest in creating democratic organizations that can change, weather critique, and be better for it. Now I’m a Berkeley Law student focusing on democratic governance, community power-building, and the commons, all of which build on my interest in populism, critical thought, and institutional dynamics.

What specifically drew you to working with social enterprises and democratically-led organizations, such as cooperatives?

I came to law school after working at Impact America, a nonprofit focused on poverty and policy in Alabama. I wanted to continue working on poverty and policy but did not know how I wanted to do so. My first semester, a fellow student told me about Cooperation Jackson. As I studied Cooperation Jackson, the lights turned on for me. All of a sudden, I was oriented to the work I wanted to do as a lawyer. I wanted to help organizations...

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1. Tell us a little about yourself and the educational or career path you took to get to where you are now?

I decided in law school to focus on tax classes because several professors and practicing lawyers told me that tax lawyers had a more "academic" practice. Working in a couple large firms, I found this was true and I think having a tax speciality provided opportunities to work on more transactions representing a wider variety of deal structures. After about 6 years with large firms, I made the tough decision to start my own practice, largely because I'd felt my learning curve was starting to level off. As a solo attorney, I had the freedom to pursue social impact work, which helped in establishing the relationships that I rely on now.

2. What specifically drew you to working with social enterprises and democratically-led organizations, such as cooperatives?

My law school focussed heavily on the intersection of the market and the law, so I was very strongly drawn to the notion that market-based solutions could achieve social goals more effectively than approaches that ignored (or worked against) individuals' economic incentives.

3. What do you find to be the most challenging about being a lawyer [or law student, legal apprentice, or other legal professional]?

For me, time management and deadlines are the most challenging aspects of practicing law.

4. What do love most about being a lawyer [or law student, legal apprentice, or other legal professional]?

It's sounds cheesy, but the "counselor" part of practicing law is the most meaningful part of my practice. I'd like to think that if a business entity or non-profit organization could visit a shrink and talk about its problems and challenges, then maybe that's me.

5. What are some of the needs you see in your community that you are hoping to address through your work?...

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This Guide discusses options for obtaining funds for farm enterprises in California through methods other than bank and institutional loans. With growing consumer interest in local sources of food, there are increasing opportunities for farmers to include their customers, friends, family, neighbors, and other community members in the farm enterprise as investors. Receiving investment dollars from community members instead of larger institutions may also be more feasible for many beginning farmers, since banks and other institutions generally only lend to well established businesses with steady revenues.

However, numerous state and federal laws apply to soliciting investments from individuals and organizations, which this Guide will explain in detail. These laws are collectively known as securities law and they are primarily designed to protect investors from entering into fraudulent or overly risky investment deals. Before asking anyone for money, farmers should be aware of the basic of securities law.

Released in September, 2017

Written by Christina Oatfield, Policy Director for the Sustainable Economies Law Center. This guide was supported by the Beginning Farmer and Rancher Grant of the USDA-NIFA program titled, Growing Roots: Deepening Support for Diverse New Farmers and Ranchers in California, Grant # 2015-70017-22868.

Here's a few articles and podcasts that are inspiring our work and the research we need to reinvent economic systems.

We'd like YOU to contribute to this monthly feature. We'll share some of what we're reading and finding interesting but if you read (or write) an article you'd like to share on Next Legal please send the link to me!

A New Credit Union Will Focus on Clean Energy from Locavesting 
Looking for a way to shift your money from one of the big banks AND have high impact with your deposits? Blake Jones, the cofounder of Namaste Solar, has founded The Clean Energy Credit Union (CECU). The credit union, which is opening soon and is based in Colorado, will be open to members of the American Solar Energy Society (ASES), a nonprofit solar advocacy group that anyone can join.

Drink Your Coffee Black-Owned from In These Times by  AJOWA NZINGA IFATEYO 
A cooperative Atlanta cafe is step one toward an alternative to white capitalism.

The Atlas of Utopias! Pretty cool project highlighting efforts around the world to reclaim water commons, create and food energy sovereignty, organize textile workers, build...

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As reported by Project Equity, almost half of the privately-held businesses in the US are owned by baby boomers, and 6 out of 10 business owners in the US are expected to sell their company over the next decade.  But many business owners will find it difficult to find a buyer when they are ready to sell, which means they will likely lay off their employees and close their doors.

But there is an opportunity to change this trajectory by helping these businesses transition to worker-cooperatives. Converting non-cooperative businesses to worker cooperatives can provide numerous benefits for the workers, the community, and the selling business owner. To read more about converting businesses to cooperatives, check out the Legal Guide to Cooperative Conversions, written by Janelle Orsi, William Lisa, and Sushil Jacob.

To check out Robert Reich's video interview with Janelle about coop conversions click here.

YES! Photos by Chris Marion. 

Here's a few articles and podcasts that are inspiring our work and the research we need to reinvent economic systems.

We'd like YOU to contribute to this monthly feature. We'll share some of what we're reading and finding interesting but if you read (or write) an article you'd like to share on Next Legal please send the link to me!

Capitalism Is Not the Only Choice from yes! magazine by Penn Loh
Recognizing these diverse economies allows us to see that there are choices to be made.

Capitalism Has a Problem. Is Free Money the Answer? from The New York Times By PETER S. GOODMAN

Panel Discussion - 37th Annual E. F. Schumacher Lectures
Four featured panelists discuss a variety of topics ranging from land reform, stewarding the commons, solidarity between grassroots movements, to the question of how to transition toward local, living economies.

This 1-hour cartoon video provides an overview of considerations for forming and structuring a law practice, explaining conventional entity and tax considerations, then placing a strong emphasis on cooperative and nonprofit models. One goal of the video is to encourage alternatives to conventional for-profit and hierarchical law firms. And here is a folder with the readings to accompany it. Let us know what you think!

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