Oregon Law Practice Management - Crowdfunding Your Law Practice, 2016
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9/4/2016 Crowdfunding Your Law Practice | Oregon Law Practice Management Oregon Law Practice Management Practice Management Tip for Oregon Lawer Crowdfunding Your Law Practice Posted on 01/12/2015 Crowdfunding is the practice of funding a project or venture raising monetar contriutions from a large numer of people, tpicall via the Internet. The crowdfunding model is fueled three tpes of actors: the project initiator who proposes the idea and/or project to e funded; individuals or groups who support the idea; and a moderating organization (the “platform”) that rings the parties together to launch the idea. In 2013, the crowdfunding industr grew to e over $5.1 illion worldwide. ource: Wikipedia. Crowdfunding for Lawer Potentiall, lawers could use crowdfunding at an time – to jumpstart a law practice, expand a law practice, or ridge the gap during a downturn in usiness. As ou might expect, crowdfunding is most successful when used to promote a cause or new product idea rather than a service. ut it could work for lawers if donors find the practice area and marketing pitch appealing. The thic of it All https://oregonlawpracticemanagement.com/2015/01/12/crowdfundingyourlawpractice/ 1/5 9/4/2016 Crowdfunding Your Law Practice | Oregon Law Practice Management efore we get too excited aout this idea, we need to do a gut check. impl put: is crowdfunding ethical? A quick Internet search produces a list of posts and articles on the suject. Here are a few: Crowdfunding: The Future Of Pulic-Interest Funding? Is financing our law practice through “crowdfunding” ethical? Dewe Reall Want to a That Crowdfunding Is Unethical Fee plitting? The first result is far the most interesting for Oregon lawers. In Crowdfunding: The Future Of Pulic-Interest Funding? author am Wright reports a conversation with Oregon lawer Kellie Ann Furr who is crowdfunding a “private-pulic interest environmental law firm” on Indiegogo. Furr is halfwa to her fundraising goal of $7,500. Take the time to look at her campaign and ou’ll understand the appeal and her success. ut ack to the ethics of it all… In his Aove the Law post aout Furr, Wright tells us: First, she sought and received an informal opinion from the Oregon tate ar on “the ethics of donation-ased crowdfunding” to make sure she was on sound ethical footing. he was also careful to select “perks” for donors that would not affect her “professional independence” — in her case, the perks mostl involve volunteer time or pro ono assistance to environmental organizations. And she includes appropriate disclaimers on her campaign page. o does this mean Oregon lawers are off and running – free to set up crowdfunding campaigns without a second thought? Not quite…. Crowdfunding i a “Communication Concerning a Lawer’ ervice” for Purpoe of Oregon RPC 7.1 necessit, crowdfunding involves representations aout our potential or ongoing law practice. Therefore, Oregon RPC 7.1 – Communication Concerning a Lawer’s ervices – would appl to the content contained in our crowdfunding appeal: “A lawer shall not make a false or misleading communication aout the lawer or the lawer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessar to make the statement considered as a whole not materiall misleading.” impl put: lawers are responsile for ensuring that representations made aout their practice are accurate. For an excellent discussion of this topic, see O Formal Opinion No. 2007-180 Internet Advertising: Pament of Referral Fees and the following articles: What Hath the We Wrought? Advertising in the Internet Age Internet Marketing: Rules of the Road https://oregonlawpracticemanagement.com/2015/01/12/crowdfundingyourlawpractice/ 2/5 9/4/2016 Crowdfunding Your Law Practice | Oregon Law Practice Management “Dihonet, Fraud, Deceit, or Mirepreentation” – the Companion of RPC 7.1 A violation of Oregon RPC 7.1 (communication that is false or misleading) could also implicate Oregon RPC 8.4: “It is professional misconduct for a lawer to … “engage in conduct involving dishonest, fraud, deceit, or misrepresentation that reflects adversel on the lawer’s fitness to practice law.” ut lawers can run afoul of RPC 8.4 in other was. As discussed elow, crowdfunding campaigns often promise “rewards” or “perks” for donors. Assuming that offering something in return for a donation is ethical, failing to deliver the “reward” or “perk” if all conditions are met would likel e construed as a violation of 8.4. The Granddadd of them all: I Crowdfunding Fee haring with a Nonlawer? Lawers and law firms are prohiited from sharing legal fees under Oregon RPC 5.4, except in limited circumstances. This egs the question: if a donor gives a lawer mone to fund his or her law practice, does this constitute impermissile fee sharing? Mae es. Mae no. Where is the “fee” and how is it “shared?” Compare the following scenarios: 1. Lawer and nonlawer wish to form an LLC offering usiness advice. The intend to charge potential clients a flat fee of $1,000 for their services and split the fee 50/50. Lawer will provide the legal advice; nonlawer will coach clients on usiness strategies, financing, marketing, and the like. While this arrangement raises a numer of issues, the question here is: does the proposed fee split violate Oregon RPC 5.4? The answer is a straightforward: es! 2. A donor gives mone to a lawer to start her law practice, no strings attached – the funds are a gift, not a loan; the donor is seeking nothing in return; the lawer is providing nothing in exchange for the donation. There is no “fee.” There is no “sharing.” The donor could e Mom, Dad, a friend, or a stranger responding to a crowdfunding appeal. It is hard to understand how this could e a violation of RPC 5.4 – ut as alwas, I encourage readers: take our questions to the experts – O General Counsel’s Office. o crowdfunding looks like a “go,” right? Not so fast … here’s the thing aout crowdfunding. Donations aren’t generall a “gift” with no strings attached: The Crowdfunding Centre’s Ma 2014 report identified the existence of two primar tpes of crowdfunding: Rewards crowdfunding: entrepreneurs pre-sell a product or service to launch a usiness concept without incurring det or sacrificing equit/shares. quit crowdfunding: the acker receives shares of a compan, usuall in its earl stages, in exchange for the mone pledged. The compan’s success is determined how successfull it can demonstrate its viailit. https://oregonlawpracticemanagement.com/2015/01/12/crowdfundingyourlawpractice/ 3/5 9/4/2016 Crowdfunding Your Law Practice | Oregon Law Practice Management ource: Wikipedia. Permitting donors to take an equit interest in our law firm is clearl impermissile under RPC 5.4. A rewards approach could quickl go awr if the lawer violated RPC 7.1, 8.4, or other applicale rules. Rememer Kellie Ann Furr? Her Indiegogo campaign offers four different “perks” or rewards for donors: volunteer time, pro ono work, or a one-hour consultation. he carefull limits the one-hour consultation to Oregon residents onl and includes a disclaimer that donating to her campaign does not create an attorne-client relationship. Is this sufficient? At the risk of repeating mself: take this question to the experts – O General Counsel’s Office. Funding a Law Practice I Onl Part of the Picture: tudent Loan, Litigation, and ecuritie Regulation Crowdfunding raises issues in other areas as well. Check out these posts: Upstart.com: Crowdfund tudent Loan Det, Commit thics Violation? New Wesites Use Crowdfunding to Finance Lawsuits JustAccess eeks Crowdfunding to Launch Venture to Crowdfund Legal Disputes Crowd Funding, Private Placements and other Options for Funding Plaintiffs’ Lawsuits under the JO Act of 2012 usiness Lawering in the Crowdfunding ra Crowdfunding: The Real Thing Is Almost Here (discussing securities regulation) Learn More If ou want to learn more aout crowdfunding, read the following: Answers to Five Common Questions aout tarting a Crowdfunding Campaign (targeted to nonprofits, ut contains good tips) Top Crowdfunding Wesites for Your Project Crowdfunding Tools and Resources 21 xamples of Crowdsourced Fund Raising Platforms Next, get ethics advice – from independent ethics counsel with whom ou form an attorne-client relationship or O General Counsel’s Office. The General Counsel’s Office can help ou identif applicale rules, point out relevant formal ethics opinions and other resource material, and give ou a reaction to our ethics question – the are alwas a good place to start. All Rights Reserved [2015] everl Michaelis Postscript: In addition to the aove, practitioners should also consult with a tax lawer or CPA. Mone raised via crowdfunding will likel e considered taxale income. Check out these guidelines, availale from PaPal. A word of caution: as noted here, failure to meet PaPal’s threshold for purposes of generating a 1099 doesn’t mean ou aren’t oligated to report the income. https://oregonlawpracticemanagement.com/2015/01/12/crowdfundingyourlawpractice/ 4/5 9/4/2016 Crowdfunding Your Law Practice | Oregon Law Practice Management H AR THI: 1 Reblog 5 Like Be the first to like this. R L AT D The thics of NYA Crowdfunding The Year in Review - Top Crowdfunding, Revisited thics Opinion Posts in 2015 In "thics" In "thics" In "Appreciation" This entr was posted in Career, thics, Financial Management, Marketing, olo Practice and tagged Advertising, attorne-client relationship, everl Michaelis, crowdfund, disclaimer, ethical, thics, Fee sharing, Finances, Financial Management, misrepresentation, Oregon law practice management, olicitation everlm. ookmark the permalink [https://oregonlawpracticemanagement.com/2015/01/12/crowdfunding-our-law-practice/] . 5 THOUGHT ON “CROWDFUNDING YOUR LAW PRACTIC” Pingack: Crowdfunding thics for Oregon Lawers | Oregon Legal Research log Pingack: Crowdfunding our law practice | The Legal Duck Pingack: The thics of Crowdfunding, Revisited | Oregon Law Practice Management Pingack: NYA Crowdfunding thics Opinion | Oregon Law Practice Management Privac & Cookies: This site uses cookies from WordPress.com and selected partners. 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