Nonprofits play an essential role in addressing social needs, and Apex Corporate Law helps nonprofit organizations navigate the legal requirements necessary to operate and grow. Serving clients in New York, Delaware, and beyond, we handle the legal complexities so you can focus on advancing your mission.
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Non-profits
The Basics of Non-profits
A nonprofit organization is a distinct type of entity formed to pursue a charitable, educational, religious, or other public benefit purpose rather than to generate profits for owners or shareholders. Instead of distributing earnings to shareholders like a for-profit corporation does, non-profits reinvest their money back into their mission/ Non-profits still need to manage money and make savvy business decisions, but the end game is public benefit, not private gain.
Non-profits are the backbone of societal gaps, tackling issues often ignored by for-profit sectors and government. In exchange for the public good they do, there are numerous advantages which are granted to non-profits.
Tax Exempt Status: non-profits are able to get tax exempt status on money related to their non-profit activities, through IRS code 501(c)(3), which shields them from federal income taxes on money related to their nonprofit activities.
Incentivize Fundraising: non-profits are able to issue tax receipts to their donors, allowing donors to write off their donations.
But there are certain rules which must be followed:
Keeping It Clean: To keep their tax exempt privilege, non-profits must stick to their guns—strictly mission-related activities. Start wandering into business ventures not related to the mission, and you might start owing business income tax.
No Political Campaigning: They must steer clear of political campaigns. Throwing their weight behind candidates could be the fast track to losing tax-exempt status.
Frequently Asked Questions
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The following are some essential steps in creating your nonprofit.
Define your mission: Every nonprofit must have a raison d’etre —so what’s your cause?
Establish your board: Same with a corporation, you have to assemble a board of directors. With non-profits, you should ensure that the board is at arm’s length, which will ensure outside parties there is accountability and oversight.
Filing Your Articles: Incorporate in your state by filing the necessary documents.
Tax Exempt Status: Once you are incorporated, you can apply for tax-exempt status with the IRS by submitting Form 1023.
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Structurally, a non-profit is quite similar to the for-profit corporation.
At the top, you have the board of directors—these are the strategists and overseers. They set policies and make sure the non-profit sticks to its mission.
Below them, the executive team, led by the Executive Director, handles the day-to-day operations.
The structure should support your non-profit’s goals, be compliant with state and federal laws, and be transparent enough to maintain public trust. A reputable and trustworthy exective team is essential to the longevity of your nonprofit.
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Absolutely, but here’s the kicker: any profits need to be reinvested into the organization's mission. Think of it like this: a non-profit can earn money just like any business, but instead of doling out dividends, they double down on their commitment to their cause.
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Every business needs employee to run it, and as the executive of a non-profit, you are certainly entitled to a competitive salary.
However, keep in mind that this salary is subject to review by the board, as well as other key stakeholders who will want access to your non-profits financials. Paying executives too much can drive away potential donors.
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Non-profits need to file an annual report with the IRS, known as Form 990. This form details their finances, activities, and governance, showing the world that they’re playing by the book, and that their money is being used to support their cause.
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Playing fast and loose with IRS rules can lead to some serious headaches. If a non-profit steps out of line—whether by engaging in excessive lobbying, participating in political campaigns, or failing to file the right paperwork—they risk losing their tax-exempt status.
Once tax-exempt status is lost, it can be very difficult to regain, so it is very important to stay on top of your legal obligations!
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Staying complaint requires balance and constant attention. Firstly, it is important to know your obligations: federal tax laws, state incorporation rules, and the specifics of non-profit law in your jurisdiction.
Secondly, regularly train your board and staff on these regulations. Implement strong internal policies for finance and governance, and conduct annual audits.
Finally, document as much as you can! Keeping detailed records and filing all necessary reports on time will keep you on the right side of the law.
Speak With a Nonprofit Law Attorney
Apex Corporate Law can make non-profit law easy for you. Book a consultation, and we will make sure you won’t have to worry about the legalese while pursuing your mission.