Creating a non-profit organization is an idea born of a desire to do good for a cross-section of one’s community. This step is almost always taken with a philanthropic and giving spirit and one might assume that business laws would be attuned in such a way to make the process as simple and streamlined as possible. After all, if someone sets out to help others, why create obstacles to stand in their way? Unfortunately, non-profits are governed and constrained by many of the same laws as any other business and it is imperative that the founder of such an organization take care to ensure that the non-profit is created and administered within the law. Our managing partner Jim Howicz explains why it may be a good idea to have the assistance of experienced counsel while forming your non-profit.
Bringing Your Organization into Focus
Forming a non-profit organization is not a difficult process, but there are a number of precise steps that need to be followed in order to achieve it. I urge you to consider hiring legal counsel to help you through these steps. The path to non-profit status that I recommend is to first form a corporation. The State of Texas’ Secretary of State has a specific corporate organization for non-profits. However, before you file, it’s best to talk with counsel about what the purpose of the organization will be serving, how it plans to raise money, and how it will be governed.
These parameters will drive the process with the Secretary of State and the corporate documents that need to be produced. Eventually, these decisions will affect how you go about getting recognized as a nonprofit by the IRS. While you’re going through the process with the Secretary of State, you should get counsel to draft your corporate documents. One of the most important of these documents is the corporate bylaws. Bylaws set out the rules for how the organization will be governed. You will need to decide if the organization will have members. You also need to decide if the organization is run by members, by a board of directors, or by some combination thereof. Counsel can help you parse through these options and determine what will best serve your objectives.
Introducing Your Non-Profit to the IRS
Once your corporation is formed with the State of Texas and your corporate documents, bylaws, and board of directors are locked in, it’s now time to approach the IRS. In fact, the IRS gives you time to handle all these tasks so that you can be organized and ready to file with them. Generally, organizations applying for recognition of non-profit status must notify the IRS within 27 months from the date of their formation to be treated as described in §501(c)(3) of the IRS code. The IRS has established a short form filing option for smaller organizations. This can be done online and requires less supporting documentation. Larger organizations are required to go through a more detailed process and must submit their corporate documents for review. Either way, if you plan it correctly and serve a purpose allowed by the IRS code, your application should be approved.
Running a non-profit correctly can be just as difficult as running any other business. Please consider seeking the assistance of legal counsel to help you set it up correctly and navigate through the organization and administrative requirements. By doing so, you can eliminate unnecessary surprises and successfully pursue the goals and objectives of your organization. If you are thinking of starting up a non-profit organization, contact us to see if Richards Rodriguez & Skeith’s business and transactional law attorneys may be able to help!