May the president of a small 501(c)(3) corporation appoint her husband to be the organization's pro bono attorney to give legal advice and handle routine legal matters?
Generally, yes. The president/CEO of a nonprofit corporation normally has authority to hire professional consultants for the organization unless the Bylaws or the Board provide otherwise. The Board can overrule her selection if it so desires, and since there is no compensation involved, there would be no economic penalty for doing so even if there were a formal contract.
Normally when a charity has an economic transaction with a close relative of an officer or director, the charity and the other party are concerned about excess benefit tax issues. But since there is no pay involved here, it cannot be an excess benefit transaction.
The real question is whether it is a good choice. Is he competent in the areas of your concern? Is he willing and able to get help when necessary?
It is hard to fire volunteers. It is extra hard when they are members of the president’s family. It may be a great idea, but the scope of the representation ought to be spelled out clearly in advance so you are sure you are getting the best advice.
Tuesday, August 16, 2011