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NC LEAP
Article Date: 3/1/2007
North Carolina Lawyers for Entrepreneurs Assistance Program
“Connecting low resource needs with high resource skills”
Vision Statement
NC LEAP will be the premier provider of pro bono business law services for entrepreneurs operating in the state’s low-wealth communities or employing persons who live in such areas. NC LEAP will also serve as a network through which the state’s business law community can work with entrepreneurs to address systematic legal barriers to economic development in North Carolina’s low-wealth communities.
A pro bono project of the North Carolina Bar Association Foundation
in conjunction with NCBA Business Law & Corporate Counsel Sections
NC Bar Center, PO Box 3688, Cary, NC 27519. Phone 919-677-0561
In order to qualify for the North Carolina Legal Entrepreneurs Assistance Program probono services, you must be a small business owner, located in North Carolina, making less than 80% of the state median income for a household of your size.
NC LEAP – Executive Summary
NC LEAP stands for North Carolina Lawyers Entrepreneurs Assistance Program. The purpose of the program is to enlist and enable business lawyers (and other lawyers who have related practices) across the state to provide legal advice and assistance to low-wealth entrepreneurs through pro bono projects.
NC LEAP will provide direct benefits to individual entrepreneurs, the communities in which they live and the state far in excess of its cost through leveraging the volunteer time of business lawyers throughout the state. NC LEAP is modeled after programs initiated by the American Bar Association’s A Business Commitment (ABC) project. The successful Georgia program and a recent legal clinic at the Duke University School of Law have served as models.
More than 75 members of the NCBA Business Law Section have already volunteered for NC LEAP, and their initial time commitments are 2,500 hours. Our fundraising goal is $250,000 to cover three years of operations costs and we have commitments exceeding $300,000 through April 2, 2007. Our project director, Milan Pham is now on board as of late February 2007. She may be reached at mpham@ncbar.org
North Carolina Lawyers for Entrepreneurs Assistance Program
NC LEAP
• What is NC LEAP?
NC LEAP (North Carolina Lawyers for Entrepreneurs Assistance Project) is a new public service program of the North Carolina Bar Association Foundation. The mission of NC LEAP is to assist low-wealth entrepreneurs with their legal needs through pro bono service by North Carolina business lawyers. Services will range from basic transactional legal needs as struggling entrepreneurs strive to establish their business and create jobs to potential long term client-counselor relations as their businesses grow. NC LEAP will both increase pro bono opportunities for North Carolina’s business lawyers in their areas of expertise and will increase the chances of success for low-wealth entrepreneurs.
• How will NC LEAP promote entrepreneurial success?
Entrepreneurial success is contingent upon four key components; 1) talent, 2) opportunity, 3) know-how and 4) capital, according to Ray Smilor of the Foundation for Enterprise Development. The legal expertise provided through NC LEAP will support two of these key components - know-how and capital. Lawyers are trained as problem-solvers and their know-how will assist start-ups navigate the long, tough journey to success. This know-how may include basic business incorporation, contracts, leasing issues, franchise questions, tax issues and personnel matters. NC LEAP will positively affect the capital position of eligible start-ups who need to maximize every scarce dollar for start-ups costs, inventory and personnel expenses. NC LEAP will help eliminate or minimize legal fees during the start-up phase.
• Why NC LEAP and Why Entrepreneurship?
“In the 21st century, we will increasingly rely on the lean and agile entrepreneurship of the small, growth-oriented business – rather than the resources, scale and market size of the large corporation – to fuel our economic growth through the creation of jobs and innovative goods and services.” The E Generation
• What is the need for NC LEAP?
As more and more traditional North Carolina businesses down-size or close, the employment base in many rural counties has been decimated. According to the North Carolina Institute for Rural Entrepreneurship, entrepreneurs play a powerful role in the economic well-being of rural communities. Today 95 % of all rural establishments have fewer that 50 employees. According to the NC Rural Center, small firms in North Carolina account for nearly all net job growth.
NC LEAP will help fulfill one of the five key elements in building a comprehensive system of entrepreneurship development in North Carolina. Technical assistance and Information is a key element to the success of low-wealth entrepreneurs. Legal assistance is a very specific form of technical assistance and lawyers are the only group capable of filling this need in North Carolina.
• Who is eligible for NC LEAP services?
NC LEAP works with low-wealth entrepreneurs who are not able to afford to hire a business lawyer. Entrepreneurs who have an annual household income, adjusted for family size, of less than 80% of the area median income (“AMI”) of the metropolitan statistical area (“MSA”) in which they live are eligible (in rural communities, we will use the statewide median income to assess eligibility). On a case-by-case, NC LEAP will assess the eligibility of entrepreneurs who have an annual adjusted household income of between 80% and 120% of the applicable AMI. In all cases, persons wishing to receive services through NC LEAP must certify that they are unable to afford to pay for legal services.
The following is an example of how these eligibility criteria work. In 2003, the AMI for a family of four in the Raleigh-Durham-Chapel Hill MSA, was $68,800. Thus, in 2004 an entrepreneur with a family of four would be eligible for services through NC LEAP if her household income is $55,040 or less. Entrepreneurs with a family of four with household incomes above $55,040, but below $82,560 would be considered on a case-by-case basis. In all cases, entrepreneurs interested in receiving services through NC LEAP will be required to certify that they are unable to afford to pay for legal services.
• What is the project’s start-up timeline?
With successful fundraising efforts already under way, it is anticipated that a project director will be hired in January 2007. This attorney will serve as the referral intake point of contact and the project coordinator. He/she will establish more detailed referral procedures with local and state agencies and non-profits already supporting the efforts of low-wealth entrepreneurs.
• What is the history of this program?
In 1994, the American Bar Association’s Business Law Section’s Pro Bono Committee began a formal project designed to increase the delivery of pro bono legal services by business lawyers. This project, known as the ABC (“A Business Commitment”) Project, is predicated on two basic ideas. First, business lawyers are more likely to engage in pro bono legal services in their areas of expertise, rather than in unfamiliar areas of the law. Second, across the country, low-wealth entrepreneurs are working to create jobs and stimulate commercial activity, but lack of access to high-quality, affordable legal services is a key barrier to their success. The goal of the ABC Project is to address this need by encouraging more business lawyers to provide transactional legal services to low-wealth entrepreneurs on a pro bono basis.
• Have other states implemented similar projects?
Yes. Since the ABC Project’s inception, efforts similar to NC LEAP have been initiated in several cities and states. Currently, many major metropolitan areas have formal ABC projects. These include Boston, Chicago, Houston, New York, San Francisco and Washington, DC. Additionally, there are also a growing number of statewide ABC programs. These include initiatives in Georgia, Indiana, Michigan, Ohio and Texas. Like NC LEAP, the majority of these other ABC projects were formed through the efforts of the local or state bar association.
• How will NC LEAP coordinate with existing programs that help entrepreneurs?
Representatives of the NCBA Foundation have already joined the North Carolina Institute for Rural Entrepreneurship’s Business Resource Alliance which meets regularly to coordinate the efforts of public and private organizations supporting rural entrepreneurs. The members of the Business Resource Alliance have already provided valuable information to assist in the structuring of NC LEAP. They have also independently confirmed the need for pro bono legal services as a high need in their communities or service areas.
• How is the volunteer leadership of NC LEAP structured?
NC LEAP is the result of a multi-year planning process of the Business Law Section of the NCBA. The Section Council has been actively engaged in every stage of NC LEAP’s development, including participation in a successful pilot project during 2003 through the Community Economic Development Clinic at Duke University School of Law. Further, the Council has demonstrated its commitment to the success of NC LEAP by providing this new project with its first funding.
The NC LEAP Advisory Committee is currently comprised of volunteer lawyers from the NCBA Business Law and Corporate Counsel Sections.
• Who will be the NBCA pro bono lawyers?
Members of the NCBA Business Law Section are providing the initial corps of NC LEAP volunteers. In an initial member survey, commitments of over 2,500 pro bono hours were pledged by Business Law Section members. That number will grow as NC LEAP becomes operational. Other Sections of the NCBA will also be invited to join the Business Law Section in this project.
• What is the dollar value of NC LEAP pro bono service?
The economic value of 2,500 pro bono hours at a reasonable billable hour rate of $150 translates to a voluntary donation of $375,000. That economic value will also rise as more lawyers are recruited as NC LEAP volunteers.
• How will NC LEAP operate?
NC LEAP will operate as a statewide public service project of the NCBA that helps low-wealth entrepreneurs in North Carolina get access to pro bono legal services by referring them to business lawyers throughout the state who have indicated an interest in participating in this new initiative. NC LEAP will screen prospective clients for eligibility, conduct an initial case review to identify the relevant legal issues and coordinate all the client satisfaction and other evaluation activities at the end of the engagement. In addition to facilitating these referral relationships, NC LEAP will provide community outreach and education activities, as well as training programs for participating attorneys.
NC LEAP will be partially funded by the NCBA, but is also currently raising funds and longer-term financial commitments from individual lawyers, law firms, corporations and foundations to support its operations. Once the Project Director is hired, NC LEAP will begin regular operations and will be based out of the Bar Center in Cary, NC.
How will NC LEAP be funded?
Several groups have already made their first gifts to NC LEAP. They include:
• Annual dues contributions from 1,500 members of the Business Law Section – $45,000 ($15,000 x 3 years)
• Business Law Section budget contribution, $7,500
• Two grants from NCBA Foundation Endowment, $15,000
• NCBA Foundation budgetary funds, $15,000
• Moore & Van Allen, $30,000;
• Womble, Carlyle, Sandridge & Rice, $30,000;
• Bank of America, $25,000;
• Kennedy Covington Lobdell & Hickman $20,000
• Kilpatrick Stockton LLP, $20,000;
• Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, $15,000;
• Parker, Poe, Adams & Bernstein, LLP, $15,000;
• Smith Anderson Blount Dorsett Mitchell & Jernigan, $10,000;
• Willams Mullen Maupin Taylor PA, $5,000;
• Duke Energy Corp., $5,000;
• Robinson Bradshaw & Hinson, $5,000;
• SAS Institute, Inc. $5,000
• Smith Moore, $5,000
• Bell Davis & Pitt, P.A., $2,500;
• Howard, Stallings, From & Hutson, P.A., $2,500;
• Hutchison Law Group, $2,500;
• DLA Piper, $2,500;
• Johnston, Allison & Hord; $2,000
• Purrington Moody Weil LLP, $1,500;
• Schell Bray Aycock Abel & Livingston, $1,500;
• Young Moore and Henderson P.A., $1,500;
• Helms Mulliss & Wicker, $1,500;
• Carruthers & Roth, $1,500;
• Nexsen Pruet Adams Kleemeier, $1,500;
• Hogue, Hill, Jones, Nash & Lynch, LLP, $1,000;
• Horack Talley Pharr & Lowndes, $1,000;
• McCoy, Weaver, Wiggins, Cleveland Rose, Ray PLLC $1,000;
• McGuire Wood & Bissette $1,000;
• Rayburn Cooper & Durham, P.A., $1,000;
• Roberts & Stevens, P.A., $1,000;
• Van Winkle Law Firm, $1,000;
• Wyatt Early Harris Wheeler, $1,000;
• Sanford Holshouser, $500; and
• Nelson, Mullins, Riley & Scarborough, $250.
An initial fundraising goal of $250,000 has been set to fund NC LEAP thru 2008-09. More than 120% of that goal ($300,000) has already been raised through the initial commitments of the NCBA Business Law Section, the NCBA and NCBA Foundation and North Carolina law firms and corporations.
The NCBA and NCBA Foundation have also made commitments for in-kind administrative and operational support of NC LEAP.
• What are the NCBA and the NCBA Foundation?
The North Carolina Bar Association is a 501(c) (6) voluntary membership organization for legal professionals in North Carolina. With more than 14,000 members it is the largest voluntary bar group in North Carolina meeting the diverse needs of lawyers and legal assistants. The Business Law Section of the NCBA is one of 28 practice area sections within the organization. With more than 1,000 member lawyers it helps meet the professional, technical and collegial needs of business lawyers in the state.
The North Carolina Bar Association Foundation is a 501(c) (3) nonprofit organization closely affiliated with the NCBA and serves as the charitable, educational and public service unit of the NCBA. Its Public Service and Pro Bono Activities department will house the project and its director will provide support to the NC LEAP project director. The department coordinates all bar pro bono projects around the state and has programmatic expertise regarding the involvement of volunteer lawyers in many settings.
Case Studies
Throughout the early stages of its development, the volunteer lawyers working to organize NC LEAP have sought to ensure that this effort will meet a demonstrated need in North Carolina for transactional pro bono legal services. One of the ways in which the level of demand for such assistance has been evaluated is through pilot projects and other similar efforts designed to provide free legal services to low-wealth entrepreneurs on a limited scale. To date, these efforts have been successful and this indicates a strong demand for the type of pro bono services that NC LEAP will make more broadly available.
Set forth below are three brief case studies describing typical matters handled to date. These examples are representative in the sense that they show the diversity of low-wealth entrepreneurs’ legal needs in North Carolina. It is hoped that this document will provide a more concrete understanding of the types of cases likely to be generated through NC LEAP, as well as the positive benefits that this type of pro bono service can have.
Case Study #1: The Grocery Store Co-Op
A small group of citizens in a rural community in central North Carolina were concerned about their lack of access to a grocery store. Additionally, they were interested in providing a market for local farmers to sell their products. To address these issues, they decided to form a small grocery store co-op, but in order to do so they needed to structure and form the co-op and, subsequently, to capitalize it. These entrepreneurs were, however, unable to afford a lawyer to assist with these issues.
Fortunately, an attorney working on a volunteer basis was able to help. She counseled the group with respect to formation issues, but most of her effort was focused on the proposed capitalization strategy. As it happened, the group was pursuing a strategy that raised troubling issues under state and federal securities laws. The lawyer worked with the group to make the needed changes to the strategy and then they were able to go forward.
As of our last contact, the co-op had started operations and was looking to hire five employees. Additionally, it was providing a market and source of income for area farmers who produce locally grown foods. In all the co-op is a tremendous success, but one that needed pro bono legal assistance to get off the ground.
Case Study #2: The Small Retail Business
A low-income woman wanted to open her own business. Her vision was of a small storefront operation that specialized in religious materials and that would be located in a low-wealth community in central North Carolina. Before she could begin moving toward this goal, she needed assistance in structuring the ownership of her new company. Later she would need assistance electing the proper tax status and addressing the issues related to a prior financing.
Given this person’s financial situation, it was impossible for her to hire a lawyer. Luckily, we were able to identify a strong attorney who was willing to provide this woman with the legal services that she needed. In the end, the attorney helped this entrepreneur to incorporate and obtain recognition as an S-corporation. The attorney also helped remedy the potentially defective securities issuance.
Participation in this effort enabled this client to open her own business, thereby creating one new job and, it is hoped, several additional ones in the future.
Case Study #3: The Workout
A few years ago a moderate-income couple living east of Raleigh was able to acquire a small copy store franchise from a national franchisor. To acquire the business, they had to borrow a significant amount of funds from the franchisor to cover both the franchise fee and start-up costs. They were unrepresented by counsel in all of their dealings with the franchisor and, as a result, never fully understood the terms of the agreements into which they were entering. While the agreements were not necessarily unfair, they were structured in such a way that the couple quickly found themselves behind on their payments to the franchisor and in danger of losing both their business and their home.
Faced with these dire circumstances, the couple availed themselves of the services of a volunteer lawyer. After working to educate the couple about the terms of their arrangements for the franchisor, the lawyer helped to negotiate a modification of the loan documents between the couple and the franchisor. Although this resulted in only slight changes to the terms of the transaction, they were sufficient such that the couple was able to get current on their debt and to hold on to both the business and their home. Additionally, the lawyer’s work helped to preserve two jobs that would have been lost if the couple had defaulted on their loan and closed their copy shop.
Conclusion
Low-wealth entrepreneurs in the state need the full range of transactional legal services to which mainstream businesses have access. Because of their limited financial means, they are not able to obtain the legal assistance that they need. As these case studies demonstrate, the provision of pro bono legal services by business lawyers can fill this gap and make a significant difference for low-wealth entrepreneurs and the communities in which they work.
NC LEAP Leadership
Patrick J. Johnson, NC LEAP Chair, Brooks Pierce McLendon Humphrey and Leonard, Wachovia Capital Center, 150 Fayetteville St. Suite 1600, Raleigh, NC 27601 919-573-6217 pjohnson@brookspierce.com
Marion A. Cowell, Jr., Fundraising Chair, Kilpatrick Stockton, 214 N. Tryon St. Suite 2500, Charlotte, NC 28202 704-562-1049 mcowell@kilpatrickstockton.com
Mark Davidson, Business Law Section Chair, Brooks Pierce McLendon Humphrey and Leonard, 230 N. Elm St. Greensboro, NC 27401 336-271-3126 mdavidson@brookspierce.com
Joseph M. Ritter, Corporate Counsel Section Chair, Fidelity National Title Insurance Company, 100 S. Elm St. Suite 350, Greensboro, NC 28211 336-808-1651 ritterjm@aol.com
NC LEAP Staff Resources:
Milan Pham, Director of NC LEAP, 919-677-0561, mpham@ncbar.org
Jane B. Weathers, Director of Sections & Divisions, 919-677-0561
jweathers@ncbar.org
Thomas M. Hull Director of Development, 919-677-0561, thull@ncbar.org
Revised 3/5/06
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