Starting a Nonprofit Organization

The process of starting a nonprofit organization generally involves:

1. drafting bylaws that set forth the structure of the organization and create a governing board with final authority for the organization,
2. incorporating as a nonprofit corporation in the state of choice, obtaining tax-exempt status from the IRS and the state in which the organization is based, and
3. completing additional documents relating to state compliance, annual reporting requirements, and sound corporate recordkeeping practices.
4. When we are asked to assist a client in establishing a new organization, the specific process usually involves:

Developing bylaws and a board of directors. After discussion with the client regarding the purposes of the organization, options for structuring and comprising the board of directors, and basic operational and administrative mechanisms, we will draft the bylaws and an explanatory memorandum that outlines the most important points. A key, often-overlooked point of emphasis is the composition of the board of directors. In particular, it is important to carefully select the initial directors and determine how future directors are selected.

Incorporation. In most states, this is a relatively simple procedure. The Articles of Incorporation generally include a number of the provisions already outlined in the bylaws.

Obtaining tax-exempt status from the IRS. The application and follow-up responses to the IRS are the most time-consuming part of the process. Generally, the two substantive pieces of information required by the IRS are:

• A statement of activities detailing, as specifically as possible, the proposed activities of the new organizations.

Estimated budgets for three years.

For specific state and IRS filing requirements, please check under your state in the State-by-State section of this online resource library.

Obtaining income and sales tax exemptions in the state of incorporation.

Further advice regarding:

• Continuing regulatory compliance.
• Creating a Board Meeting Minute Book and other corporate record-keeping practices.
• Risk management and insurance.
• Contracts and relationships with third parties.

Once this process is complete, legal questions often arise in such areas as maintaining tax exemption, governance and board procedures, liability concerns, licensing and protecting intellectual property, charitable contributions and donor relations, employee matters, contract/grant review and drafting, and real estate leasing and purchasing.

We are pleased to provide counsel in each of these areas as newly established organizations grow and look forward to developing and maintaining long-term relationships with our clients

The JDW Network

Webpage: _________________________________________________________ Email: _____________________________________________________________ Telephone: (843) 637-1962