Comments on: Part II: Starting a Nonprofit in Arizona – Forming the Entity http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/ Daily Dose of Nonprofit Law Sat, 14 Jan 2012 02:31:06 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Ellis Carter http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-2024 Ellis Carter Mon, 12 Sep 2011 21:03:04 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-2024 In this case the board member's wife acted as incorporator of the organization. If it is a public charity and her husband will serve on the Board, then regardless of who incorporated, any financial transactions with her company have to be fair and arms length. Any such arrangement should be made pursuant to the rebuttable presumption safeharbor. For 501(c)(3) public charities the procedure, if carefully followed, shifts the burden of proof to the IRS to prove the unreasonableness of the compensation package. For other tax-exempt organizations, the procedure serves as a good roadmap for adequately documenting financial transactions with insiders. To “adequately document” the decision for purposes of the rebuttable presumption process, the records of the governing body must state the terms of the contract that was approved, the date it was approved, the members of the governing body who had a conflict, the members of the governing body who were present during the debate on the compensation arrangement that was approved and those who voted to approve or reject it. Obviously, the husband and any other conflicted board members must recuse themselves from the vote and in this case should leave the meeting room while the board deliberates. The documentation should also note the comparability data obtained and relied upon by the governing body, how it was obtained and the actions taken with respect to any member of the governing body who had a conflict of interest with respect to the compensation decision. Additionally, the governing body must record the basis for its determination whenever it decides that the reasonable compensation for the product or service is higher or lower than the range of comparable data received. The documentation must be made concurrently with the determination on whether to enter into the contract. Records must be prepared by the next meeting or within 60 days of the governing body and must be reviewed and approved by the governing body as reasonable, accurate and complete within a reasonable time thereafter. While this process provides legal cover, also be sure to consider the "new york times test". If you wouldn't want it made public, you probably should not move forward with the arrangement. If the organization is a private foundation, then it is subject to the self-dealing rules which are more strict. If that is the case you should get specific legal advice before moving forward. Read more: http://charitylawyerblog.com/2011/03/08/setting-nonprofit-executive-compensation/#ixzz1Xm3PV7VS In this case the board member’s wife acted as incorporator of the organization. If it is a public charity and her husband will serve on the Board, then regardless of who incorporated, any financial transactions with her company have to be fair and arms length. Any such arrangement should be made pursuant to the rebuttable presumption safeharbor. For 501(c)(3) public charities the procedure, if carefully followed, shifts the burden of proof to the IRS to prove the unreasonableness of the compensation package. For other tax-exempt organizations, the procedure serves as a good roadmap for adequately documenting financial transactions with insiders. To “adequately document” the decision for purposes of the rebuttable presumption process, the records of the governing body must state the terms of the contract that was approved, the date it was approved, the members of the governing body who had a conflict, the members of the governing body who were present during the debate on the compensation arrangement that was approved and those who voted to approve or reject it. Obviously, the husband and any other conflicted board members must recuse themselves from the vote and in this case should leave the meeting room while the board deliberates. The documentation should also note the comparability data obtained and relied upon by the governing body, how it was obtained and the actions taken with respect to any member of the governing body who had a conflict of interest with respect to the compensation decision. Additionally, the governing body must record the basis for its determination whenever it decides that the reasonable compensation for the product or service is higher or lower than the range of comparable data received. The documentation must be made concurrently with the determination on whether to enter into the contract. Records must be prepared by the next meeting or within 60 days of the governing body and must be reviewed and approved by the governing body as reasonable, accurate and complete within a reasonable time thereafter. While this process provides legal cover, also be sure to consider the “new york times test”. If you wouldn’t want it made public, you probably should not move forward with the arrangement.

If the organization is a private foundation, then it is subject to the self-dealing rules which are more strict. If that is the case you should get specific legal advice before moving forward.

Read more: http://charitylawyerblog.com/2011/03/08/setting-nonprofit-executive-compensation/#ixzz1Xm3PV7VS

]]> By: Jamie Sutton http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-2018 Jamie Sutton Sun, 11 Sep 2011 19:07:55 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-2018 As was asked above, "What do you do if the by laws and articles of incorporation are filed and accepted before a board has been established? And, Is it OK for the wife of a board member and officer to form and file the initial State documents, even if the wife's company may later do business with the non-profit, and what do I do if I have already done this? Thanks As was asked above, “What do you do if the by laws and articles of incorporation are filed and accepted before a board has been established?

And, Is it OK for the wife of a board member and officer to form and file the initial State documents, even if the wife’s company may later do business with the non-profit, and what do I do if I have already done this?

Thanks

]]> By: Part I: Starting a Nonprofit in Arizona – Laying the Groundwork | CharityLawyer http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-284 Part I: Starting a Nonprofit in Arizona – Laying the Groundwork | CharityLawyer Sat, 01 May 2010 18:50:20 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-284 [...] mechanics of creating the organization and applying for tax-exempt status. This is the topic of Parts II and III. If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed [...] [...] mechanics of creating the organization and applying for tax-exempt status. This is the topic of Parts II and III. If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed [...]

]]> By: Linda Borders Killian http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-175 Linda Borders Killian Thu, 19 Nov 2009 21:04:07 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-175 How do I get to Part III? How do I get to Part III?

]]> By: Linda Borders Killian http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-174 Linda Borders Killian Thu, 19 Nov 2009 21:03:22 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-174 Very information and in terms a rookie can understand. Very information and in terms a rookie can understand.

]]> By: Linda Borders Killian http://charitylawyerblog.com/2009/09/30/part-ii-starting-non-profit-in-arizona/comment-page-1/#comment-173 Linda Borders Killian Thu, 19 Nov 2009 21:01:46 +0000 http://charitylawyerblog.com/2009/09/30/part-ii-%e2%80%93-starting-a-non-profit-in-arizona-%e2%80%93-forming-the-entity/#comment-173 Whoaa . . . what do you do if they by laws and articles of incorporation are filed and accepted before a board has been established? Whoaa . . . what do you do if they by laws and articles of incorporation are filed and accepted before a board has been established?

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