While most nonprofit organizations do not have a full-time attorney on staff, many nonprofits find that it is helpful to have an ongoing relationship with an attorney to call on when questions arise. When should your nonprofit consult with an attorney?
Starting a Nonprofit
When you decide to start a new nonprofit, you will want to consult with a lawyer to discuss what type of state legal entity you will create and whether you will seek tax-exempt status from the state and/or IRS. Additionally, you may need guidance filing the appropriate forms and required attachments such as bylaws, budgets, and conflict of interest policies.
Reinstating a Nonprofit
If your nonprofit has lapsed on reporting requirements, you may find your organization in jeopardy. Many states require incorporated organizations to file reports periodically. Failure to do so can lead to involuntary dissolution of the organization. You may need the guidance of an attorney to determine the appropriate course of action to get your organization back on track.
Consult an attorney when reorganization the nonprofit corporation in any way, including mergers with other nonprofits, acquisitions of other nonprofits, dissolutions of a nonprofit, re-categorizations of foundations or public charities.
Board Issues, Administration
Since nonprofit corporations are generally governed by a board of directors, board conflicts are serious. Contact an attorney in the structuring of your board of directors, including whether the board should be elected by members, self-perpetuating, or selected by an outside body.
An attorney may help with outlining the board’s composition, roles, responsibilities, and training. An attorney can assist with explaining legal and fiduciary duties of directors, and offer risk management, including advice on insurance, employment policies, and business procedures.
Attorneys can help draft documents that nonprofit corporations and tax-exempt entities need to have in place, including
- Articles of incorporation and/or certificates of formation
- Conflict of interest policies
- Gift acceptance policies
- Document retention policies
- Fiduciary responsibilities of the board of directors
- Whistleblower policies, and more.
Contracts and Leases
Before signing a contract or lease, it is often helpful to have an attorney review the document, so that you can better understand the organization’s obligations. Additionally, an attorney can help put into place processes to guide the organization in reviewing contracts and leases.
Seeking an attorney’s guidance might be helpful if your nonprofit is applying for tax-exempt status from either the state where you operate or from the IRS. Even once you received tax-exempt status, an attorney’s guidance can help you sort through potential issues like unrelated business income, staying compliant with regulations related to 501(c)(3) organizations, and dealing with automatic revocation.
State law varies on how nonprofits can fundraise. Some states may limit specific fundraising activities like raffles and auctions. An attorney may be able to help guide your organization as you plan fundraising activities.
A lawyer can help identify, prevent, mitigate, and evaluate risks for your organization. While most organizations have procured liability insurance, a lawyer can help you put sound policies into place that can help prevent and manage risks before they turn into a crisis for your nonprofit.
An attorney’s guidance can be critical in determining what intellectual property rights a nonprofit organization needs to protect. Whether a trademark, copyright, or patent is needed, an attorney can guide you through the appropriate application process.
Employment laws can be daunting. Some apply to all organizations while others require a minimum number of employees to be triggered. A lawyer can help decipher these laws along with other issues like when a contractor is an employee or what to include in an employee handbook.
If your nonprofit organization is involved in a lawsuit, you will want to seek an attorney’s guidance. Additionally, an attorney may want to be consulted if you are threatened with a lawsuit. Not every threat will mean your organization will become a party to a lawsuit, but it may be safe to discuss next steps with an attorney.
Other legal issues may arise for your nonprofit depending on your organization’s specific activities and history.