Phone and Laptop Searches at the Border

Did CBP ask to search your phone or laptop when entering the United States?  There’s a pretty good chance federal law enforcement is investigating you or your employer.

For FY2024, the U.S. Department of Homeland Security's U.S. Customs and Border Protection processed 420 million travelers at ports of entry.

3% (just over 12.6 million travelers) were referred to secondary inspection (i.e. given additional scrutiny by officers).

.01% (47,047 travelers) had their electronic devices searched.

Border searches usually don’t happen at random. 

And the law governing border searches of electronic devices is complicated and still developing.  Some circuits require reasonable suspicion.  Others no suspicion. In all cases, the search has to be reasonable under the Fourth Amendment.  

Internal DHS policies govern how the search is to be conducted, the timeline for getting your devices back, and other issues like whether a taint team is required to screen for attorney-client privileged materials.

So what should you do if CBP asks to search your phone or laptop at the border?  The answer will vary based on circumstances.  Are you a U.S. Citizen returning home?  A foreign national seeking admission?  An attorney carrying sensitive client information?

In all cases, you will want to be cooperative while also exercising your rights.  For example, you don’t have to provide your password, but if you don’t CBP can and likely will exclude or detain your device.  If you are a foreign national seeking admission, they might deny admission and send you home.  

If you or your employee’s phone or laptop are detained at the border, you will need sound counsel with experience in border searches and DHS policies and procedures.  If you are an employer sending employees abroad, it makes sense to think through and implement internal policies and procedures governing the carrying of electronic devices containing sensitive corporate information.

Before joining C+H, C+H Dallas Partner Rob Dunikoski spent years advising Homeland Security Investigation (HSI) special agents on these and other complicated customs law issues.  For more information on his background and experience, please visit https://ch-llp.com/about-rob-dunikoski.

Non-Profit 101: Protecting Your Non-Profit in Challenging Times

Five Steps to Prepare for Uncertainty

“Paperwork saves lives” – it was a frequent refrain in the back-office of the international non-profit where I served as General Counsel. It reminded us that our paperwork, ensuring finances, governance filings, and policies were in order, was critical to enabling our organization to achieve its mission, impacting—even saving—real human lives.

In a climate where the charity sector is facing increased uncertainty and scrutiny coupled with the potential loss of key funding, this has never been more true. Having paperwork in order is a key way you can protect your non-profit and help it stay focused on mission.

I’ve seen this in action many times. Sometimes it is invisible—as when an organization quietly provides timely and accurate government filings year after year, never drawing scrutiny. Sometimes it is louder—like an allegation of improper spending and sweetheart deals that is quickly put to rest by immediate production of Board minutes, conflict policy and disclosures, and contract terms. For a charity working in an environment of increased scrutiny on civil society, something I witnessed many times with international partners, survival could depend on taking care to avoid providing any non-compliance hook to hang an investigation or review hat on. For all charities, ensuring paperwork ducks are in a row before scrutiny comes is just smart risk management.

Guidance from a recent training on helping nonprofits navigate evolving issues in the sector, by the Office of the Attorney General of New York State, rang true to what I’ve seen in practice. I’ve simplified the guidance to five key steps nonprofits can take now to be prepared.

1. Know which federal actions apply to your organization 

   Does it impact funding? Beneficiaries? Programs? Is the action in question legally binding and in effect? This may require you to assign someone to monitor federal actions, as they’re changing at a dizzying pace. (Hint: The Council on Non-Profits has a good tracker to help follow relevant executive orders and legal challenges in effect, as well as other practical resources.)

2. Do a risk assessment

   Once you know which executive orders in effect may impact you, assess whether anything within your organization is at odds with them. Review federal grants and contracts—what are the terms related to cancellation and any remedies you have? Review your organization’s policies and governance practices. Ensure Board and committee meetings are documented. (Hint: Form 990 Part 6 provides a good outline of basic good governance practices to check for.)

3. Make sure your documents and practice line up—with each other, and with the law

   Are your purposes as documented in your tax exemption application (1023), governing documents (bylaws, articles of incorporation), annual reporting (990), and other communication materials (website, annual report) actually charitable in nature? Do they reflect what you are actually doing? (Hint: Don’t forget to complete any required Form 990 schedules; a missing schedule can be a red flag for reviewers attracting unwanted attention.)

4. Avoid unnecessary red flags 

   Don’t inadvertently create cause for concern by making missteps in common areas. (Hint: This covers a wide range of compliance concerns!) For example:

   • Ensure you are properly characterizing employees and contractors.

   • If you’re earning revenue, evaluate whether it is triggers UBIT (the “unrelated business income tax”) and report it if so.

   • Stay charitable: Don’t cross the line from an Advocacy organization (permitted) to Action organization (not permitted). Don’t control in any joint venture to the for-profit partner.

   • Don’t permit private benefit: Ensure you have reasonable compensation. Ensure you have a conflict policy, expense reimbursement policy, travel policy and appropriate review processes. If you provide grants or scholarships, ensure you have the right processes and criteria.

   • Report overseas activity as required and exert appropriate oversight to ensure it is all for your charitable purposes and no impermissible purposes (e.g., financing terrorism).

5. Don’t Lie

   Making any kind of misstatement regarding a federal matter (for example, on your Form 990) could open you to investigation, and even potential criminal action. Make sure your government filings are accurate. In the event you’re subject to any kind of government inquiry, take care not to make any kind of false statement, however innocuous it may seem—just ask for the reason behind the inquiry and state that you need to speak with counsel. (Hint: If you receive an examination letter from the government, seek professional advice to ensure you learn as much as possible about what is being sought and why, and don’t volunteer documents beyond the request made.) 

   This can be a lot of work—and paperwork may be (unfairly, in my opinion!) shorthand for ‘boring,’ but taking care of these kinds of documents could be the critical preparation that allows your organization to continue serving your community in challenging times. The good news is it is all doable, and you’re not alone. If you’re ready to dive in, reach out to request a compliance checklist to guide you, with key areas to review and questions to ask.

   We’re here to help! To schedule a free 30 minute consultation, contact non-profit law expert Jeannie Rose Barksdale – jeannierose@ch-llp.com 

The Copyright Problem of AI, According to ChatGPT

As the generative AI arms race grows, many have opined on what a future AI-based world will look like, both in terms of risks, opportunities, and other practical effects. Will AI make the world less human? Will it harm or improve our relationships? Should technology be able to make decisions about life and death? Or, you know, could AI destroy the world?  

Less attention is paid (at least outside legal publications) to the ill-defined legal foundation on which this arms race lies. Indeed, the question is still very open whether the use of copyrighted works to train generative AI infringes the copyright of those works.

As of the writing of this article, at least 40 federal lawsuits involving copyright claims related to AI have been filed since June 2019, and the number is growing quickly. Most suits have been brought by authors, publishers, artists, or other creators alleging that use of their content in connection with AI infringes their copyright rights, and at least two cases have focused on the human authorship requirement of copyright law, addressing whether a work of art (e.g., a painting) created by AI is protected by copyright given that its authorship was not primarily human. This article focuses on the issue of possible infringement.

 In terms of answers, the normally sleepy U.S. Copyright Office has been buzzing with activity, including its hosting a series of listening sessions in the Spring of 2023 on the use of artificial intelligence to generate works in creative fields, and starting a series of reports on legal and policy issues related to artificial intelligence and copyright, the first such report focused on digital replicas[1] and the second focused on copyrightability of works generated by AI.[2] But these efforts have focused on how existing legal frameworks may be used to address these complicated legal questions and have not provided a clear answer to whether unauthorized use of copyrighted material to train AI constitutes infringement.

As for case law, some courts have provided clarity that AI outputs must be exact copies of or substantially similar to purportedly infringed works to sustain a claim that the AI-generated output itself constitutes copyright infringement (e.g., Kadrey v. Meta Platforms, Andersen v. Stability AI, both from the Northern District of California). But there is still very little clarity on whether use of copyrighted material as inputs to train AI constitutes infringement.

In one recent case in the United States District Court for the District of Delaware, Thomson Reuters Enterprise Centre GmbH & West Publishing Corp. v. ROSS Intelligence Inc., a federal judge ruled that ROSS (an AI developer)’s use of copyrighted material to train its AI-based legal research tool was not fair use and therefore was copyright infringement as a matter of law.  

Admittedly, the fair use analysis that was at the heart of this case (and that will be for most if not all such copyright infringement cases involving AI) is highly fact-dependent. Such analysis is based on Section 107 of the U.S. Copyright Act, which considers the following four factors:

1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2. The nature of the copyrighted work;

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

4. The effect of the use upon the potential market for or value of the copyrighted work.

   17 U.S. Code § 107
   

Since each case will be analyzed differently under fair use, it is not possible to categorically answer the question of whether training AI on copyrighted material is copyright infringement. But, just as the Thomson Reuters case above does not likely mean AI tools always are copyright infringement, so too the holding in Authors Guild, Inc. v. Google Inc., 804 F.3d 202 (2nd Cir. 2015), which is sometimes cited to support that AI tools are defensible fair use, does not dictate that will always be the case[3]. It will depend on the facts.[4] And in any event, it is critical to take note that fair use is a defense to copyright infringement, meaning the burden is on technology companies to prove their use is fair in order to overcome claims of infringement. 

All that to say, as AI tools and adoption continue to grow, there is still little clarity on these important legal questions. So, one might well ask what AI itself thinks of this important question. I did. I asked ChatGPT this question multiple times over the last couple years, and its answers have been illuminating.

In the Spring of 2023, as ChatGPT was first gaining prominence among the masses, my immediate instinct as an intellectual property lawyer was that AI technology may infringe IP rights. That is when I first approached ChatGPT about this question. Indeed, it was my very first topic of conversation with any AI model.

At that point, I did not understand the technology and had given very little consideration to the legal complexities, so I instinctually assumed that the use of copyrighted material to train ChatGPT would have been encompassed by the exclusive rights granted to a copyright holder as set forth in 17 U.S. Code § 106. (Some argue that it does not.[5]). Thus, my question focused on who owned the source content and not whether its use was infringement. The answer was insightful on nonetheless.

ChatGPT dodged my primary question by stating that its source content came from “a variety of sources,” including publicly available sources and licensed content. More interestingly, ChatGPT plainly stated that the “content generated by ChatGPT belongs to the user who inputs the prompt and generates the output.”

April 23, 2023:

Really? That user need not concern himself or herself at all with what the owner of the source content might think about that? Or better yet, ChatGPT has the rights necessary to grant that user those rights? And, regarding the content that OpenAI used from various providers, while there is mention of licenses from “various providers,” it is interesting to note that nothing is mentioned of the legal basis for using the content not licensed from copyright holders. In any event, when I asked the same question six months later, on September 26, 2023, I got a different response.

ChatGPT again noted that its source content was from publicly available information, and like in the first response, did not limit its answer to only publicly available sources. But this time, it omitted that any content had been licensed, perhaps understanding that fact amounted to a concession that a license may be required in some cases, thereby undermining the argument made by some that, as a rule, “[t]raining a machine learning model with [ ] copyrighted data does not infringe” the exclusive rights of the copyright holder.[6]

Moreover, regarding ownership of the outputs, much like the season, ChatGPT’s answer had changed. In Spring 2023, I was told I owned the output as the user, but in Fall 2023, ChatGPT clarified that it owned the model and punted on the output ownership question, instead pointing back to the fact that “responses are generated based on patterns and information . . . , which comes from various sources and [do] not have a single identifiable owner.”

September 26, 2023 

But this response also lasted for only a season. In March 2024, when I asked the very same question, for the third time, ChatGPT provided the third substantively distinct response, this time claiming that OpenAI, the organization behind the development of the GPT models, owned the content generated by ChatGPT.

Regarding the real question I was asking—about source content—ChatGPT was totally silent this time but at least remembered to inform me that I was licensing to OpenAI any content I input into ChatGPT as outlined in its privacy policy and terms of use. Because, you know, they can do whatever they want with it.

March 12, 2024:

Finally, in February 2025, ChatGPT provided yet another answer, seeming to most closely align with the current state of legal prognosticators and to include the appropriate amount of legal hedging.

That is, ChatGPT uses some licensed data and some publicly available texts for training, but it “does not directly copy or store proprietary or copyrighted materials unless they have been licensed,” recognizing that such storage or copying could have legal implications. But really? The presumption of this statement seems to be that ChatGPT can freely use copyrighted material for its commercial purpose of training its AI model irrespective of a license and need only obtain such a license if it takes the additional step to “copy or store” the materials. Talk about missing the forest for the trees. 

And, of course, ChatGPT warns that you watch out. Anything that ChatGPT produces is owned by you and to be used at your peril because it is your responsibility to ensure it “doesn’t infringe on third-party rights.”

February 21, 2025:

So again, the legal foundation surrounding AI is still quite unresolved and, as evidenced by AI itself, evolving, if not altogether murky.

Yet, in a rapacious quest to be first and conquer the competition, technology companies and those adopting technology tools may be blowing through these legally significant questions about ownership and rights.

More caution is warranted, both for technology companies creating AI tools and companies and individuals using them.

If you have any questions about this article or need counsel on the issues addressed in it, please contact Ryan June by emailing ryan@ch-llp.com.

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[1] See Part I, available at https://copyright.gov/ai/Copyright-and-Artificial-Intelligence-Part-1-Digital-Replicas-Report.pdf.

[2] See Part II, available at https://www.copyright.gov/ai/Copyright-and-Artificial-Intelligence-Part-2-Copyrightability-Report.pdf.

[3] The court’s holding in the Google Books case was based heavily on the court’s finding that Google’s snippet-only use of the books it digitized did not serve as a substantial substitute for such works, and thus, did not seriously diminish the potential market for or value of the copyrighted works. Certain AI applications are arguably substantial substitutes for entire industries generating creative works. Whether that constitutes a substantial substitute for each individual work used to create such AI models is to be adjudicated, but it certainly would not be unreasonable to find as such

[4] Recent court precedent on fair use has increasingly focused on the commercial impact of the purported fair use of the underlying works. This is true for AI cases, such as Thomson Reuters Enterprise Centre GmbH & West Publishing Corp. v. ROSS Intelligence Inc., where the court called the fourth factor [the effect of the use upon the potential market for the value of the copyrighted work] the “single most important element of fair use.” 2025 U.S. Dist. LEXIS 24296, at *27 (D. Del. Feb. 11, 2025) (citation omitted). It is also true of landmark copyright cases unrelated to AI, such as the recent case finding Andy Warhol’s use of a Prince portrait based on Lynn Goldsmith's photo was not fair use because it did not sufficiently transform the original photograph and competed in the same market. Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 598 U.S. 508 (2023). In the Warhol case, the Supreme Court borderline conflated the first and fourth factors, finding that both disfavored fair use because the infringing work functioned for a similar purpose as the original, which was a commercial and competitive purpose. This trajectory does not bode well in favor of fair use for AI, particularly where it displaces the market for the content used to train it.

[5] For example, Jenny Quang argues in the Berkeley Technology Law Journal as follows: “Training a machine learning model with [ ] copyrighted data does not infringe because the data are not redistributed or recommunicated to the public. Copyright protects creative expression, but model training extracts unprotectable ideas and patterns from data. Thus, data mining uses of copyrighted works need not even be subject to a fair use analysis.” Jenny Quang, Does Training AI Violate Copyright Law, 2021 Berkeley Tech. L.J. 1407, 1409.

[6] See id.

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© 2025 Ryan June. All rights reserved.

Preventing Misconduct with an Ethical Infrastructure

My colleague Juan Castañeda recently offered excellent guidance for how to handle an internal investigation—a critical part of responding once a problem has materialized.  

But how to keep ethical misconduct issues from arising in the first place—or once something goes amiss, keep it from metastasizing into a full-blown scandal?

Let’s ask the robots.

I thought I’d check what AI had to say about it. But first, I spent a few moments jotting down core principles I anticipated from the computer’s compilation of conventional wisdom:

1.     Policies and processes

2.     Tone from the top

3.     Strong culture promoting speaking up

4.     Accountability

Let’s see how well I guessed. (Scout’s honor, I wrote this list before running this prompt.)

***Bated breath***

Four out of four!

Well, that’s that—do I even need to write this article?

If you know these things, blessed are you if you do them

Not so fast. It’s easy to list each of these items on a best practices checklist.

What’s hard is to do them—and do them well. Crossing these items off a list may prevent liability when something blows up—a non-trivial goal most organizations are wise to pursue. But avoiding liability is a low bar. When misconduct arises, it tends to derail an organization from its mission, creating churn and tainting a hard-won reputation. Wouldn’t it be nice if you could simply prevent bad things from happening in the first place?

The truth is, it’s impossible to fully prevent problems from arising. It seems built into how humans operate: sometimes we do the right thing—but all too often, we don’t. Even the best organization cannot control how employees, or even leaders, behave.

Investing in what you can control

But an organization can reap significant prevention benefits by treating these principles not as a checklist, but as investments in what can it control, building an ethical infrastructure which in turn, influences how people behave.

Let’s take a closer look at each item on our list:

1. Establish Clear Ethical Standards: Set clear and compelling expectations about what kind of behavior is permitted and prohibited through standards and policies that don’t just make rules, but reflect values and are easy to understand and follow. Ensuring people are aware of, understand, and connect expectations to a bigger picture is a baseline requirement for helping people who want to do the right thing succeed. Not to mention that it is significantly harder to have accountability when expectations aren’t clearly laid out.

2. Lead by Example from the Top: Just as policies and standards set formal expectations, the words and speech of leaders informally set expectations. They build culture, which can make it normal for people to do the right thing. This culture is built through thousands of often ordinary acts: a leader expressly asking for feedback, incorporating a reflection on ethical standards into a recurring agenda item for All Hands meetings rhythms, publicly praising someone’s courage in speaking up about a problem. It’s built into what is funny, what is celebrated, what is silently avoided. Leadership’s role is to ensure this culture is intentional, not accidental.

3. Create Safe Reporting Mechanisms: Even when an organization has clear expectations on paper, and leadership makes it normal to do the right thing, inevitably something will still go wrong. How can an organization make sure it hears about the problem in time to respond before it blows up? It probably won’t, without a well-publicized, easy to access, safe-feeling place to receive concerns, and a process that ensures the organization responds. This helps unearth issues so that an organization can reap the benefit of the final, critical piece of ethical infrastructure.

4. Enforce Consequences Consistently: All the policies, inspirational speeches about ethics, and reporting hotlines in the world won’t matter if people know the unwritten rule applies: when the right kind of person does the wrong thing, he or she can get away with it. Organizations can’t control who behaves badly, but they can ensure people are held accountable fairly—even when they are important, well-regarded leaders—rather than justifying conduct that falls short of organizational values and ethical standards in the name of the mission. 

The critical thing an organization can commit to is how it responds when something goes wrong, ensuring that 100% of reports are taken seriously, and that consequences are applied consistently when warranted. The ethical infrastructure is how it delivers on this commitment. While an organization cannot control bad behavior, by following through a commitment to consistent response it impacts how people behave.

Leading from integrity

But the language and action must work together. For example, if a leader says feedback is valued, but blows up when he or she receives it—people learn to question authority at their peril, a recipe for a scandal in the making to metastasize. This is why accountability is so important—if staff see people violate expectations without receiving consequences, they learn those rules can be broken with impunity, which leads to more bad behavior.

Which is why leadership is at the heart of an ethical infrastructure. Leaders have a powerful privilege and responsibility for setting the tone within an organization, not only in the precautions they implement, but who they are. Leaders who consciously prioritize building an ethical infrastructure while leading from integrity will create a liability shield—that gets far less frequent use, as doing the right thing becomes the norm.

But even AI knows: “when leaders compromise on ethics . . . it creates a culture where misconduct can flourish.” I couldn’t have said it better myself.

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If you have any questions about this article or need counsel on the issues addressed in it, please contact Jeannie Rose by emailing jeannierose@ch-llp.com.

The Top 4 Issues to Be Aware of When Doing an Internal Investigation

“So you are the great lawyer I’ve been told about! But, you are so young! I was expecting an old lawyer.”

With those words, the silver-haired senior-level executive of the customs broker I was investigating for bribery let me know that his guard was down. In fact, he

seemed relieved and almost eager to help me, a young lawyer that reminded him of his nephew.

This was exactly the reaction I wanted. We exchanged pleasantries in Spanish over a cup of coffee and proceeded to have a friendly free-flowing conversation. That conversation revealed that his company was bribing government officials in Latin America, he was a liar, and he had no idea that he had just given me the evidence I needed when I went up the chain to confront his boss. He never saw it coming.

There are many articles on best practices for conducting internal investigations related to bribery or fraud. However, at the core of any internal investigation— whether it be domestic or cross-border is—people. The people at the center of the investigation (employees, former employees, third party vendors, government officials or lawyers) are the key to unlocking the real story behind what has really happened. Faced with a whistleblower tip of bribery or fraud, a company will undoubtedly look at the underlying documents that paint a scattered picture of events, but it is the people that weave the documents together to tell the story. 

Here are some tips on the best ways to set-up witnesses interviews during an internal investigation for optimal effect.

 1. Start with the Low-Hanging Fruit.

Any good investigation looks like a pyramid. Ideally, start your internal interviews on the ground floor with lower-level personnel. Why? First, they will most likely be further removed from the fraud being perpetrated by senior management and thus, more forthcoming about facts.

Second, the ground troops may be actual witnesses to executive-level fraud and more than willing to blow the whistle on management if given an opportunity.

 Third, line employees possess great real-time information of the daily happenings within the company, where data is located, as well as a more accurate view of the “real” heirarcy in a company. Interviewing these witnesses will be useful in recreating who may be behind the fraud, the centers of power within a company that could have known of the fraud, and where the web of deceit extends.

2. Pick a Location that Puts Them at Ease.

If you are going to interview any company employee (be it lower-level personnel or senior executive), find a location that will put them at ease. If it makes sense, talk to them at their workplace in a discrete conference room or set-up a meeting at a neutral location. Do not conduct the interview at a lawyer’s office. Pick a location that is open, bright and pleasant to be in. Aside from location, be a good host.

Coordinate logistics (via phone, not email) so that food, refreshments and ample parking are available.

While it may seem trite: environment matters. You do not want your potential key witness to arrive at a location and feel instantly uncomfortable by the set-up.

Instead, you want to prime your witness from the start to feel good about what he or she is walking into and who they are meeting. Your interview and information will flow more freely if the witness is at ease.

For example, the interview that was conducted in the opening scene was held in a United States border town with Mexico, but in a beautiful Spanish style office adorned with Mexican art work, a friendly receptionist and plenty of food and coffee as hospitality. It set the tone for the “warm” conversation that took place thereafter.

3. The Interviewer Should Bring the Element of Surprise.

Let’s be honest, lawyers often think that the best way to get anything done is to be the loudest dog in the block. That may be the case in an adversarial proceeding with a person that can be easily intimidated to cave or in a cross-examination at trial. However, in most internal investigations, lawyers are dealing with witnesses from whom the lawyer wants information.

In such a scenario, the old adage is true: “you catch more flies with honey than you do with vinegar.” Thus, to get optimal information from a witness in an internal investigation, the interviewing lawyer should be non-threatening, friendly, and good with people.

As in the opening scenario, the senior executive that I was interviewing came with his guard up fully expecting to go toe-to-toe with a hardened lawyer. Instead, he found himself with a young friendly lawyer who treated him with respect. As a result, his apprehensions, anxiety and defensiveness melted away. In his mind, he had nothing to fear and information flowed my way. Information that was key for my later interviews and which confirmed to me that this friendly avuncular executive was lying.

4. Know Your Facts Cold.

Based on outward appearances, the attorney conducting your internal investigation interview should be pleasant and non-combative. However, behind the scenes, your interviewer should be prepared for anything. The single best way of preparing for the unexpected is to know the key facts cold.

In depth preparing would include:

• Collecting all key documents (especially emails and personnel files)

• Creating a list of key players

• Reviewing and analyzing prior interviews

• Diagramming organizational charts and hierarchy structure

• Compiling a chronology of events

• Mapping pertinent locations

• Charting key processes and relevant products related to the fraud

• Compiling a vocabulary list of key business terms

• Researching U.S. and foreign laws related to privacy, attorney-client privilege, and the myriad of legal issues touching on the proported fraud

• Creating an investigation plan that tracks key witnesses, issues, potential offenses, documents, and questions that need to be answered

Why prepare? Plain and simple, thorough preparation and knowledge of the universe of facts is the single best way for the interviewer to spot an inconsistency, contradiction or bold-faced lie. Moreover, preparation creates confidence. A prepared investigating lawyer will not be spending his or her time making sense of basic information, but will be thoroughly present to connect with the witness.

Before joining C+H, San Diego Partner Juan Castañeda spent years in Big Law and with the Department of Justice.  For more information on his background and experience, please visit https://ch-llp.com/about-juan-castaneda.

Non-Profit 101: Turning Your Non-Profit Vision into Reality

Five Questions to Ask Before Starting a Non-Profit

1. Have I actually thought through what kind of organization I want to start? 

   Deciding to “start a non-profit” presumes you have already answered a host of questions—and assumes a non-profit is the right approach for you. But is it? The legal form should be a tool to further your goals. Make sure you’ve thought through the implications before you start something new. The answers could change what you actually start!  

2. What am I trying to accomplish?

   To decide what kind of organization to start, get clarity on your goal. Just because you want to do good doesn’t necessarily mean you should be a non-profit, just like the desire to sell goods or services doesn’t necessarily make you a company. There are many ways to pursue mission, for example: non-profit, LLC with a social purpose, LLC owned by an existing charity, B Corporation (a form of entity signaling a company’s commitment to a financial and social bottom line), B Corp certification (which certifies a company meets certain social good standards).   

   What is your overall mission, the north star that will guide you long-term —and what are the tactics that may change over time? How will you fund your dream? Who will call the shots? Who do you hope to engage?  

   The more you flesh out your vision, the more you can answer . . .  

3. What advantages and disadvantages matter to me? 

   A quick search will give you the main advantages of being a tax-exempt non-profit: 

   • Tax benefits for the entity: it usually is not taxed on revenue, and may be exempt from tax in other areas, like property, sales, or hotel. 

   • Tax benefits for donors: people are often incentivized to make contributions because of the personal benefit they receive on contributions. 

   • Halo effect: non-profits may enjoy a reputational boost. People feel good about them. 

   But only you can decide how and when these matter to you, in light of your actual goals. For example, how important are the tax considerations for your donors if they don’t itemize taxes, or if your primary income isn’t from donations? 

   The main restriction is about what happens to the money: in a tax-exempt entity, profit goes back to the mission, and cannot be used for private benefit. Are you willing to forego personal profit and put all funds back into your mission? 

   Tax-exempt organizations are also subject to greater oversight and have less flexibility. For many, the trade-offs are worth it. Before you start, make sure they are worth it for you. 

4. Should I form something or join something? 

   Even if you want to do charitable work, is starting a new non-profit the best way to accomplish your mission? Forming a tax-exempt entity takes time and paperwork. There are avenues for accelerating launching charitable programs that might be a better fit, such as a fiscal sponsorship arrangement. 

5. Do I need help thinking through these questions?

   Getting clear, thoughtful answers to these questions will set the tone for whatever you launch. It may feel like a lot of pressure. But you’re not alone. All of these questions can be helpful to discuss with a trusted advisor who has walked through these questions before.  

   We’re here to help! To schedule a free 30 minute consultation, contact non-profit law expert Jeannie Rose Barksdale – jeannierose@ch-llp.com