Nonprofit organizations often bypass much-needed legal services because they're operating on a limited budget. But it's often cheaper to avoid problems than to fix them. While many tools are available to help form a nonprofit without a lawyer, every nonprofit is unique. It's all too easy to go astray, for example by:
(1) Forming the wrong type of business. You'll need to choose between forming a nonprofit corporation or some other association or legal entity. Each has advantages and disadvantages. If you form one that turns out not to fit your organization’s activities, you'll have to spend time and money fixing this. A brief consultation with a lawyer can help determine which to choose.
(2) Failing to follow applicable laws. Nonprofit organizations must abide by both state and federal laws, the applicable portions of which can be difficult to find, combine, and interpret. For example, nonprofits are required to be transparent with how they spend their funds, and implement strict financial record-keeping systems. A lawyer who understands the complexities can guide you.
(3) Not including proper language in internal documents. Nonprofit corporations must adopt bylaws and a conflict of interest policy, using specific language, in order to receive tax exemption from the IRS and have their articles of incorporation accepted by the state where they do business.
(4) Using the wrong type of contract or policies. Let's say the board of your nonprofit decides to require each member to spend ten hours a month fundraising. If that’s not stated in the board manual, there’s no way to hold board members to that promise. While sample policies for such purposes can be found online, a lawyer is in the best position to draft or review such a policy and make sure it complies with state law.
(5) Improper filings. A lot needs to be filed when you form a nonprofit organization; for example, with the state where your nonprofit will be operating, as well as with the IRS, for tax exemption. Mistakes can extend the time it takes to form your nonprofit and get it operational.
(6) Not considering issues with nonprofit’s name and logo. You can start the research process as to whether another nonprofit is already using your chosen name or logo on your own. But if you discover that another nonprofit is using a similar name or logo, you'll probably want a lawyer to analyze whether you truly face trademark issues, so as to prevent a legal showdown and expensive rebranding.
We've been representing nonprofit organizations and churches for 23 years. If we can be of service to your organization, give us a call at 253.858.5434 to set up an appointment today.