Unlike most attorneys, my practice is tailored especially to nonprofit entities. As a past employee and current volunteer with several nonprofit organizations, I am sensitive to their particular needs and challenges. I make it a point to keep abreast of the latest laws, regulations, and IRS rulings that affect nonprofits. In addition, my connections with other professionals who specialize in nonprofits allow me to quickly gather an appropriate team to solve particularly thorny problems.
Establishing a nonprofit organization is not as simple as filing a few forms. There are many not-so-obvious decisions that can greatly affect the odds of success. I help individuals and groups plan and implement their vision, whether that means forming a public charity, a private foundation, or some other entity. I usually offer a flat fee for a complete startup package, with the goal of making the process painless and efficient for my clients.
A typical startup package includes the following:
I review charter documents (bylaws and articles of incorporation) and ensure compliance with federal tax-exempt regulations and state regulation of conflict-of-interest transactions. I also conduct comprehensive Legal Audits of an organization’s operations and policies, helping to identify strengths and weaknesses.
Is your organization in compliance with federal and state employment laws? How can you fine tune your personnel programs to prevent discrimination grievances? Do you have appropriate policies in place before a problem arises?
I also have experience helping one nonprofit merge with another, and with dissolving nonprofit corporations.
Having trouble with the IRS or with Maine Revenue Services? I have extensive experience dealing with these tax agencies, whether it’s an income tax, sales tax, or property tax issue.
To forming a Maine Nonprofit Organization
So you are brimming with enthusiasm and you have decided to form a nonprofit organization. What’s the first thing you should do? Turn around and re-examine your decision to incorporate. One of the most common mistakes people make is to establish an organization without fully thinking through the consequences. Forming and maintaining a nonprofit organization takes much time and effort. For some, it might make more sense to consider alternatives, such as operating as an unincorporated association or teaming up with an already existing group.
As already noted, incorporating a 501(c)(3) organization requires many documents and filings. Most groups find it helpful to appoint one person to be responsible for keeping track of every state and federal filing requirement. This person does not necessarily have to complete all of the work herself, but should make sure that all of the work is in fact completed.
We have all heard of the KISS method – Keep it Simple, Stupid. Well, for organizational documents, I suggest the KIFF method — Keep it Flexible, Friend. The Articles of Incorporation should be a bare bones document that includes the basic state and IRS requirements and not much else. The details of an organization’s structure should be set forth in the bylaws. Bylaws should be very clearly worded, as they will be important in resolving future disputes. At the same time, do not make the mistake of adding in too many requirements or standards. Your organization will likely evolve over time, and your bylaws should be flexible by anticipating such change. Again, these documents can be very confusing for beginners, so professional help is recommended.
The vast majority of problems that the IRS identifies on Form 1023 applications are minor errors such as a failure to answer a question or provide additional information. It’s important to read the forms carefully and to make sure you complete all of the necessary parts. Nevertheless, the Form can be very confusing for beginners, so hiring an attorney or other experienced professional can save much time and frustration. If you are having difficulty with the form, you can call a toll-free IRS help line at (877-829-5500).
You can save a lot of time and energy by tracking down online information. Most of the forms you will need to incorporate can be downloaded for free from the internet. IRS Form 1023 and accompanying instructions can be found at www.irs.gov. Maine forms can be downloaded at www.maine.gov. There are also websites that contain a wealth of useful information, including www.nonprofitmaine.org.
There are a number of support and educational organizations that your nonprofit should consider joining. Foremost is the Maine Association of Nonprofits, which offers very reasonable dues for small organizations.
Depending on the size of your organization, you may or may not need to file a Form 990 or Form 990-EZ. Nevertheless, some smaller organizations do so anyway, as these documents will be available online at www.guidestar.org and many foundations rely on them in making funding decisions. As such, the Form 990 can be a wonderful public relations tool, a way for an organization to put its best foot forward.
It is important to establish and maintain separate bank accounts for the corporation in order to avoid commingling with any individual’s personal accounts. Organizations that begin with good bookkeeping practices tend to be much more successful in staying organized over the long term.
There are different categories of 501(c)(3) organizations, and some enjoy greater benefits than others. If your organization is classified as a public charity (as opposed to a private foundation), donors will be able to deduct a greater percentage of their donations from their federal income taxes. Furthermore, public charities will be eligible to apply for and receive grants from private foundations. Certain organizations qualify as public charities by virtue of their activities (schools and churches, for example). Others can qualify only by meeting a public support test, which generally requires at least one-third of the organization’s support to come from the general public. Determining whether the organization meets this test can be a time-consuming and complicated process, and some groups rely on professional assistance.
In a couple months, when you are sitting amidst of the piles of paper that are required to incorporate a 501(c)(3) organization, take a moment to remind yourself why you are making this effort. In all likelihood, you are motivated by a beautiful idea or a noble cause. I, for one, salute you for your spirit and hard work!
Disclaimer: This information is provided for educational purposes only and is not to be relied upon as legal advice. Readers are encouraged to retain the services of an attorney to help them with their specific situation.
Your nonprofit corporation must establish Articles of Incorporation and file them with the Secretary of State. Among other items, the Articles of Incorporation must include the following information (see 13-B MRSA § 403 for a complete list of requirements):
Your non-profit corporation must establish a set of Bylaws. For more on the purpose of the Bylaws, see Ten Tips for Forming a Maine 501(c)(3) Corporation.
After the incorporators have filed the Articles of Corporation, it is time to hold the Organizational Meeting. Minutes should be taken at this meeting and at all future meetings. At this meeting, the following key measures should be taken:
All non-profit corporations must file an Annual Report by June 1 of each year (although the Secretary of State requests filings by April 1). There is a $35 filing fee, as well as a $25 late fee for filings received after June 1. You may file the Annual Report online at www.informe.org/aro/index_on.html.
The Annual Report is where you list the corporation’s current board of directors. The board must be comprised of at least three individuals, two of whom are not “financially interested” in the corporation (i.e., receiving compensation).
A corporation with one or more employees generally must obtain workers compensation insurance.
Most 501(c)(3) corporations that employ four (4) or more persons in one day in twenty (20) different weeks in a calendar year must pay a State Unemployment Tax. 26 M.R.S.A. § 1043(11)(A-1)(3). When your corporation reaches this size, go to the Maine Department of Labor’s unemployment tax website to download the appropriate registration form.