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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The IRS begins scrutinizing tax-exempt organizations more closely

Charitable organizations, typically recognized as 501(c)(3) organizations, are beholden to the public financially and otherwise, which is one of the trade-offs for being exempt from paying most taxes.  The IRS and the Attorney General in each state ensure that tax-exempt organizations are acting, in a very broad and general sense, “reasonably.”  Focus is generally put upon compensation of key people (directors, officers), and private inurement (benefiting privately).  Tax exempt organizations need to review their practices because, in my opinion, when the IRS announces “closer scrutiny,” audits are forthcoming.

Read this article to learn more about what the IRS will be scrutinizing, and steps for your organization to take:

https://www.benefitslawadvisor.com/2018/03/articles/irs/irs-announces-heightened-scrutiny-for-tax-exempt-entities/

Holding an event–waivers and releases

“I am going to plan and host a fundraiser for our child’s youth group.  We plan to have obstacle courses with adults on tricycles and other fun and crazy activities.  Should I have people sign a waiver?”

This was a real question and I’m posting it here because a lot of parents are holding events to raise money to benefit their kids’ activities.  Some activities are funded by the school, others are not and rely upon parents raising money to keep the activity going.

Waivers and releases are definitely necessary if you are holding an event where you invite people to an event where there is a risk of harm.  There is a general belief that a waiver-release provides little protection against a lawsuit by an injured party–true in some jurisdictions.  Ohio, however, has case law providing language that, if contained in the waiver-release, provides fairly strong protection.

Who does the release cover–the participant only?  (Not recommended.)  What activities are covered?  Who signs the document?  What if the participant is a minor?

Downloading a general waiver-release from a Google search might offer little protection in Ohio.  This is where contacting an attorney in your state to provide you with a state-specific document with the proper language is the best advice you can receive.