Can I form a non-profit corporation that gives artists low-fee legal, financial, and tax consulting, and serve as its officer, employee, and occasional retained lawyer?

Plain-English summary

An attorney employed by a law firm wished to form a non-profit corporation to render consulting services to local artists on legal, financial, and tax issues for a minimal fee. The attorney asked whether he or she could (1) serve as an officer, director, or member of the corporation; (2) serve as its employee; and (3) be retained by it from time to time to give legal advice. The opinion confines itself to the Rules of Professional Conduct and declines to comment on the various Rhode Island statutes and the Internal Revenue Code Section 501(c)(3) that the activity might implicate.

The opinion directs the attorney to Rules 5.3, 5.4(c), 5.5, 6.1, and 6.3. Rule 6.3 permits a lawyer to serve as a director, officer, or member of a legal services organization apart from the lawyer's firm, subject to limits where participation would be incompatible with obligations to a client under Rule 1.7 or would have a material adverse effect on a client of the organization whose interests are adverse to a client of the lawyer. Rule 5.4(c) bars a lawyer from permitting a person who recommends, employs, or pays the lawyer to direct or regulate the lawyer's professional judgment.

The Panel's findings: (1) the attorney may serve as member, officer, or director within the confines of Rule 6.3 regarding conflicts between the corporation's clients and the attorney's other clients; (2) the attorney may be employed by the corporation but must at all times maintain the independent professional judgment addressed by Rule 5.4; (3) the attorney may be retained from time to time, subject to Rules 6.3 and 5.4; and (4) the attorney cannot share in fees realized by the corporation from rendering legal services. The opinion also cautions that under Rule 5.3 the attorney may be responsible for the conduct of the corporation's non-lawyer assistants, and that without precautionary measures the arrangement could be construed as assisting the unauthorized practice of law under Rule 5.5.

In practice

Under this opinion, the roles the attorney proposed are permissible but bounded by three constraints the Panel identifies: Rule 6.3 conflict limits on participating in organizational decisions, Rule 5.4's requirement of independent professional judgment (including the bar on sharing legal-service fees the corporation earns), and the Rule 5.3/5.5 cautions about supervising non-lawyer assistants and avoiding assistance to the unauthorized practice of law. The opinion expressly does not address the corporate, nonprofit, or tax statutes the plan may implicate.

Common questions

Q: Can a lawyer be an officer or director of a non-profit that offers legal consulting?

A: Yes. The opinion finds the attorney may serve as a member, officer, or director within the confines of Rule 6.3's conflict provisions.

Q: Can the lawyer share in the fees the non-profit collects for legal services?

A: No. The opinion's fourth finding is that the attorney cannot share in fees realized by the corporation from rendering legal services.

Q: What must the lawyer preserve if employed or retained by the corporation?

A: The opinion requires the attorney to maintain the independent professional judgment addressed by Rule 5.4 at all times.

Q: What are the unauthorized-practice concerns?

A: The opinion cautions that under Rule 5.3 the attorney may be responsible for non-lawyer assistants' conduct and that, without precautions, the arrangement could be construed as assisting the unauthorized practice of law under Rule 5.5.

Background and rules framework

The opinion interprets Rhode Island Rules of Professional Conduct 5.3 (responsibilities regarding non-lawyer assistants), 5.4 (professional independence of a lawyer), 5.5 (unauthorized practice of law), 6.1 (pro bono public service), and 6.3 (membership in legal services organizations), analogs of the corresponding Model Rules. Rule 6.3 permits service in a legal services organization subject to conflict limits; Rule 5.4(c) protects the lawyer's independent judgment from direction by a third-party payor.

Citations and references

Rules of Professional Conduct:

• MR 5.3 / RI RPC 5.3 (responsibilities regarding non-lawyer assistants)
• MR 5.4 / RI RPC 5.4(c) (professional independence; third-party payor)
• MR 5.5 / RI RPC 5.5 (unauthorized practice of law)
• MR 6.1 / RI RPC 6.1 (pro bono public service)
• MR 6.3 / RI RPC 6.3 (membership in legal services organizations)

Statutes:

• The opinion declines to comment on R.I. Gen. Laws Sections 11-27-11 et seq., 7-5.1-1 et seq., and 7-6-1 et seq., and Internal Revenue Code Section 501(c)(3).

See also

• RI EAP Opinion 95-47: nonlawyer selling collection forms and referring clients for a fee
• RI EAP Opinion 2016-05: collaborating with a nonlawyer in a compliance practice

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2093-25.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Final
ETHICS ADVISORY PANEL
Opinion #93-25, Request #358
Issued June 30, 1993

An attorney employed by a law firm desires to form a non-profit corporation to render consulting services to local artists on legal, financial and tax issues for a minimal fee. The attorney asks: (1) may he/she serve as an officer, director or member of such non-profit corporation; (2) may he/she serve as an employee of such non-profit corporation; (3) may he/she be retained by such non-profit corporation from time to time for the purpose of giving legal advice?

The Panel confines its advice to the Rhode Island Rules of Professional Conduct ("Rules") and declines to comment on the applicability, if any, of R.I. Gen. Laws § 11-27-11 et seq. (Law Practice), § 7-5.1-1 et seq. (Professional Service Corporations), § 7-6-1 et seq. (Rhode Island Nonprofit Corporation Act), the Internal Revenue Code of 1986 as amended § 501(c)(3) and regulations promulgated thereunder, or any other law, rule or regulation with respect to such proposed activity.

The Panel calls the attorney's attention to Rules 5.3, 5.4(c), 5.5, 6.1 and 6.3.

Rule 6.1 PRO BONO PUBLICO SERVICE states in part:
A lawyer should render public interest legal service. A lawyer may discharge this responsibility by providing professional services at no fee or a reduced fee to persons of limited means or to public service or charitable groups or organizations. . . .

Rule 6.3 MEMBERSHIP IN LEGAL SERVICES ORGANIZATIONS states:
A lawyer may serve as a director, officer or member of a legal service organization apart from the law firm in which the lawyer practices, notwithstanding that the organization serves persons having interests adverse to a client of the lawyer. The lawyer shall not knowingly participate in a decision or action of the organization:

(a) If participating in the decision would be incompatible with the lawyer's obligations to a client under Rule 1.7; or

(b) Where the decision could have a material adverse effect on the representation of a client of the organization whose interests are adverse to a client of the lawyer.

Rule 5.4(c) states:
A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render services for another direct or regulate the lawyer's professional judgment in rendering such legal services.

Accordingly, the Panel finds:

(1) The inquiring attorney may serve as a member, officer or director of such non-profit corporation within the confines of Rule 6.3 regarding conflicts of interest between clients of the non-profit corporation and other clients of the inquiring attorney;

(2) The attorney may be employed by the non-profit corporation but must at all times maintain the independent professional judgment addressed by Rule 5.4;

(3) The attorney may be retained by the non-profit corporation from time to time but the attorney is subject to Rules 6.3 and 5.4.

(4) The attorney cannot share in fees realized by the corporation from the rendering of legal services.

The Panel cautions the inquiring attorney regarding Rule 5.3 (Responsibilities Regarding Non-Lawyer Assistants) and Rule 5.5 (Unauthorized Practice of Law). Under the facts presented, the attorney may be responsible for the conduct of non-lawyer assistants employed by the non-profit corporation and, if precautionary measures are not taken, could be construed to be assisting a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law.