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Students Learn How Lawyers Can Serve Social Enterprises

By Bibeane Metsch-Garcia
April 29, 2015

About 10 trees are planted for every 12 pounds of hair—which provides nitrogen to composting material—that is left over from cuts at the Social Club Grooming Company in Detroit. With about 240 pounds of leftover hair each year, that means that 200 trees are planted annually.

Sebastian Jackson, a barber and the founder of the Social Club Grooming Company, began thinking about alternative uses for the barber shop’s waste after he learned hair was being used to clean up an oil spill.

Students from Michigan Law recently learned about the effort when they took a trip to the barber shop as part of a mini-seminar, Social Enterprise, Urban Entrepreneurship and Legal Approaches for Social Transformation, taught by Professor Dana Thompson, founder of the Entrepreneurship Clinic at Michigan Law.

The class focused on the attorney's role in working with social and urban entrepreneurs who are using their ventures to solve some of society's most challenging issues. Students read Practicing Law in the Sharing Economy: Helping People Build Cooperatives, Social Enterprise, and Local Sustainable Economies (American Bar Association, 2013) by Janelle Orsi and "Which Legal Structure is Right for my Social Enterprise? A Guide to Establishing a Social Enterprise in the United States" by Morrison & Foerster LLP.

During one session, students met with Ari Weinzweig, a co-founder of Zingerman's Community of Businesses, at Zingerman's Roadhouse to learn about his philosophy of the company's business model. The company's vision for the future includes goals such as "changing our future," "radically better finance," and providing "opportunity and responsibility for everyone."

In addition to meeting social entrepreneurs and their advisers, the seminar exposed students to popular options for entity structures of social enterprises. These include low-profit limited liability companies (L3C) and benefit corporations—the latter of which does not yet exist in Michigan, though legislation has been proposed. Students also explored the question throughout the seminar of how to define a social enterprise by reading about many companies with varying social missions from Toms Shoes to the Empowerment Plan.

At the Social Club Grooming Company, for example, the social enterprise seeks to cultivate a sense of community and to connect people from various cultural backgrounds by hosting "shop talks" featuring people from diverse backgrounds who tell their stories while getting a haircut. During their visit, Michigan Law students met with Jackson, his attorney, Tifani Sadek, and Jamie Shea, MBA '12, managing director of investments at Mission Throttle.

Shea, who has a background in public lands as well as nightclubs and restaurants, described the difficulty for investors of valuing social change and measuring relationships that are fostered by some social enterprises. He suggested that the next step in social enterprises is to continue to leverage traditional markets in the private sector as a way of getting investments for socially conscious businesses. He pointed out that Generation Y is more interested in and focused on impact investing as an alternative to the traditional model of accumulating wealth, and then giving it away through charitable donations.

These new social enterprises will need the help of lawyers, which is what prompted Thompson to offer the course. Students heard from Sadek about how she transitioned from practicing general commercial litigation at a large Detroit law firm to hanging out her own shingle and to serve social entrepreneurs in Detroit like Jackson.

Sadek prepared for the transition by taking Continuing Legal Education (CLE) courses on transactional law, and learning from other firms that provided the types of services she was interested in offering as well as from her clients who are themselves entrepreneurs and small-business owners. Students learned from Sadek that an attorney working with social enterprises must function as not only a legal adviser but also a business consultant and strategist for her clients.

She begins her relationship with clients by putting an emphasis on making their ventures financially sustainable and then ending with the legal conversation, she said. What entity she ends up forming for a client depends on several business questions, including: how much control do they want over the company?, how much money will they be making?, and what types of investments will they seek?

This is an exciting time for law students and attorneys interested in social entrepreneurship, she noted, as there are increasingly more opportunities to become involved in this burgeoning field.

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