Here are some of the top legal considerations to address when starting a non-profit organization:
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Choosing a legal structure: This is a crucial first step. Non-profits can operate as unincorporated associations, trusts, or corporations. Incorporation offers the most protection for personal liability, so it’s the most common choice.
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Developing governing bylaws: This document establishes the rules and procedures for how your non-profit will operate. It should cover things like board member duties, officer roles, committee structures, and conflict of interest policies.
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Obtaining tax-exempt status: While not mandatory, 501(c)(3) tax-exempt status offers significant benefits for both your organization and donors. The application process involves filing Form 1023 with the IRS, so ensure you meet eligibility requirements and have strong documentation for your mission and activities.
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Registering with your state: Most states require non-profits to register with a designated agency. This process typically involves filing formation documents and paying a registration fee.
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Compliance with employment laws: If you plan to hire employees, you’ll need to comply with federal, state, and local employment laws. This includes things like minimum wage, overtime pay, and payroll taxes.
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Risk management and insurance: Consider the potential risks your non-profit may face and obtain appropriate insurance coverage. This might include general liability insurance, directors and officers (D&O) liability insurance, and workers’ compensation insurance.
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Recordkeeping and financial reporting: Maintain accurate and complete financial records for your non-profit. This is essential for both financial accountability and ensuring compliance with tax regulations.
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Fundraising regulations: Familiarize yourself with any federal, state, or local regulations governing fundraising activities. There may be specific rules regarding solicitation practices, donor disclosures, and charitable gaming (if applicable).
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Intellectual property: If your non-profit creates or uses intellectual property (like trademarks or copyrights), be sure to understand the legalities of ownership and protection.
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Ongoing legal counsel: While you can navigate some legal aspects yourself, consulting with an attorney specializing in non-profit law is highly recommended. They can provide guidance on complex issues, help draft essential documents, and ensure your organization remains legally compliant.
Remember, these are general considerations, and specific legal requirements may vary by state. Consulting with a lawyer experienced in non-profit law in your area is essential to ensure your organization is operating legally and protecting itself from potential liabilities.
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