Nonprofits have been doing wonderful work for our communities for ages. Nonprofits are typically on a shoe-string budget, especially starting out, so sometimes they can be weary of hiring an attorney due to the added cost and expense. Just like any other organization or entity, nonprofits are businesses. Well, businesses with a little more red tape and regulations. Amber has served on multiple nonprofit boards, represented nonprofits as a lawyer, and formed a nonprofit of her own.
A nonprofit lawyer is in a unique position to be able to be proactive and identify issues that may come up or know what to do when issues outside the organization's control pop up. Here are five benefits to having a nonprofit lawyer either on your Louisiana or Mississippi nonprofit's board or utilizing their services:
"Step 1: Form a nonprofit. Step 2: Instant tax exemption status, right?"
Oh sweet summer child, no. It is so much more than that.
Your formation documents, which range from $25-$100 to the Secretary of State, are vital. If they do meet IRS standards during your tax status application, they must be amended further causing you even more costs that could have easily been avoided.
The biggest question I ask folks at the outset is "Why do you want this organization to be a nonprofit?" Some folks think it means folks will donate hand over fist to them. That's not always the case. You want a lawyer to look for grants to see if they are available for what you want to do; if not, you may want to reconsider.
If you're a nonprofit you can't just close up shop and keep all the assets and cash. You either have to donate it to another nonprofit or it goes to the State.
You are going to need to make sure no one else is using your name nationally and locally, ensure no copyrights and trademarks exist, form by-laws, protocols, conflict of interest standards & disclosures, meeting schedules, standard operating procedures, and get board member positions filled.
Do you want to be a private foundation or a public charity? That is critical to the type of funding and tax exempt status you can qualify for down the road and things you need to consider right out the gate.
You must apply for a tax exempt status with the Internal Revenue Service after formation of the nonprofit. You can be a 501(c)(3) or 501(c)(4). It can take up to six (6) months for the IRS to review your application and the application sure isn't quick or easy.
There is specific language you will need to include along with very specific dissolution and conflict of interest protocol before the application will be approved. A Slidell nonprofit lawyer or CPA who has done it before is going to save you a lot of headaches. You have to stay in compliance after being approved as the IRS can revoke your status and ask for audits.
The Pension Protection Act of 2006 put in place a system by which tax-exempt organizations’ tax-exempt status would be revoked automatically if the organization failed to file three consecutive information returns (IRS Forms 990, 990-N, 990-EZ, or 990-PF). A lawyer can make sure you're aware and be in contact with your CPA to ensure it gets filed.
The user fee for Form 1023 is $600 and for Form 1023-EZ is $275. That's not a small amount of change for a nonprofit starting out to lose if the application is done incorrectly.
A nonprofit lawyer can make sure you have all the appropriate documents in-house and being sent outside of the organization to keep your tax exempt status in place and avoid legal liability.
Of course there are contracts or agreements between vendors, distributors, and the like, but there are also:
A big pitfall often seen are when nonprofits erroneously list something as a donation but it is really consideration for a contract (verbal or written). Your nonprofit will get into some serious hot water if that happens.
Yes, you are a nonprofit but that doesn't alleviate you from running a "business" and having employees. Worker's Compensation, intentional torts, negligent hiring and retention, Fair Labor and Standards Act, FMLA, bonus/severance/retirement payments.... they all come into play. A nonprofit lawyer can help you run the nonprofit and those who help you correctly.
This one is pretty self explanatory isn't it? Most lawyers working with a nonprofit will do it pro bono (for free) or at a reduced fee schedule. Some nonprofits put attorneys on their boards to ask for advice, but it's still a good idea to get unbiased outside counsel when certain issues arise to make sure your nonprofit is doing what it needs to remain in compliance with all state and federal regulations.
Need help navigating nonprofit issues in Louisiana or Mississippi?
Want to get started with a paid business consultation with Amber & Tubbs? You can shoot us an email to start a conversation or reach out to our Assistant Brielle via phone or text at 985-265-7069 to schedule or get pricing information.
Want More Amber & Tubbs? Please Follow Us Online:
Amber's Facebook
Tubbs' Facebook (yes you read that right)
Our Instagram
