Do I Need A Lawyer for My Non-Profit Organization?
A lawyer specializing in non-profit organization law has expertise in incorporation, maintenance, and tax filing requirements for a non-profit organization. Much like a corporate lawyer who specializes in corporate formation and maintenance, an attorney for the non-profit sector has specific knowledge that is tailored to non-profit entities.
A non-profit organization must ensure proper compliance of the rules and laws to maintain its status as a tax-exempt organization. Failure to do so can lead to the organization losing status as a tax-exempt organization and become liable for fees and penalties.
Navigating the Different Types of Non-Profits
There are many different types of non-profits. An attorney that specializes in this field can provide advice on the appropriate entity for the organization’s needs and goals. A charitable organization has different tax and legal obligations from a religious, political, or private philanthropic foundation.
Preparation of Legal Documents
A lawyer can prepare and file the appropriate forms with the government and Internal Revenue Service (IRS) to form the entity and take advantage of its tax-exempt status. A lawyer can also draft bylaws and amendments of the organization. Furthermore, a non-profit organization may also wish to file for trademarks, copyrights, or other intellectual property. An attorney can evaluate the organization’s intellectual property rights and advice on such issues.
An attorney can negotiate contracts with vendors, employees, and third parties. Additionally, an attorney can counsel the organization on liability issues so that litigation may be avoided or minimized.
Lawyers can also provide advice on management and maintenance of the organization. The organization will need to form a board of directors and appoint officers. Attorneys can advise board members, executives, and employees on compliance with various regulations to ensure that the organization’s status is maintained.
Choosing an Attorney
When choosing an attorney, choose one who is not already on the board. It may seem easy to consult with an attorney who is on the board of the organization, but this attorney will have a conflict of interest. As a board member and counsel to the organization, an attorney from the board cannot represent the organization in litigation and may even be called as a witness.
The best way to identify an attorney for consultation may be a referral from another organization that benefitted from their services, which is a tried and tested way to retain counsel. Other means of finding an attorney are through referral services organized by the local state bar association or through online portals. Having a non-profit attorney prepare the legal documents and advise on the appropriate tax-exempt entity for the organization should provide piece of mind, prevent common pitfalls, and set up the organization on a course for successful operations so that it achieves its goals.
MacMain, Connell & Leinhauser understands that non-profit organizations have unique needs. Our attorneys provide specialized knowledge for counseling such organizations. For an initial consultation, please contact us online or call us at 484-318-7106. Located in West Chester, Pennsylvania, we serve clients throughout Philadelphia and Chester County.
Starting a Non-Profit Organization in Pennsylvania
Starting a non-profit organization in Pennsylvania requires a few simple steps. Incorporation is initiated by filing with the Pennsylvania Department of State Bureau of Corporations and Charitable Organizations (“Department of State”) and payment of fees.
A non-profit organization is an organization that is formed for either a charitable, educational, religious, scientific or literary purpose. Most non-profits are formed for tax purposes and are commonly referred to as 501(c)(3) organizations because they seek to have tax-exempt status with the Internal Revenue Service (IRS).
By pursuing certain steps and maintaining some formalities, a non-profit organization can begin operations and enjoy tax-exempt status. To form a non-profit organization, prepare for the following:
Choose a name for your organization. The non-profit should identify itself by a name that is distinguishable from all other names of corporations, business entities and non-profit associations already registered. The Department of State can be contacted to determine if the proposed name of the organization already exists.
Choose at least one director. The non-profit should choose at least one director to be on the board of the organization. Directors are responsible for the governance of the corporation. Though only one director is required to register the non-profit with the Department of State, in order to obtain tax exempt status, the non-profit will need at least three directors. Directors should also be at least 18 years old.
Registered Agent. The director must find and name an individual who will be appointed as the registered agent for the organization. This individual is responsible for receiving legal notices on behalf of the organization. This person must be a resident of Pennsylvania and should maintain an office during normal business hours.
Articles of Incorporation. The non-profit organization will need to draft articles of incorporation and file with the Department of State. It also provides an online form that can be used to create the articles. The articles should provide the following:
- Name of the organization
- Address of the registered agent
- Stated purpose of the organization
- When it was formed
- Statement regarding members of the organization, if any
- Address and name of the incorporators of the organization
- Statement that the organization will not seek profits
- Statement that the organization is based on the Non-profit Corporation Law of 1988
- Name and address of the each of the incorporators of the organization
- The stated term of the organization
Filing and payment of fees. Once the articles are drafted, they must be filed with the Department of State along with a filing fee.
Docketing Statement. Along with the articles and payment of a filing fee, a Docketing Statement must be filed. This statement is a form provided by the Department of State requiring certain information about the organization.
Publication of the Articles of Incorporation. Incorporators of the organization must publish the Articles of Incorporation in at least two newspapers. The organization must keep a copy of these publications in its records.
Bylaws. The non-profit organization must also prepare bylaws by which the organization plans to operate. The bylaws must also comply with Pennsylvania laws. These bylaws must be kept with the organization and utilized in conducting meetings, electing officers and define duties and responsibilities of directors and officers of the organization.
Employer Identification Number. The organization needs to apply for an Employer Identification Number with the IRS. This number can be used to open bank accounts, and file tax returns and obtain tax exempt status with IRS.
Chester County Business Attorneys at MacMain, Connell & Leinhauser Offer Counsel for Non-Profit Organizations
The Chester County business lawyers at MacMain, Connell & Leinhauser have facilitated the formation of several non-profit organizations for our clients throughout Pennsylvania. Schedule a consultation by contacting us online or call our office at 484-318-7106. Our office is located in West Chester, Pennsylvania. We serve clients in Philadelphia, Chester County and throughout the state.
What Happens When a Nonprofit Dissolves?
Charitable organizations exist for all sorts of purposes. But each year, many of them must dissolve. Whether they dissolve because their mission is accomplished, or because they no longer have the funding to pursue their goals, or for whatever reasons the dissolution decision is made, there is a strict formula they must follow.
In certain ways, it is similar to the way a for-profit company dissolves; but there are additional factors involved. A nonprofit’s bylaws or articles of incorporation should include references about the dissolution process, and these require following.
However, many smaller nonprofits may not have included such instructions in their bylaws or articles of incorporation.
Federal and State Laws
When the nonprofit decides to dissolve, it must follow federal law, which applies to all such organizations, as well as the state law in which the organization is registered. State laws may vary, so it is important to obtain legal advice to ensure the dissolution conforms.
In most states, the board of directors must adopt a resolution and prepare a Notice of Intent to Dissolve. If the nonprofit has creditors, and most do, a Notice to Creditors is sent, informing them that the organization is dissolving. The state will have regulations on how long creditors have to file any claims with the nonprofit for money owed.
Some states may require the publication of a Notice to Creditors, as well as the Notice of Intent to Dissolve, in a newspaper in the county in which the nonprofit organization is headquartered.
Federal law requires that nonprofits distribute any assets held to another nonprofit organization upon the dissolution. No one on the board of directors, organizational members, or any private party may receive such assets. The nonprofit must file a final tax return with the IRS.
Considerable Planning Involved
Expect the dissolution of a nonprofit to involve considerable planning and to take a fair amount of time. The board must put together a planning group for the dissolution, which includes the president or executive officer. Before any type of in-depth planning gets underway for the dissolution, the board should hire legal counsel.
Once the board agrees on preparing a Notice of Intent to Dissolve, it must send articles of dissolution to either the secretary of state’s office, or that of the state Attorney General. Once that step is taken, the office in question issues a public notice.
Because of the federal law on asset distribution, the board must identify other nonprofits with a similar mission and inquire whether those organizations are interested in receiving the assets. Transfer of assets is complicated, and includes the need to inventory all such assets, including intellectual property. Many legal documents, such as contracts, are usually needed for this asset transfer.
The dissolution is not complete until all steps are finished, including the filing of the final Form 990 with the IRS. Even after the nonprofit has completed its day to day activities, some board action may prove necessary, even though the organization is no longer formally running.
If your nonprofit requires legal representation, contact the experienced nonprofit attorneys at MacMain, Connell & Leinhauser. Call 484-318-7106 or contact us online to schedule a consultation. From our office in West Chester, our experienced attorneys serve clients throughout Chester County and Philadelphia.
Running Background Checks on Church Volunteers
Gone are the days of “sacred immunity,” where churches and similar religious institutions were immune from legal liability. Over the last twenty years, the cultural and legal climate has changed, and churches are now a frequent target of litigation. Failure to conduct background checks is one of the top ten legal risks that churches face.
Sadly, many volunteers have criminal backgrounds and prey on churches that may be trusting and look the other way. Churches must be vigilant, because they serve vulnerable populations, including children and seniors, and handle cash that supports their mission and service work.
In Pennsylvania, background checks are mandatory for individuals who have direct volunteer contact with children.
Screening Volunteers for the Safety of Children
One of the most important duties a church has is to protect its children from harm. In recent years, the most common reason for churches to be involved in litigation was due to sexual misconduct of volunteers or church administrators.
Only adult volunteers who are responsible for the welfare of a child, and have direct contact with children, are required to obtain clearances. All volunteers are required to have a Report of Criminal History from the Pennsylvania State Police, and a Child Abuse History Clearance from the Department of Human Services.
If a prospective volunteer has lived out of the state of Pennsylvania in the last ten years, a federal (FBI) fingerprint based criminal history check, through the Pennsylvania State Police, is also required. Any volunteer who does not need to undergo federal fingerprint screening, because they have lived in Pennsylvania continuously for the last ten years, must affirm in writing that they are not disqualified from service based upon certain enumerated convictions.
You should consult competent legal counsel in determining as to which volunteers need to be screened.
Screening Volunteers to Avoid Financial Crimes and Embezzlement
Many churches have deacons, administrative assistants, accountants, and other volunteers who help collect and manage the church’s money. Without this, churches could not fulfill their missions.
Yet sadly, one out of every ten protestant churches have been victimized by embezzlers. Churches may screen volunteers who handle money for criminal records, work status validation, social media activity, education and licensing, credit report, and personal or professional references.
Sadly, running background checks may not be enough to protect your congregation. Many sex offenders are juveniles themselves, and thus are not subject to background check laws. Churches should always make sure that no child is ever left alone with a single adult. They also should ensure that any offices where money is stored or handled, or where children are located, are visible from the outside. For example, they should have windows or opened doors.
Contact MacMain, Connell & Leinhauser by filling out an online inquiry or calling us at 484-318-7106. We go above and beyond, because we appreciate the many benefits that churches and other religious institutions bring to the communities that they serve. We bring our personal experiences serving religious organizations and non-profits to provide the specialized counsel that our local religious institutions need and deserve.
Forming a Non-Profit Corporation
Non-profit charitable corporations are formed for a wide variety of reasons. Non-profit corporations, also called 501(c)(3) corporations, are tax-exempt from income, sales, and property taxes. A designation of a “non-profit” also may allow a corporation to obtain certain private and public grants or qualify for low-cost postage rates. Forming a non-profit company to undertake charitable work will also secure liability protection for the company’s officers and director.
Creating a legal non-profit corporation involves several steps. Hiring an experienced attorney to help you navigate the process is often the quickest and most efficient way to handle the formation of a non-profit corporation.
Naming Your Non-Profit
One of the first steps in forming a non-profit is choosing a name for the corporation. Each non-profit corporation must have its own unique name, different from any other company incorporated within the state. Checking with your state’s corporations office (often located in the Secretary of State’s office) to make sure there is not another corporation with that name should be the first item on your to-do list.
All non-profit corporations should end with a corporate designator such as “Corporation,” “Incorporation,” or “Limited.” Following the selection of the non-profit name, the corporation may apply for a federal tax identification number (FEIN) from the Internal Revenue Service (IRS).
Articles of Incorporation
Another important step in forming a non-profit corporation is drafting and filing the corporation’s “Articles of Incorporation.” This document lists basic information about the corporation, such as name and office address, and must include specific language in order for the corporation to obtain its tax-exempt status. The requirements for the Articles of Incorporation vary state by state.
An advantage of a non-profit corporation is its tax-exempt status. In order to qualify for that status, a federal 501(c)(3) tax exemption application must be filed with the IRS. There also is an alternative online application, Form 1023-EZ, titled the Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, that can be used in certain circumstances.
Determining which form to use, and how to complete the lengthy Form 1023 is frequently the most complicated part of forming a non-profit corporation. Often, this requires the assistance of an attorney to determine if you meet the IRS eligibility requirements. Depending on the state of incorporation, there may also be a separate state tax exemptions application.
Conducting Non-Profit Business
Forming your non-profit will also require the drafting of by-laws, which will set forth the corporation’s internal governing rules with respect to procedures for meetings, voting processes, and the election of directors and officers. Non-profit directors are responsible for policy and financial decisions and need to be appointed according to your state law.
Under most state laws, non-profits typically have one director. Directors will facilitate board meetings during which minutes need to be recorded and saved.
In order to conduct the business of the non-profit, some non-profit corporations will also need to obtain sales tax permits or zoning permits. In most states, the non-profit must also submit a Charitable Solicitations Registration, prior to soliciting donations.
If you are interested in forming a non-profit corporation or need additional information about non-profits, an experienced Non-Profits lawyer at the MacMain, Connell & Leinhauser can assist you. To schedule a confidential consultation today, call us at 484-318-7106 or contact us online.