Category Archives: Arizona Nonprofit Corporations

Nonprofits and Affiliated Entities

Increasingly, nonprofits are creating affiliate organizations such as entities to hold real property, taxable subsidiaries that run unrelated businesses, lobbying organizations, foundations, chapters, and even management organizations. There are myriad reasons to create affiliates but there are a number of common scenarios that we will touch in this post.Continue Reading

Nonprofit Law Jargon Buster – What is a Group Exemption?

The group exemption permits a central or parent organization to certify that each subordinate qualifies for exemption and to include it under its umbrella for tax-exemption purposes. The process is designed to reduce paperwork for both taxpayers and the IRS where affiliated entities are similar in their purpose, structure and operations.Continue Reading

The Arizona Entity Restructuring Act

Prior to passage of AREA, an entity seeking to change its structure likely had to undergo a multi-step transaction to accomplish its goal. AREA permits direct conversions and makes clear that it applies to all entity types (corporations, nonprofits, benefit corporations, LLCs, partnerships, etc.).Continue Reading

Top Five Nonprofit Legal Risks

Too often, we see nonprofits signing contracts that are presented to them by vendors without appropriate legal review. Many vendors use form contracts that are extremely one sided in the vendor’s favor on the theory that many clients will sign whatever is given to them without scrutinizing the terms.Continue Reading

Choice of Domicile for Nonprofit Corporations

Over the years we have worked with organizations in many different states and have had the chance to form some opinions about choice of domicile for nonprofits. Some of the factors that have influenced our thoughts on this matter include states requiring mandatory audits, multiple agencies overseeing nonprofits, unclear statutes governing nonprofit corporations, and aggressive regulation.Continue Reading

DIY Nonprofit Law – Top Five Mistakes

The state form does not include the tax provisions that the IRS requires tax-exempt organizations to have. Would be founders that file using the state’s form Articles of Incorporation without including an attachment with the appropriate tax provisions will end up with a taxable nonprofit – a result almost no one intends. Continue Reading

When to Start a Nonprofit

We are used to hearing lots of folks – including yours truly – complain about the “nonprofit birth control” problem in this country. While it is true that too many nonprofits are formed for the wrong reasons – there are also many good reasons to form a new nonprofit. The trick is to learn to tell the difference. Continue Reading

Nonprofit Dissolution: How to do it Right

Nonprofit corporations are often faced with tough decisions about their future. For a variety of reasons, a nonprofit’s board may determine that dissolution is the best answer. Causes range from dwindling resources to a reduction in the need for the nonprofit’s services. Should the Board determine that dissolution is the best option for a nonprofit, there are business and legal steps that must be taken to properly wind down and dissolve the nonprofit. Continue Reading

Is it time for a Legal Audit?

A legal audit is an overview of an organization’s non-financial compliance, governance and risk management issues. Organizations typically consider a legal audit when new management takes over and wants to ensure they are starting with a clean slate or the in the wake of a costly mistake. Continue Reading

Nonprofit Corporations: Eight Items to Do By Year End

Hold Annual Meeting. Most corporate bylaws require that the directors meet at least annually. Many state nonprofit corporation statutes also require an annual meeting. The annual meeting is typically the meeting where the board (or voting members) fill vacancies on the board, appoint officers, approve budgets, circulate and sign conflict of interest disclosures, and ratify actions taken during the year.Continue Reading

Choosing a Fiscal Sponsor

A fiscal sponsorship is often a great idea for small charities that do not have the resources to apply for their own tax-exempt status. It allows them to receive tax deductible donations from donors to accomplish their mission without having to expend their resources on administrative duties. However, as the recent International Humanities Center scandal has shown, it can be dangerous to get into bed with a fiscal sponsor without first performing some basic due diligence.Continue Reading

Forming a 501(c)(3) Booster Club

Section 501(c)(3) of the Internal Revenue Code allows for tax exemption for organizations organized and operated to foster national or international amateur sports competition so long as no part of the net earnings inure to the benefit of any private shareholder or individual. A parent run booster club must be organized so that it benefits the entire class of athletes or participants and does not benefit certain individuals over others.Continue Reading

Start-up Nonprofits Beware: Ensure your Tax Preparer is Registered with the IRS

Charities should be aware that it is now illegal for anyone to receive compensation for preparing a return for someone else if they have not obtained a PTIN from the IRS first; a paid preparer who is not registered with the IRS is perpetrating fraud. If a charity chooses to work with an unregistered paid preparer, it opens itself up to IRS scrutiny and, possibly, denial of tax exemption plus additional attorneys’ fees to resolve any issues arising from the initial filing. Charities also need to keep in mind that the organization, regardless of whether or not a paid preparer was used, is ultimately responsible for the information in it’s exemption application.Continue Reading

Nonprofit Startups: Repurposing An Existing Nonprofit

Often prospective clients call us wanting to know whether we know of any dormant nonprofits that are going out of business that they could take over. The idea is that taking over an existing entity avoids the hassle and expense of incorporation, creating a governance structure and obtaining tax-exempt status for a brand new entity. Presumably, a new board of directors would be substituted in place of the old board and new officers would be elected.Continue Reading