Starting a nonprofit: There’s more needed than a desire to help

All of my nonprofit clients have one thing in common—they want to help.  They have a cause they’re passionate about and they want to do more than donate their money, they want to have their hands in every aspect of helping.  They are ready to devote their time and energy to make an impact on their cause, whether it’s helping children or animals, supporting veterans, revitalizing their community, assisting seniors or people with disabilities, educating through art, and other very worthwhile causes.  They contact an attorney to set up the paperwork, and once that’s finished, they can focus solely on helping.   And, that is the problem.

Forming a tax-exempt nonprofit is a business.  It is not something where you file a few forms, wait for acceptance, and the business aspect is overthe “business aspect” is ongoing.  It is, in my opinion, more than a business because, once tax-exempt, you belong to the public, must be transparent to the public, must operate in accordance with state corporate law, and you will have Attorney General and IRS oversight.

Consider the following before deciding to start a tax exempt nonprofit organization:

I.  Have a business plan.

  • What is your purpose and mission?
  • Who is your audience?
  • What are your financial goals?
  • Do you have the resources to start this? In Ohio you must:
    • Form a nonprofit corporation, which costs money;
    • File for tax-exempt status with the IRS, which costs money; and
    • Register with the Ohio Attorney General.

II.  Form a Board of Directors.

  • You should choose people dedicated to your cause.
  • You should choose people who have business, legal or accounting experience.
  • You should choose an odd number of people to ensure no tie vote.

III. Legal

  • You should have an attorney help you form your corporation
  • You should have an attorney advise on developing organizational documents such as bylaws, waivers and releases, volunteer forms, contracts.
  • You should have an attorney advise the board on their rights and responsibilities, activities that could jeopardize tax-exempt status, legal issues in fundraising, and other legal matters.

Starting a nonprofit is starting a business.  It should be run like a business.  Nonprofit organizations can make a profit, what differs is where the profits go.  If you are ready to run a nonprofit, I suggest researching articles at National Council of Nonprofits, or Nonprofit Hub, and develop a business plan first, so you are well-informed on what is required.  Running a nonprofit successfully will allow you to have a greater impact on your cause.

If you would like to form a tax-exempt nonprofit or have additional questions, contact me at julie@juliemillslaw.com.

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Estate Planning—Crucial for Business Owners

Do you own your own business?  Are you about to join the world of business owners?  If yes, then this information is crucial for you.

Most people who contact me for estate planning know the basics of what is needed–a last will and testament (“will”), possibly a trust.  Business owners need to engage in similar planning for what happens to their business if they die, yet many clients sit down to discuss post-death planning for everything but their business.  Providing for the future of your business without you is important to your business, and equally important to your family.

Real-Life Scenario.  Jim (not his real name) started a remodeling business.  He fell through the roof of a dilapidated house and died (not really—he is alive but his possible death is a situation we discussed).  Jim did not have a will, or any documents spelling out what happens to his personal or business assets if he died.  As with your personal assets, your business assets are distributed to your heirs at death if you do not have a will.  It is entirely possible that the remodeling business’ assets would be distributed to an heir who is not knowledgeable about, or remotely interested in, remodeling houses or running a business.  If Jim’s business has employees or investors, serious issues with business matters might develop if he died because of the business’ operations being put on hold or left “up in the air” while the probate process proceeds.  It could take months to a year until probate is complete and the business either finds a new owner, is sold, or dissolved.

“What should I do?”

  1. Advice is basic: specify who you want to take control of running the business, and what you want to happen to your interest in the business. The best method to accomplish this planning is, in my opinion, a buy-sell agreement.  This agreement controls everything from who would receive shares of the business, what would happen to the business’ assets, and how ownership would transfer to another person or people.  It is your business’ “last will and testament.”
  2. What if you want your heirs to inherit the value of your interest in the business but not any control in it? Jim, the remodeler, might want to provide his grieving spouse with money from his business but knows she would not want to quit practicing law to remodel houses, or run a business.  In this case, consider purchasing buy-sell insurance. Business partners or investors could purchase Jim’s share of the business’ value which would provide Jim’s wife (or heirs) with money.
  3. Prepare a business succession plan. Designate who will run the business and a couple of alternates.  Detail the business’ assets, liabilities, future ventures, and everything people taking control and ownership of the business should know if you are not there to tell them.

Preparing for the future of your business is as important as preparing for the future of your loved ones should something happen to you.  Business and family assets are often intertwined, requiring plans to determine what will happen to both.

Contact me at julie@juliemillslaw.com to discuss estate and business succession planning.

Home-based food business in Ohio–how to do it legally

I love practicing law, but if I had the recipe for my friend’s grapefruit marmalade, or family member’s pepper butter, I’d be very busy making these items and making a lot of money selling them with my home-based food business.  If you want to make food items to sell, what are the rules?

Many people make goods to sell at their local farmer’s market.  This has spawned the “cottage food” industry—making food to sell at local venues.  The first thing to keep in mind is that, if you want to ship food outside of your state, you typically need to meet more requirements (licenses, inspections, labeling, etc.) than what is required under cottage food industry regulations, because these regulations pertain to making specific items typically from a home kitchen, and selling locally.

Let’s assume, then, that you want to make food items in your kitchen and sell them at your local farmer’s market.  I will also assume you reside in Ohio, the state where I practice law.  (If you reside elsewhere, be certain to check your state’s requirements for home-based food business.)  Ask yourself the following questions to determine whether you need licensed, and what other requirements you might need.

  1. Is your product included in the “cottage food” list? These are non-potentially hazardous food items listed specifically in Ohio Administrative Code Section 901:3-20-04:
  • Non-potentially hazardous bakery products (such as cookies, breads, brownies, cakes, and fruit pies)
  • Jams
  • Jellies
  • Candy (including no-bake cookies, chocolate covered pretzels or similar chocolate covered non-perishable items)
  • Fruit butters
  • Granola, granola bars, granola bars dipped in candy
  • Popcorn, flavored popcorn, kettle corn, popcorn balls, caramel corn (does not include un-popped popping corn)
  • Unfilled, baked donuts
  • Waffle cones
  • Pizzelles
  • Dry cereal and nut snack mixes with seasonings
  • Roasted coffee, whole beans or ground
  • Dry baking mixes in a jar (for making items like breads and cookies)
  • Dry herbs and herb blends
  • Dry seasoning blends (such as dry barbeque rubs and seafood boils)
  • Dry tea blends
  • Flavored honey produced by a beekeeper, if a minimum of 75% of the honey is from the beekeeper’s own hives;
  • Fruit chutneys;
  • Maple sugar produced by a maple syrup processor, if at least 75% of the sap used to make the maple syrup is collected directly from trees by the processor;
  • Waffle cones dipped in candy;
  • Dry soup mixes containing commercially dried vegetables, beans, grains, and seasonings.

If your food product is specifically included in this list, it is a “cottage food” and you do not need a license to sell it.  On the packaging, however, you must state that the product is “home produced.”  (Click here for more labeling and packaging information.)

  1. Is your food product not a cottage food? Then you need licenses and possibly a home inspection.
  • If you are making foods considered potentially hazardous, then you need to comply with Ohio’s regulations for “home bakeries.” Potentially-hazardous foods include baked goods that need refrigerated, such as cheesecakes, filled doughnuts, cream and custard pies.  You will need licenses (Ohio Department of Agriculture, and local health department) and a home inspection, but you can sell outside of Ohio.
  • Certain foods require production in licensed facilities, or in canneries. These include salsas, BBQ sauces, canned vegetables, frozen foods and homemade hummus, which must be produced in a licensed facility.  In fact, salsas, BBQ sauces, and canned vegetables must be produced in a licensed cannery.

For more information on home-based food businesses in Ohio, visit the Ohio Department of Agriculture’s websiteContact me at julie@juliemillslaw.com to discuss starting your own home-based food business.

 

 

Want to start a small business? Keep it simple

I am so energized by entrepreneurs.  Someone who decides to take an idea or a desire to do or provide something, start their own business and risk so much, then work hard to turn the business into something that will provide for him- or herself, and maybe a family…I enjoy providing as much as I can for clients who ask for my assistance in realizing these goals.

Starting your own small business can be daunting.  While it does take time, energy and money, all three of these requirements can be kept simple, minimal.  Many would-be business owners get completely bogged down over-researching and over-planning the start-up of their business.  Unless you plan to court investors or venture capitalists, then keeping it simple might be the recommended plan for starting your small business.

  1. Write a one-page business plan. Business plans help you formulate your vision and communicate your plan with others.  I’ve seen people omit this step altogether, or become mired in creating an unnecessarily in-depth plan.  You need a business plan for yourself to stay on track, plan goals and develop a financial budget, so I do not recommend skipping this step.
    • What is your mission (why does your business exist)?
    • What are your goals or objectives that will help you accomplish your mission?
    • What steps will you take to meet your objectives?
  2. Develop a budget. Keep start-up costs as low as possible.  How much money will you need to get up and running?  Take that number and add 20% to account for things you hadn’t anticipated.  How long can you run your business before you need to turn a profit?
  3. Select a business entity. Should you form a limited liability company (LLC)? Partnership?  C-corporation?  Elect s-corporation status?  Operate as a sole proprietor, without forming a business entity?  In some states, filing fees for forming an entity are steep.  Consequently, some articles recommend operating as a “sole proprietor” (no separate business entity) for a few months until you can afford incorporation filing fees.  Ohio’s incorporation filing fees are not steep (generally under $200), and the personal exposure risk in operating as a sole proprietor is too great to justify not incorporating if you are starting a business in Ohio.
  4. Operate as a business.
    • Open bank accounts in the name of the business and keep business money completely separate from personal money.
    • Get letterhead and business cards.
    • Sign all business-related matters as “John Doe, President” or whatever title you choose.  Signing just your name might subject you to making a personal guarantee.
    • Get an employee identification number (EIN) even if you do not have employees—you might need it for IRS or other matters.
    • Get a website.

If you want more information on starting a small business, researching the Small Business Administration website, and your state’s Secretary of State’s website, are good places to start.

If you would like to discuss starting your own small business, please contact me at julie@juliemillslaw.com, or via my office’s Facebook page at https://www.facebook.com/juliemillslaw/. 

 

The Service Dog at Outback Steakhouse

I see more confusion with laws covering service animals than almost anything else.  Most surprising is when attorneys are dispensing incorrect information (this article is replete with incorrect information).  Business owners who conduct their own research (even on reputable sites) or consult with their attorney still get conflicting advice.  So, what is the law on service animals for businesses?

First, businesses contemplating their rights and responsibilities regarding service animals are under the coverage of the Americans with Disabilities Act (ADA).  Businesses are “places of public accommodation” under the ADA and include restaurants, hotels, stores, medical offices, theaters, schools, recreation facilities…  If you are thinking about your friend with an emotional support rabbit in her apartment, or the woman who took her emotional support pig on the airplane with her (true story.  Pig defecated in the aisle and caused passengers to get sick), then this post does not apply to you.  The rabbit in the apartment and the pig on the plane are both under coverage of different federal laws.

Second, the only species that businesses are required by the ADA to accommodate are dogs and miniature horses.  Yes, miniature horses are about the size of large dogs, easily trained, and typically have more than double the working life (24 years) than a dog (10 years).

Third, a service animal should be almost invisible to patrons, completely attune to its handler.  A dog running around, decked out in overly-obvious service dog vests, running up to others, is likely not a service dog.  The yellow lab I saw at O’Hana at Disney World that was covered in service dog vest and patches, and had his front paws up on the table while looking at its person and begging for food—not a trained service dog.  The large Great Dane sitting in a booth at Outback Steakhouse, eating off a plate?  Service dog or not, the restaurant was not required to permit the dog to eat at the table and off of a plate.  In these instances, businesses can ask the handler to remove the animal.

Myths about service dogs:

  • They must be registered or certified. (No.)
  • They must have “papers.” (No.)
  • They must wear identifying vests, or other garb. (No.)
  • They must be formally trained.  (No.)
  • They can be made to wait outside while their handler eats or shops inside. (No.)
  • They cannot go into hospitals. (They can go to into hospitals, including staying in the hospital room, accompanying to medical testing.  They can be refused into “sterile’ areas such as operating rooms and burn units.)
  • They cannot go into food prep areas. (If the public can go there, a service dog can go there.  The kitchen, where customers can’t go?  Then no.  The kitchen, like at Buca di Beppo that has a table for dining that is situated basically in the kitchen?  Then a service dog can go to that table.)
  • They can’t be pit bulls. (They can be, and they are.)
  • They aren’t permitted somewhere if someone has allergies or fear of dogs.  (Not true.  The Department of Justice specifically states that allergies and fear of dogs are not valid reasons to exclude.)

With very, very few exceptions, a service animal can go wherever its handler or the public goes.  A service animal is not a pet and is, under the law, no different than other medical equipment such as a wheelchair or oxygen tank.  Federal law such as the ADA trumps state law and local codes, including health codes, zoning laws, city codes, breed ban legislation, and other state and local laws.

Contact me with any questions at julie@juliemillslaw.com.

Authorized user on a dead person’s credit card—“but Dad said I could…”

Dad dies.  His adult daughter is an authorized user on his credit card, and Dad gave her permission to use the card for whatever she wanted.  Dad happily paid the monthly bill.  Dad dies and Daughter keeps using the card, thinking that she has always used it and thought she still could.  Or, in many cases, she is the executor of his will and uses it to pay for bills or other expenses related to Dad’s final expenses.  Permissible?  Obviously (at least to me) not, but it happens frequently.

An authorized user’s use of a credit card after the primary account holder dies is illegal.  Under state law, it is considered fraud, and is no different than finding a stranger’s credit card and using it.  The authorized user could face jail and, or fines.

The terms of use for credit cards state, generally, that an authorized user’s privilege to use the card ends automatically upon the death of the primary cardholder.   If an authorized user continues to use the card after this privilege ends (cardholder dies), such use constitutes the authorized user’s agreement to pay the bill which might include the entire balance, not just what the authorized user bought.

For instances where an executor who is an authorized user with good intentions uses the deceased’s credit card to pay bills, the end result—liability on the authorized user—might not change.  Daughter/Executor cannot use Dad’s credit card after his death to pay any of his outstanding medical bills, credit card bills, utility bills, etc.  Executors must pay expenses and other estate bills from assets of the estate.  If there are no assets of the estate, then the estate is considered insolvent.  Racking up the balance on a credit card of a deceased person, whatever the reason, will result in liability for those charges, and perhaps the entire card balance, on the authorized user, including (in this example) the executor.

If you are an authorized user on a credit card, notify the credit card company immediately upon the death of the primary cardholder.  Using the primary cardholder’s credit card after death when you have no right to do so will likely have no good outcome.

Contact me at julie@juliemillslaw.com or message me through http://www.juliemillslaw.com with any questions.

Can our group hold fundraisers?

Yes.  Really, you can do anything you want.  The question is, should you?

I had a parent of a scout-like troop ask if the group should become a nonprofit in order to hold fundraisers.  The answer depends upon who the group will benefit, what does the group want to offer donors, among other considerations.

  1. A nonprofit is a state-formed entity.  To gain tax-exempt status (group does not pay certain taxes such as federal income tax; donors can take a deduction for donation on their taxes), the nonprofit needs to file for exemption with the IRS.  The typical status you see is a 501(c)(3) charity.
  2. A tax-exempt nonprofit can only be formed to benefit the public (generally).  For example, such an organization can be formed to fight childhood cancer, but cannot be formed to fund just Timmy’s cancer treatments and medical bills, even if you give away any “leftover” funds.
  3. Anyone can fundraise (note that your state’s Attorney General will want to know if you fundraise, likely regardless of whether or not you are a nonprofit, or tax exempt).  The issue is what is offered to a donor.  “Donations are tax deductible” can be offered only if you have tax-exempt status.  You could hold a spaghetti dinner to benefit Timmy above, but if you are not tax exempt, you cannot say to donors that their donations are tax deductible.
  4. Becoming a tax exempt nonprofit is not something to consider unless you are ready to essentially run a business.  You must first incorporate with your state, then apply for tax exempt status with the IRS.  In Ohio, a nonprofit must have a minimum of 3 board of directors, must file articles of incorporation, should have organization bylaws, hold regular meetings and keep corporate minutes.  A nonprofit is a corporate entity (C-corp, LLC, etc.), and by applying for tax-exempt status with the IRS, you are asking the federal government to exempt your corporation from paying certain taxes.

For smaller groups who still want to become tax exempt, the IRS has shortened their application by introducing the form 1023EZ a couple of years ago, see http://www.irs.gov.  For information on forming nonprofit organizations in Ohio, see http://www.sos.state.oh.us/sos/upload/publications/busserv/Nonprofit.pdf.  Also, read what the Ohio Attorney General has to say about nonprofits:  http://www.ohioattorneygeneral.gov/Business/Services-for-Charities.