Monday, October 4, 2021
With my bum shoulder and a lot of work on our dean search cramping my style over the past few weeks, I have been remiss in posting about the 2021 Business Law Prof Blog Symposium, Connecting the Threads V. The idea behind the name (and Doug Moll likes to riff on it--so have at it, Doug!) is that our bloggers here at the BLPB connect the many threads of business law in what we do--here on the blog and elsewhere.
Anyhoo (as Ann would say), as always, my BLPB co-bloggers did not disappoint in their presentations. I know our students look forward to publishing many of the articles and the related commentaries in the spring book of our business law journal, Transactions: The Tennessee Journal of Business Law. I also am always so proud of, and interested to hear, the commentary of my colleagues and students. This year was no exception.
In the future, I will post more about the article that I presented. But I will offer a teaser here, accompanied by the above screen shot from the symposium. (It was "Big Orange Friday" on our campus. The orange had to be worn. Go Vols!)
The title of my presentation and article is Choice of Entity: The Fiscal Sponsorship Alternative to Nonprofit Incorporation. A brief excerpt from the continuing legal education handout for the symposium presentation is set forth below (footnotes omitted).
[T]his presentation urges that competent, complete legal counsel on choice-of-entity for nonprofit business undertakings should extend beyond advising clients on which form of business entity best fits their needs and wants, if any. For many small business ventures that qualify for federal income tax treatment under Section 501(a) of the U.S. Internal Revenue Code of 1986, as amended (“IRC”), as religious, charitable, scientific, literary, educational, or other eligible organizations under Section 501(c)(3) of the IRC . . . , the time and expense of organizing, qualifying, managing, and maintaining a tax-exempt nonprofit corporation under state law may be daunting (or even prohibitive). Moreover, the structures imposed by business entity law may not be needed or wanted by the founders or promoters of the venture. Yet, there may be distinct advantages to entity formation and federal tax qualification that are not available (or not as easily available) to unincorporated not-for-profit business projects. These may include, for example, exculpation for breaches of performative fiduciary duties and limitations on personal liability for business obligations available to participants in nonprofit corporations under state statutory law and easier clearance of or compliance with initial and ongoing requirements for tax-exempt status under federal income tax law.
The described conundrum—the prospect that founders or promoters of a nonprofit project or business may not have the time or financial capital to fully form and maintain a business entity that may offer substantial identifiable advantages—is real. Awareness of this challenge can be disheartening to lawyer and client alike. Fortunately, at least for some of these nonprofit ventures, there is a third option—fiscal sponsorship—that may have contextual benefits. This presentation offers food for thought on the benefits of fiscal sponsorship, especially for arts and humanities endeavors.
Again, I will have more to say about this later, once the article is fully crafted. But your thoughts on fiscal sponsorship--and examples, stories, and the like--are welcomed in the interim as I continue to work through the article.