NOT-FOR-PROFIT FORMATION & GOVERNANCE
We believe not-for-profit businesses are critical to the community’s well-being. The formation and governance of not-for-profit businesses involve a myriad of decisions, many of which can have financial and operational ramifications. At Underberg & Kessler, we have a team of attorneys experienced in not-for-profit formation and ongoing governance issues and concerns. After reviewing the mission of your not-for-profit business, our attorneys in Rochester, Buffalo, Canandaigua, Geneseo, and Webster will help you complete its formation and guide you in setting up ongoing governance policies and procedures to accomplish its mission.
You can contact us here and learn about not-for-profit formation and governance below:
Formation Begins by Defining Your Mission & Governance Structure
A not-for-profit business typically exists to better the community it operates in or to serve a specific group of people or cause. This mission needs to be defined in writing, especially if the organization plans to seek 501(c)(3) status and the benefits available to non-profit businesses. The founders also need to consider how the organization will be governed. The decision of whether or not the organization will be governed by a Board of Directors (BOD) or the organization's members has major implications to the organization’s operations. Most non-profits also have committees. The number of committees, types of committees and the authority these committees have also has to be decided upon. We observe many not-for-profit organizations utilize committee positions as method of vetting potential board members. There are rules that must be complied with by the Board of Directors and the organizations Committees. Our lawyers would be happy to discuss the options and help you determine which is most appropriate for your organization.
What are the Benefits of 501 c3 Status?
If your not-for-profit is classified as charitable, it may be eligible for 501(c)(3) status under the Internal Revenue Code. There are many benefits to this, including but not limited to exemption from federal and state income tax on revenues generated from your mission-ralted activities, the ability of donors to take deductions on their federal and state income taxes for donations to your organization, exemption from payment of New York State sales tax, and possibly New York real property taxes. Applying for 501(c)(3) can be complicated. Our attorneys can assist you with this.
If your not-for-profit is not eligible for 501(c)(3) status, there may be other ways to obtain exemption from federal income tax, though donations would not deductible as charitable contributions and New York sales tax exemption is not available.
How Does One Achieve 501 c3 Status?
The process is to file with the IRS on Form 1023 or, if eligible, make an online filing with the IRS on Form 1023-EZ. Your organization will need to provide information about its board of directors, officers and highest paid employees; if it conducts fundraising activities, what those consist of; and projected financials for the current and next few years, among other things. Copies of the organization’s formation documents (certificate of incorporation and bylaws) must be filed with the IRS as well.
Not-for-Profits Need Ongoing “Corporate Housekeeping”
In New York, the State Attorney General has jurisdiction over many kinds of business transactions that a not-for-profit business may engage in. A few examples are the sale or lease of all or substantially all of the organization’s assets or the merger of the organization into another. In addition, in New York, depending on the amount of annual revenues of the organization, it may need to make filings with the Charities Bureau in addition to filing with the IRS on a Form 990 or 990-EZ. There are many governance requirements under New York law that come into play as a not-for-profit grows, and the Not-for-Profit Corporation Law is amended from time to time. We can help you keep your organization in compliance with these laws and regulations.
Not-For-Profit Formation & Operation Experience
Our Experience in Western, NY and Beyond
Represented a secular school in Kenya in the establishment of a not-for-profit corporation, including the applicable governance and its application for tax-exempt status.
Represented many organizations in obtaining exemption as 501(c)(3) organizations, including schools, charitable organizations, cultural organizations and organizations fostering national amateur sports competitions.
Represented the board of directors of a financially troubled education corporation in connection with an investigation by the New York Attorney General of potential criminal fraud by management and the subsequent dissolution of the corporation by the New York Attorney General.
Formed a local performing arts company as a not-for-profit corporation, and prepared and filed with the Internal Revenue Service an application for exemption under the Internal Revenue Code under section 501(c)(3).
Represented a large not-for-profit senior living facility in its successful application to a town for exemption from real property taxation.